Major
Moolah
Adding up the Earnings Gaps in College Majors
By Daniel Penrice
True or false? In a time of rapid technological change, with new knowledge
being created and old knowledge becoming obsolete at an ever-accelerating
pace, undergraduate professional or technical training is less valued in
the workplace than are the general intellectual skills fostered by a liberal
arts education.
If you answered "true," you are in agreement with many of
today's business leaders and liberal arts educators, but you are wrong.
So say two economists from Northeastern's Center for Labor Market Studies,
Paul Harrington and Andrew Sum. In a recent paper titled "The Post-College
Earnings Experiences of Bachelor's-Degree Holders in the U.S.," Harrington
and Sum demonstrate with hard data, regression analyses, and other economists'
tools that it literally pays to major in professional and technical fields
rather than in liberal arts.
At the center, Harrington and Sum have been wrestling for years with
one fundamental question: Why do individuals win or lose in the labor market?
"What we've seen," says Harrington, "is that, over time,
as the job content in the economy has changed, the answer to that question
has changed. In 1950, the majority of people that worked were high school
dropouts. Education wasn't a very important determinant of earnings at
that time. But what's happened, particularly over the last twenty-five
years, and particularly in New England, is that the job content in the
economy has really changed. We've seen a tremendous increase in the demand
for people with professional-level skills. And the role of schools in developing
occupational proficiencies has expanded tremendously."
One problem in trying to understand the role of universities and colleges
in preparing students for success in today's labor market has been that,
until now, there has been no reliable information on the earnings of individuals
with degrees in various undergraduate fields of study. The new findings
by Harrington and Sum change all that. Using a database (the National Survey
of College Graduates, commissioned in 1993 by the National Science Foundation)
that includes salary information for more than 111,000 individuals, the
N.U. authors have produced what they call the first "systematic and
reliable estimates of the expected employment and earnings experiences
of college graduates by major field of study." From their study, Harrington
and Sum derive several lessons not only for undergraduates, but also for
the educational institutions that propose to serve them.
The authors' first finding (illustrated by the table on page forty-nine)
is clear: even when other factors are held constant, very large differences-nearly
100 percent at the extremes-exist in the earnings of college graduates,
depending on their major field of study. Seven of the ten most remunerative
majors are in engineering fields (with physics, economics, and pharmacy
occupying the other top slots), while the bottom ten majors consist of
education fields, liberal arts subjects (philosophy and the arts), and
such questionably academic pursuits as home economics and "leisure
studies."
That engineers make a lot more money than schoolteachers is, of course,
already widely rumored among lay observers of the American labor market.
Yet because their study focuses on majors rather than occupations, Harrington
and Sum draw conclusions about the market value of various degrees that,
they argue, are more useful to students and educators than simple rankings
of earnings in different job categories.
In an example of one of their more nuanced findings, the authors disclose
that "higher earnings for college graduates are tied to employment
in jobs that are closely related to the major field of study." They
add, "The size of the earnings disadvantages in the technical fields
for persons working in jobs unrelated to their major fields of study was
particularly large." Thus an engineering major who works in a non-engineering
job, for instance, may earn up to forty percent less than a classmate employed
in engineering.
Of course, money isn't everything in career decisions: "Over half-some
people say two-thirds-of engineering graduates will be pursuing other jobs
ten years after they graduate," says Allen Soyster, dean of the College
of Engineering. Yet Harrington and Sum note that technical and professional
degrees (except in education-arguably a professional field that the American
labor market declines to recognize as such) also enable such mobility.
As Harrington explains, "Students who have undergraduate degrees in
engineering or the biological/health fields can migrate [in graduate school]
into other technical fields, or into nontechnical jobs. But the migration
is only one way. When you look at the pathways out of the social sciences/humanities
areas, they're almost never into technical fields. So these are actually
very narrowing majors."
Harrington argues for the significance of such findings with a simple
point: some educators have touted the value of a liberal arts degree by
making claims about the labor market that have now been proven erroneous.
"Undergraduates have all flocked to the professions," he observes,
"and the proponents of liberal education have said, 'That's all a
mistake,' and that these kids are being wildly misled. But that supposes
this tremendous level of ignorance. What these kids are really following
is a set of labor-market signals that are very clear to them. They see
what happens to friends and relatives, and they read reports about engineering
shortages in the newspaper, and they vote with their feet across fields
of study."
Although undergraduates would appear to be well informed about which
kinds of majors command the highest premiums in the labor market, colleges
and universities have much to learn about how to help their students maximize
the economic returns from their educational investments, according to Harrington
and Sum. Many of the institutional lessons they point to stem from their
study's findings about issues other than choice of major per se.
In one of their key conclusions, for example, the authors state that
"systematic differences in literacy proficiencies [that is, literacy,
numeracy, and "document" skills] across major fields of study
. . . could explain some fraction of the earnings differences among major
fields of study . . . " Sum describes the value of "literacy
proficiencies" in the labor market when he says, "These proficiencies
substantially influence the likelihood that adults will attend college,
complete college, obtain advanced degrees, and secure jobs in the college
labor market. They also strongly influence the annual earnings of college
graduates." Thus, he and Harrington suggest, part of the reason for
engineering majors' high earnings may be the superior quality of their
fundamental skills. The lesson for higher education here is that students
in every field of study will benefit economically if colleges can help
them increase their basic proficiencies.
The researchers emphasize another finding from their study: the importance
of access for college graduates to the "college labor market."
(College-labor-market jobs-those that normally require a college degree-can
be contrasted with such "non-college-labor-market" positions
as receptionist, data-entry technician, salesclerk, waiter/waitress, and
construction worker.) Although the growing earnings gap between the college-educated
and the non-college-educated is becoming well known, it is also significant
that fifteen percent to twenty percent of college graduates-most of them
with degrees in the humanities or social sciences-now fail to secure employment
in the college labor market.
As the new study has found, such workers earn substantially less than
their counterparts in college-labor-market jobs, even if the latter jobs
are unrelated to college majors. As Harrington and Sum see it, this gives
colleges and universities a responsibility to help liberal arts majors,
in particular, gain access to the college labor market.
In general, the two economists would like to see more colleges and universities
acknowledging that, like it or not, students have a right to expect the
schools in which they "invest" to help them reap the highest
economic returns on their investments. These institutions, they say, need
to recognize and act on what Sum calls "the importance of the ability
of graduates in most technical and professional fields to obtain jobs that
utilize the specific skills that they learned in their major field of study,
and for other majors to obtain jobs that are part of the college labor
market."
How can colleges and universities become effective on these terms? Harrington
summarizes his and Sum's prescriptions for higher education with a list
of three requirements. "Strong literacy proficiencies are the sine
qua non for labor-market success," he explains. "So your ability
to raise reading, writing, and math proficiencies really matters a lot.
The second thing is your ability to impart occupational skills that are
in demand. You do this by having a fairly broad mix of professionally oriented
fields of study. And then the third thing is being able to play the role
of labor-market intermediary."
In defining this role of labor-market intermediary, Harrington proposes
an aggressive approach to campus-based placement. "An institution
needs to do a couple of things," he says. "One is, it really
has to understand who its students are, what proficiencies they have, the
kinds of jobs they'd be good at, and the kinds of jobs they wouldn't be
good at. And it has to have long-term relationships with employers in the
local labor market, to be able to call them up and say, 'I've got a great
engineer, he's got a 3.6 GPA, he's just the guy for you. But there's a
lot of companies that want to hire him-I think you need to come in at $55,000.'
It's a kind of direct bartering, negotiating kind of a deal, where the
institution really is a supplier of labor."
Whether it is feasible or desirable for college faculty and staff to
start rolling up their sleeves, picking up the phone, and negotiating compensation
packages for students remains to be debated. Will colleges and universities,
in the hunt for new sources of revenue, take advantage of tight labor markets
to extract commissions as "suppliers of labor"? Will this diminish
the value to these institutions of such economically hobbled horses as
aspiring teachers? Such questions, while promising more grist for the economists'
mills, might also provide educators generally with food for rumination.
For the time being, Harrington and two Northeastern colleagues, economist
Neeta Fogg (also with the Center for Labor Market Studies) and psychologist
Thomas Harrington (no relation to Paul), have pooled some of their latest
research-including material adapted from the new Harrington-Sum study-to
help students make informed decisions about a college major. In a book
titled The College Majors Handbook: A Guide to Your Undergraduate College
Investment Decision (published in December by Jist Works of Indianapolis),
the three scholars offer what they intend as an objective presentation
of both the personal and the economic factors that students should consider
in deciding what to study in college.
Meanwhile, over at the College of Engineering (where two co-op jobs
per student were on offer last spring), Dean Soyster greets Harrington
and Sum's announcement about the monetary value of an engineering degree
with a shrug: "Everybody knows this," he avers. And in making
his pitch to prospective engineering majors, Soyster touts the opportunity
to learn problem-solving skills that are needed in many different occupations.
Indeed, he sounds like nothing so much as a distinctly old-fashioned liberal
arts professor when he opines, "Engineering is a good preparation
for life in general. That sounds a little corny, but it seems to work out
that way."
Figures show: the average annual earnings, in 1997 dollars, for all
individuals with bachelor's degrees in each of fifty-eight fields of study;
and the differences (expressed as percentages) between average earnings
for each major and the average pay of English majors. Earnings figures
are derived from a sample that included more than 111,000 workers of all
ages, who were asked to report their annual salaries in 1993.
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