by Tyler Cowen
on April 9, 2008 at 3:51 pm
in Data Source
Economics comes in 4th, with an average of $43,419.
I don’t think computer programming deserved its own category there (a generic IT position would have been better), but I am glad that use engineers are (justly) rewarded more than you ner’do’well economists 😉
I think the money business pays the most for new graduates … modern measurable marketing, data analysis, operational research, statistics, econometrics … those are the skills that we need.
However this knowledge of maths, of rational analysis, of critical thinking, of problem solving – it is often found in Engineers, hence the finding.
Hal Varian of Google suggested the same thing on Freakonomics.
Do philosophy majors earn less because they don’t see the point in working hard for money? They are, after all, studying philosophy in college. And they may turn down high paying opportunities for the alternative of a light work, light pay, and more time to read and think.
As a former philosophy major who has done just that, I wonder how common such a “career choice” is.
Computer Programming isn’t a major. Perhaps they mean Computer Science or Computer Engineering? Or one of the “business-y” fake computer majors?
Yes, this only has undergraduate degrees. Law school is (almost?) always done as postgraduate work.
Here’s a puzzle:
If there is such a large expected (starting) wage gap between, say, philosophy majors and engineering majors, why would anyone major in philosophy? Since at American schools there is no cost related to choosing one’s major, this seems very odd. Shouldn’t we expect all major choices to be approximately equal in returns, at least in the long term?
I wonder if other social sciences are encompassed in Sociology. It seems the usefulness of in-depth, qualitative methodology is greatly undervalued, in my opinion… Or perhaps economics is greatly overrated.
An interesting comparison is GRE scores. Quantitative scores seem to track pretty well with salary, with the exception notable exception of philosophy. GRE scores here, with philosophy helpfully highlighted
(Full Disclosure: I’m a philosophy undergrad who became an econ graduate student)
It seems that many of the above comments seem to assume that higher-paying majors are more difficult — hence this notion that something like philosophy is “easy.” Can you support this claim?
Is difficulty measured by the grading? (If all but one student in a gym class received “F”s would that make it more difficult than an econ class that had a normal distribution?)
Is it measured by the intellectual difficulty? If so, how is that measured? Hours worked? Even if it’s busy work? Amount of overall thought? How would that be quantified?(I certainly found my undergraduate philosophy classes to be much more difficult than my undergraduate econ classes. For that matter, “soft” sciences and humanities are in many ways more difficult intellectually than “hard” sciences, which have fairly cut-and-dried answers and procedures.)
To be honest, I’m not expecting any enlightened answers to the above questions. In fact, I don’t think there’s much correlation between the difficulty of a major (however it’s measured) and its pay. People don’t choose majors purely on how much they’ll make in the long run. And majors are not rewarded economically because they’re difficult. They’re rewarded because they’re marketable right now (i.e. someone can make money off of the work you do for them because of some skill you have due to the major). And, with some majors, such as business, I think the whole signaling/credentialing aspect of a degree is more true than the skill argument I just made. After all, business is not a very difficult major compared to the majors required for many jobs listed below it, and — though I can’t find the study right now that put business majors below those in the social sciences, hard sciences, fine arts, and other professional programs in terms of their overall cognitive ability — business majors are not exactly known as the brightest bulbs on most campuses.
Is it really easier to major in a subject like philosophy than history, which finished higher up on the list?
As a history major, I don’t think so.
My guess is that the personalities of history majors might excel better in a business environment than those of philosophy.
It’s pretty simple really, wages are positively correlated with how boring a subject is, so that the marginal undergrad will be indifferent between all careers.
To respond to many of these points, but in particular to David Jinkins’s question: “Why would anyone major in philosophy? […] Shouldn’t we expect all major choices to be approximately equal in returns, at least in the long term?”:
I think that, in the long run, the philosophy major will often earn as much as – or more than – the engineering major, if they are motivated by money. The majors at the top of the list have one important thing in common, and it has nothing to do with how difficult or boring the major is: they are the closer on the spectrum to vocational training than humanities or social science (ex. econ) majors are. Engineering and computer science are job skills that can be put to use right away, without significant additional training, and there are lots of companies hiring for those specific job skills. So they start out at close to $50k, but unless they go to b-school they’re unlikely to have significantly increased their income ten years after graduation.
Compare the philosophy or English major – as my English-major friend said during the college job search, “Those English firms just ain’t hiring.” So the English and philosophy types take a hit at the start. But graduate schools highly value what they’ve learned, and they tend to do quite well in law school and b-school. (They also do very well on entrance exams: see the related statement in the NY Times link at the end of this comment.) Many of the best lawyers, and all of the best investment bankers and PE execs, with whom I’ve worked have been social science or humanities majors. Philosophy majors in particular stand out. My subjective experience has been the same: of my college friends, those with the highest incomes were, without exception, humanities or non-econ social science majors. The comp sci, econ and engineering majors made way more right out of school, but they were passed by long ago.
I also would imagine that humanities majors are more likely to go into professional school – perhaps since they’re earning less and so have more to gain long-term, and less opportunity cost – but I don’t know whether statistics back that up.
Finally, don’t discount the fact that some people just like the education for its own sake and don’t choose majors based on income-related considerations at all. So to really determine the answer to your question, the returns would need to be measured by something more than just income.
How ’bout this.
Starting salary correlates pretty well with specialization.
The high starting for engineering is a bit of a trap, I think due to the high specialization. It’s risk vs. reward. You are guaranteed a good salary as an engineer, but your specialization, especially after a few years of employ, limits the number of customers. So, you flat-line pretty fast.
A philosophy major has almost no immediate customers, but their doors are wide open for future specialization. So, some turn out to be billionaires and some end up working in the used record store.
It’s not a tight correlation. I for example knew I didn’t want to do engineering, but took it because it was hard and provided a “margin of safety.” I’m much more interested in econ and philosophy as a calling. Engineering pays the bills.
Okay okay, really the last thought.
Off topic, way off topic, but I went to the Hal Varian post referenced by R N B and read this.
Q: In 2001, you wrote, “The reason for the California electricity crisis can be summed up in four words: demand grew, supply didn’t.† Given the evidence of market manipulation by Enron and others, do you still think the reasons were benign market forces, or something more sinister?
A: I think that the failure to invest in generation and transmission facilities led to a system that operated very close to capacity. This allowed for unscrupulous traders to push the system over the edge on some occasions. As such, I would still argue that it was lack of capacity expansion that created the environment that enabled manipulation.
To me, this sounds like a brilliant observation, which explains some of the constant political conflict. Supply-tight periods on commodities amplify the marginal impact of a few, normally insignificant, misanthropes. Consider the ubiquitous price gouging debates after every crisis. The real problem is getting close to the edge of the cliff, not the little nudge that pushes us over. But it’s always the nudge that gets all the attention. Seen versus unseen all over again.
To me Econ is a nice mix of good starting salary and good longterm upside.
It requires both quantiative and some verbal reasoning skills, provides some tools that you can use immediately but also some theory and general knowledge. Is intellectually difficult enough to seperate you from the pack but is not really that much work like engineering.
Plus it sets you up for a business/finance/consulting type career that pays well or a government job with relatively high earnings and lots of perks. Plus it is good training for a number of greaduate programs.
I started school as a math major and transfered to econ. I regreted it for a while (even though I really enjoyed econ) but now I am really glad with the choice. My wife an engineering grad agrees with me. She thinks Econ is a great major and kind of wishes she had done something other than engineering even though she has had a really nice career so far.
I must have been hedging my bets…I have a CS degree with a Philosophy minor. The philosophy doesn’t come up much at work, but can get philosophical about how much money I make.
One final comment here – I agree with many of those above.
But I am not joining with all those who compare final engineers’ salaries with other professions, I think that point is less relevant, as are the exceptional self-made billionaries, and I don’t want to enter discussions about whether physics is harder than philosophy.
The engineering degree, if from a respected institution, is a signal to the business world that the graduate can apply theoretical algorithms to real world problems, can crunch the hard numbers, can analyse a lot of variables and rationally draw the optimal conclusions. Those are skills that Hal Varian wants at Google and those are skills that investment banks want in hedge fund management.
bcv: the description posited of IB types is not my own – I know precious few – but that of some Wall Street quants I know, who do work with i-bankers. They generally perceive that they do all the heavy lifting (valuations, etc.) and the bankers get the publicity and big bonuses for merely being the “deal-makers”.
Welcome to our company which sells all kinds of cabal online alz.
It seems we will be in economy ression for quite a long time. We can see the economy crisis effect everywhere.
Check out payscale.com, a salary tracker company. They checked salaries at both the three year mark and the 15 year mark (without graduate degrees). Engineers (and CS) start at 60k and go to 100k with time. Philosophy majors start at 40k and go to around 80k. Business Admin Majors start at 45k but only get to around 65k. Chem/Bio majors(without graduate) start at 40k and cap at 50k. English starts at 40 and doesn’t go anywhere
Engineering > Philosophy> Business> science> English
You do the math
Comments on this entry are closed.
Previous post: Sebastian Mallaby on hedge funds
Next post: Jacqueline Passey resumes blogging
Email Tyler Cowen
Follow Tyler on Twitter
Email Alex Tabarrok
Follow Alex on Twitter
Subscribe in a reader
Follow Us on Twitter
Marginal Revolution on Twitter Counter.com
Get smart with the Thesis WordPress Theme from DIYthemes.