They find that majoring in economics causes students’ earnings during their mid-twenties to rise by $22,000 per year, or 46%. The results show that simply choosing the economics major over alternatives in the social sciences is one of the best investments a person can ever make. The $22,000 earnings bump is comparable to the raw gap between economics majors’ earnings and those of other social-science majors, suggesting these differences are almost entirely due to students’ choices, not inherent differences in earnings potential.
The authors figure that majoring in economics unlocks access to jobs in high-paying industries, such as finance, insurance, and accounting. It’s unclear whether this is because economics classes teach skills that employers in these industries consider useful, or whether employers simply value the economics major as a signal of the student’s competence and ability. For students at least, the question is academic, because majoring in economics will secure them higher earnings either way.
The study has limitations. It only analyzes the economics major, so the findings may not be applicable to other high-earning majors such as engineering and nursing. Moreover, UCSC’s proximity to wealthy Silicon Valley may unlock job opportunities for economics graduates that are not available to students at most other universities. Nevertheless, the evidence is strong that choosing a major is a critically important financial decision for students.
That decision is becoming ever more important as new evidence emerges that a significant minority of college degrees do not justify the cost. Some programs even leave graduates with a student debt burden higher than their annual earnings. While college is a good investment on average, that average belies substantial differences in earnings potential across programs. Low-value college majors undermine the promise of higher education as a pathway into the middle class.
The good news is that students seem to have control over their future earnings potential and can influence their career outcomes with the choices they make in college. Our task is to ensure that relevant information on earnings differences across majors gets into their hands. Hopefully, the Bleemer-Mehta study will beget more research on the financial returns to choice of major.