Does going to college make economic sense? How much does the answer to that question depend on the college major you choose?
A new study by Temple University economist Douglas Webber calculates the lifetime earnings premium accrued by college graduates in various subject areas, relative to the earnings of high school graduates with no college attendance. Webber corrects for “selection bias”—that is, for the fact that people who are intrinsically (due to any number of factors) more likely to earn more are also more likely to go to college. The conclusion: Even when selection bias is corrected for, college still makes economic sense, and the benefits are larger in some areas of study than in others. (STEM majors did especially well.) Webber provided Science Careers with an exclusive glimpse at data that fill out the big picture, including lifetime earnings by specific major. It’s a fascinating analysis with many interesting and surprising results, so read on.
Over their lifetimes, graduates with majors in science, technology, engineering, and mathematics (STEM) can expect to earn far more than high school graduates with no college attendance, with an earnings premium of $1.5 million over and above the $1.73 million that high school graduates with no college attendance can expect to earn.
Over their lifetimes, graduates with majors in science, technology, engineering, and mathematics (STEM) can expect to earn far more than high school graduates with no college attendance, with an earnings premium of $1.5 million over and above the $1.73 million that high school graduates with no college attendance can expect to earn. Business majors do slightly worse than STEM majors, with a lifetime earnings premium of $1.4 million. Social scientists stake out the middle ground, earning $1.05 million more than noncollege high school graduates over a lifetime. Arts and humanities majors can expect to earn about $700,000 more, on average, than high school graduates with no college attendance.
Webber ran the numbers both ways: with and without correcting for selection. Without correction, the simulation showed that STEM majors could expect an even larger lifetime earnings premium: $2.2 million more than high school graduates with no college attendance, instead of $1.5 million.
Webber studied three separate cohorts, born in the decades following 1955, 1965, and 1975, respectively. He found that earnings have improved considerably for most college majors—but the gains in STEM fields are surprisingly small. For example, the most recent cohort of arts and humanities majors can expect to earn in excess of 50% more than the earliest (1955) cohort. For social science majors, the increase in lifetime earnings is about 40%. The latest cohort of STEM majors, though, will earn just 14% more than the 1955 cohort of STEM majors.
Webber’s selection correction says, in effect, that those with the propensity and ability to major in STEM can expect to earn a premium over other high school graduates, even if they don’t go to college. It follows that those who have a propensity to go to college and to major in a STEM field—and then actually do so—could expect to earn the uncorrected lifetime earnings premium. (I wasn’t sure about this interpretation, so I sent Webber an e-mail. “I think you are spot on,” he replied.)
Using the corrected values for STEM in Table 8, we see that the college premium for STEM majors has increased by about 27% from the first cohort to the last—a significantly larger increase than the 14% reported above in the growth of total lifetime earnings.
Caveats first: Sample sizes are now smaller, so these estimates are less precise than those for the broader fields: STEM, social sciences, and so on. Also, the correction factor used for specific majors was calculated for all STEM fields together (not field by field). Finally, these numbers—like all the numbers in this article—do not factor in the costs of college: tuition, servicing student loans, and so on. Webber presents those numbers (by major category) in his Table 4.
The numbers in the table above, for all STEM graduates and for high school graduates, are much smaller than the numbers that include men (e.g., about $3.5 million for men in STEM fields, compared to $3.05 million in all fields). We have no information about how much of this difference is attributable to discrimination and how much to fertility-related working-pattern differences.
There’s a lot that’s interesting here, but the big-picture result is that even in times when it can seem difficult to get a job in most fields, a college STEM degree remains valuable. The closest thing to an exception is biology, where a degree still results in a substantial lifetime-earnings premium, but one that’s less than in some non-STEM fields.
Hat tip: . The Chronicle has an interview with Webber, here.
Why were women excluded? Using only men in the study is, Webber writes in the article, “consistent with many labor market studies.” However, “[t]his is a particularly important restriction for this study given the relatively weaker labor force attachment of women in the 1979 cohort of the [National Longitudinal Survey of Youth], and the drastic differences in major choice among women (e.g. STEM fields) relative to today.” Webber elaborated in an e-mail: “Sample size limitations prevent me from doing things separately by gender. Putting them together but not dealing with issues such as discrimination and fertility will just give me the wrong answer for everyone. Thus, I look only at men so that I can get the ‘right answer’ for at least some subgroup of the population. This is much more important though for some of the in-depth questions in the review process, and much less important for the top-line numbers that I am giving to you.”