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Major Premium (How to weigh whether a particular major is better than skipping college entirely)
Econ Log ^ | 04/01/2013 | Bryan Caplan

Posted on 04/06/2013 10:21:09 AM PDT by SeekAndFind

Economists usually talk about the college premium, but the college premium heavily depends on your major.  At the same time, though, stronger students typically choose harder - and more lucrative - majors.  Thus, the college premium is doubly infected by ability bias: People who would have made more money anyway are more likely to go to college, and college graduates who would have made more money anyway are more likely to select demanding majors. 

To weigh whether a particular major is better than skipping college entirely, you need to adjust for all these factors, then see whether the adjusted college premium outweighs your full cost of college.  As far as I have found, however, no researcher has published such figures.  Don't get me wrong: Existing research provides all the numbers necessary to make this calculation.  But you have to snap all the pieces together yourself. 

Here's how in six tolerably difficult steps:

Step 1: Get the average college premium. (+83% on the latest Census data).

Step 2: Adjust the average college premium for ability bias. (leaving a +46% "reasonable estimate" based on my reading of existing literature that controls for measured ability).

Step 3: Get major-specific premia (usually calculated relative to the education major, roughly the lowest-earning major). (The best source I've found is Altonji, Blom, and Meghir 2012).

Step 4: Adjust these premia for ability bias. (50% ability bias is a standard estimate in this literature, which routinely controls for pre-existing ability).*

Step 5: Get the ability-adjusted premium of the average-earning major (probably business). (Just apply Step 4 to Step 3).

Step 6: The major-specific college premium relative to high school alone then equals: Step 2 * (1+Step 4)/(1+Step 5).

Here are the final results for common majors:

Earnings Compared to H.S. Grads

Major

Males

Females

Electrical engineering

+63%

+72%

Computer Science

+61%

+63%

Mechanical engineering

+61%

+72%

Finance

+61%

+55%

Economics

+60%

+59%

Accounting

+53%

+53%

Mathematics

+53%

+50%

Nursing

+52%

+59%

Chemistry

+48%

+47%

General business

+46%

+46%

Political science/gov't

+46%

+47%

Biology

+44%

+43%

Communications

+37%

+45%

History

+35%

+37%

Sociology

+35%

+36%

Liberal arts

+34%

+36%

English language/lit.

+34%

+37%

Anthro./archaeology

+32%

+36%

Fine Arts

+25%

+29%

General Education

+24%

+30%

Needless to say, these major premia lack the precision of Planck's constant.  Compared to what the typical 12th-grader vaguely thinks, though, this table is good as gold. 

STEM fans will revel in the top three rows.  To avoid confirmation bias, though, notice that the payoff for English, history, and communications is only modestly lower than the payoff for biology, chemistry, and math.

The real winner in this table, I do declare, is economics.  I've long told my undergrads, "Economics is the highest-paid of all the easy majors."  Still, the magnitudes surprised me.  After adjusting for pre-existing ability, male econ majors (+60%) are almost as well-paid as male electrical engineers (+63%).  Given engineers' workload, they definitely seem to get the short end of the stick. 

When I was an undergrad at UC Berkeley, a popular campus t-shirt read, "As the limit of GDP --> 0, GOTO poli sci."  Given current major premia, I'm tempted to make a t-shirt that says, "Do not stop in STEM.  Go directly to econ."

* 50% ability bias means a 50% decline in the coefficients measured in log-dollars.  Some major premia are so large that the log dollar=% change approximation breaks down, so be careful.



TOPICS: Business/Economy; Education; Society
KEYWORDS: college; education; major

1 posted on 04/06/2013 10:21:09 AM PDT by SeekAndFind
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To: SeekAndFind

As a general rule for choosing a major, tell an adult who is at least 50 what you want to major in. If he/she asks you “How are you going to make money at that?” and your answer is “It isn’t always about money. When did you become so cynical?”, then you need to rethink your major!


2 posted on 04/06/2013 10:26:41 AM PDT by Bryanw92 (Sic semper tyrannis)
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To: Bryanw92

Unfortunately you are correct as it takes money to be cultured.


3 posted on 04/06/2013 10:53:10 AM PDT by AEMILIUS PAULUS (It is a shame that when these people give a riot)
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To: Bryanw92
LOL!!! ain't that the truth...
4 posted on 04/06/2013 11:09:03 AM PDT by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -ww- NO Pity for the LAZY)
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To: AEMILIUS PAULUS

>>Unfortunately you are correct as it takes money to be cultured.

You can be poor and cultured. But it takes money to buy food, pay rent, own a car, etc. They didn’t realize this when mommy and daddy (and student loans) were paying the bills.

Professional “educators” crack me up more than anyone. They get a degree that insures they won’t make really big money and then they complain constantly about the money. I ask them, “You didn’t know that teachers don’t make much money?”

They reply, “Yes, but I love teaching kids.”

I say, “Well, are you teaching kids?”

They say, “Yes, but I should be making more money.”

I say, “There are people making less than you who hate their jobs and didn’t really have much choice in their profession.”

They say, “Then, they should have gone to college.”

I say, “You went to college and you don’t make anything. But you love your job, so count that as a blessing.”

Sure fire way to piss off an “educator”.


5 posted on 04/06/2013 12:03:40 PM PDT by Bryanw92 (Sic semper tyrannis)
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To: Bryanw92

We agree. One simply has to culture oneself in this world. By the way I made pretty good money as I took a practical series of degrees. We ended up with everything we wanted and needed. I have been fortunate.


6 posted on 04/06/2013 12:09:47 PM PDT by AEMILIUS PAULUS (It is a shame that when these people give a riot)
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To: Bryanw92

Male teachers will always have jobs.


7 posted on 04/06/2013 12:19:37 PM PDT by EQAndyBuzz (The reason we own guns is to protect ourselves from those wanting to take our guns from us.)
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To: SeekAndFind

When I was a kid I was constantly harangued by my parents and grand parents to do well in school so that I could get into a good college. That was the road map they believed in.

Being the iconoclast that I am, I ignored them all and went straight into the workforce after high school. In time, most of my siblings followed the lead of our uncles and aunts and did at least four years of college.

Didn’t bother me, because I made more money than all of them, but some time in my forties I recognized the fact that every one of them had become a hopelessly indoctrinated liberal. Some even radically so.

I truly don’t regret skipping that experience.


8 posted on 04/06/2013 2:48:40 PM PDT by Windflier (To anger a conservative, tell him a lie. To anger a liberal, tell him the truth.)
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To: SeekAndFind

Learn a real skill. Practice making a very useful item (anything that people would really want) as a hobby for now. Ignore the crazy end-of-the-world distraction propaganda in order to be ready to compete, when the time comes.


9 posted on 04/06/2013 3:00:59 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: SeekAndFind

If any moron needs this info to begin with, they should not be allowed into college.


10 posted on 04/06/2013 5:21:04 PM PDT by SgtHooper (The last thing I want to do is hurt you. But it's still on the list.)
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To: SeekAndFind

the article is over thinking........ get an engineering degree.

Problem solved


11 posted on 04/06/2013 5:49:08 PM PDT by bert ((K.E. N.P. N.C. +12 .....History is a process, not an event)
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To: bert

“...the article is over thinking........ get an engineering degree.”

Yup, but most of the lefty/liberal ‘smart kids’ aren’t up to the rigors of getting a degree that requires intelligence and effort, such as an engineering degree. There is one out for them if they decide to go for it and can’t cut it...abort to an Industrial Engineering degree.

(Mine, from a time when we had to work our butts off, is in Chemical Engineering from a well respected school. And along the way, I also picked up one in Chemistry, but the Chem E paid the bills, and made it possible to be comfortable now in retirement.)


12 posted on 04/06/2013 6:33:44 PM PDT by GGpaX4DumpedTea (I am a Tea Party descendant...steeped in the Constitutional Republic given to us by the Founders.)
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To: bert

RE: get an engineering degree.

Problem solved

__________________

Society does not just need engineers (this coming from an engineer).


13 posted on 04/06/2013 7:57:13 PM PDT by SeekAndFind
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