There’s been a lot of talk among economists and others lately about declining wages for college graduates as a group (for example: Arnold Kling, Michael Mandel, and Tyler Cowen) and males in particular. Mandel says:
Real earnings for young male college grads are down 19% since their peak in 2000.
Real earnings for young female college grads are down 16% since their peak in 2003.
See the pretty graphs at the links. These accounts are interesting but don’t emphasize, or don’t emphasize as much as they should, student choice in college majors and how that affects earnings. In “Student choice, employment skills, and grade inflation,” I said that colleges and universities are, to some extent, responding to student demand for easier classes and majors that probably end up imparting fewer skills and paying less. I’ve linked to this Payscale.com salary data chart before, and I’ll do it again; the majors at the top of the income scale are really, really hard and have brutal weed-out classes for freshmen and sophomores, while those at the bottom aren’t that tough.
It appears that students are, on average, opting for majors that don’t require all that much effort.
From what I’ve observed, even naive undergrads “know” somehow that engineering, finance, econ, and a couple other majors produce graduates that pay more, yet many end up majoring in simple business (notice the linked NYT article: “Business majors spend less time preparing for class than do students in any other broad field, according to the most recent National Survey of Student Engagement [. . .]“), comm, and other fields not noted for their rigor. As such, I wonder how much of the earnings picture in your graph is about declining wages as such and how much of it is really about students choosing majors that don’t impart job skills of knowledge (cf Academically Adrift, etc.) but do leave plenty of time to hit the bars on Thursday night. Notice too what Philip Babcock and Mindy Marks found in “The Falling Time Cost of College: Evidence from Half a Century of Time Use Data:” “Full-time students allocated 40 hours per week toward class and studying in 1961, whereas by 2004 they were investing about 26 to 28 hours per week. Declines were extremely broad-based, and are not easily accounted for by compositional changes or framing effects.”
If students are studying less, maybe we shouldn’t be surprised that their earnings decline when they graduate. I can imagine a system in which students are told that “college” is the key to financial, economic, and social success, so they go to “college” but don’t want to study very hard or learn much. They want beer and circus. So they choose majors in which they don’t have to. Schools, in the meantime, like the tuition dollars such students bring—especially when freshmen and sophomores are often crammed in 300 – 1,000-person lecture halls that are extraordinarily cheap to operate because students are charged the same amount per credit hour for a class of 1,000 as they are for a seminar of 10. Some disciplines increasingly weaken their offerings in response to student demand.
Business appears to be one of those majors. It’s in the broad middle of Payscale.com’s salary data, which is interesting given how business majors presumably go into their discipline in part hoping to make money—but notice too just how many generic business majors there are. The New York Times article says “The family of majors under the business umbrella — including finance, accounting, marketing, management and “general business” — accounts for just over 20 percent [. . .] of all bachelor’s degrees awarded annually in the United States, making it the most popular field of study.” That’s close to what Louis Menand reports in The Marketplace of Ideas: “The biggest undergraduate major by far in the United States is business. Twenty-two percent of all bachelor’s degrees are awarded in that field. Ten percent of all bachelor’s degrees are awarded in education.” If all these business majors graduate without any job skills, maybe we shouldn’t be all that surprised at their inability to command high wages when they graduate.
I’d like to know: has the composition of majors changed over the years Mandel documents? If so, from what to what? Menand has some coarse data:
There are almost twice as many bachelor’s degrees conferred every year in social work as there are in all foreign languages and literatures combined. Only 4 percent of college graduates major in English. Just 2 percent major in history. In fact, the proportion of undergraduate degrees awarded annually in the liberal arts and sciences has been declining for a hundred years, apart from a brief rise between 1955 and 1970, which was a period of rapidly increasing enrollments and national economic growth. Except for those fifteen unusual years, the more American higher education has expanded, the more the liberal arts sector has shrunk in proportion to the whole.
But he’s not trying to answer questions about wages. Note too that my question about composition is a genuine one: I have no idea of what the answer is.
One other major point: if Bryan Caplan is right about college being about signaling, then there might also be a larger composition issue than the one I’ve already raised: people who aren’t skilled learners and who don’t have the willingness or capacity to succeed after college may be increasingly attending college. In that case, the signal of a college degree isn’t as valuable because the people themselves going through college aren’t as good—they’re on the margins, and the improvement to their skillset is limited. Furthermore, colleges universities aren’t doing all that much to improve that skillset—see again Academically Adrift.
I don’t know what, if anything, can be done to improve this dynamic. Information problems about which college major pay the most don’t seem to be a major issue, at least anecdotally; students know that comm degrees are easy and other, more lucrative degrees are hard. There may be Zimbardo / Boyd-style time preference issues going on, where students want to consume present pleasure in the form of parties and “hanging out” now at the expense of earnings later, and universities are abetting this in the form of easy majors.
This is the part where I’m supposed to posit how the issues described above might be improved. I don’t have top-down, pragmatic solutions to this problem—nor do I see strong incentives on the part of any major actors to solve it. Actually, I don’t see any solutions, whether top-down or bottom-up, because I don’t think the information asymmetry is all that great and consumption preferences mean that, even with better information, students might still choose comm and generic business.
Mandel ends his post by saying, “Finally, if we were going to design some economic policies to help young college grads, what would they be?” The answer might be something like, “make university disciplines harder, so students have to learn something by the end,” but I don’t see that happening. That he asks the question indicates to me he doesn’t have an answer either. If there were one, we wouldn’t have a set of interrelated problems regarding education, earnings, globalization, and economics, which aren’t easy to disentangle.
Although I don’t have solutions, I will say this post is a call to pay more attention to how student choices and preferences affect education and earnings discussions.
EDIT: See also College has been oversold, and pay special attention to the data on arts versus science majors. I say this as someone who majored in English and now is in grad school in the same subject, but by anecdotal observation I would guess about 75% of people in humanities grad schools are pointlessly delaying real life.