In Part 1 of this series of blog posts, I said that the question of the worthiness of investing in a college education was best addressed by looking at four discrete concerns: high cost, high debt, scarce jobs, and low graduation rates. In Part 2, we looked at the first concern, that too many families were finding that a college education had become too expensive. In Part 3, we analyzed the student debt “bubble.” This week, we’ll examine the concern that too many college graduates can’t find well-paying jobs.
There are too many unemployed or underemployed college graduates who are not earning enough to pay back their debts.
Let’s start by acknowledging the obvious: Not all college degrees confer the same economic benefit to the graduate. Ease of finding employment and the size of the starting salary vary enormously from major to major, but surprisingly they vary only a little due to the reputation of the college or university.
To illustrate: a recent report from College Measures (“Higher Education Pays: But a Lot More for Some Graduates Than for Others”) looked at the earnings of graduates from five geographically dispersed states, and found that “earnings vary widely among graduates from the same school who have chosen different majors.” One of the conclusions of the study was “what you study matters more than where you study,” the point being that the choice of major was far more significant in determining earnings than was the reputation of the institution.
The importance of the choice of the major in influencing starting salaries was the subject of an article in The New York Times (“A College Major Matters Even More in a Recession,” June 20, 2014). Majors in high demand in the job market enjoy an economic premium during a recession, insofar as their earnings are higher relative to normal economic times. Graduates in economics, finance, and computer programming, for example, earn salaries five to eight percent higher than graduates with the same major in a normal economy.
Unfortunately, graduates in low-demand majors such as music, drama, and philosophy, who, even in normal economic times, will earn as much as 40 percent less than the average salary among all college graduates, suffer even more during a recession, with starting salaries from ten to twelve percent less than those with the same major who graduated in normal economic times.
Liberal arts graduates are often chosen to illustrate the absence of an immediate financial payoff for having a college degree. They are sometimes even objects of ridicule—witness President Obama’s derision of Art History majors, or Florida Governor Rick Scott’s disparagement of Anthropology majors.
But let’s not get too discouraged. Consider the following:
- The struggle for liberal arts majors to get their careers under way is nothing new. By the time liberal arts majors are in their 40s, the salary differential with graduates of most professional programs has largely, or entirely, disappeared (in part because liberal arts majors are more likely to obtain graduate degrees than are those who majored in professional programs—and graduate degree holders are generally more handsomely compensated). Comparing lifetime earnings, and not starting salaries, is the fairer way of properly assessing the economic value of different majors.
- At the same time, employers have far less incentive than they did in better economic times to spend money and time training new hires when they can find people with a good education and experience in the job market.
A Bloomberg report (“College Graduates Struggle to Find Employment Worth a College Degree,” June 5, 2014) quoted an employers’ consultant: “Because it’s such a buyer’s market for employers, they get graduates who will work for less money and for more hours.”
Conclusion: liberal arts graduates who have never had a job of any kind, who lack any auxiliary professional or practical skills, or who missed the chance to have an internship often get bumped to the back of the employment line. Colleges and universities should be far more proactive in helping undergraduate students gain experience in real world settings, using knowledge acquired from their major.
- The fact remains that college graduates are far more likely to be employed than are those with just a high school diploma. Quoting from an editorial in The New York Times (February 12, 2014), “The recent jobless rate for college graduates ages 25 and older was 3.2 percent, and their median pay at full-time, full-year jobs was $75,300 for men and $53,700 for women.”
When faced with a choice, employers will almost always choose the college graduate over the high school graduate. Some college graduates may be working in jobs that historically have been the province of those with just a high school education—but they have a job, they are getting experience, and they are preparing for their careers, while those with just a high school diploma are squeezed out of the job market entirely.
In “Do the Benefits of College Still Outweigh the Costs?”(Federal Reserve Bank of New York, June 2014), the authors found that “most college graduates work their way into college-level jobs by the time they reach their thirties,” although about one-third “spend much of their careers in jobs that typically do not require a bachelor’s degree.”
The overarching point is that a college degree creates the opportunity—even the likelihood—of finding a well-paying job—but it is not a guarantee of finding such a job, irrespective of major.
College students who choose to major in the liberal arts must recognize that their starting salaries (not their lifetime earnings) are likely to be lower than their fellow students who are majoring in STEM fields, and adjust their expectations accordingly. They need to pay close attention to the size of their student loans (and they should avoid private loans if at all possible), and they should very seriously consider internships and/or minors in professional programs during their college years. But the idea that they are somehow economically forever doomed, because they chose the wrong major, is erroneous.
Next week: if you decide to go to college, it is imperative that you graduate.