Archives

Want to be stinking rich? Major in economics.

J Brauer | © Stone Garden Economics

Mirror, mirror on the wall, who is the fairest of them all? Put differently, Which college degree pays off the best? At first blush, the answer is petroleum engineering. According to the PayScale.com’s 2014 College Salary Report, the highest paying bachelor’s degree in the United States is petroleum engineering, with a juicy starting salary of US$103,000. In fact, the top-10, highest paying undergraduate degrees all have the word “engineering” attached to them (petroleum, chemical, nuclear, computer, electrical, aerospace, materials science, industrial, mechanical, and software engineering). At the bottom of the scale of 129 listed college majors sit social work, elementary education, and child & family studies, with average starting salaries of just above US$30,000.

Even in terms of mid-career salaries, the top-30 spots almost entirely belong to the science, math, engineering, and technology fields—if one includes statistics, economics, and finance among the more “mathy” subjects. There are a couple of perhaps surprising exceptions: One is “government,” the other “international relations.” The former is ranked #14 with a mid-career salary of US$97,100, and the latter ranks #28 at US$85,700.

Within the business school environment, the majors stack up as follows, however: economics comes in first place (US$96,700 and at an overall rank of #15), followed by management information systems (#18; US$92,200), finance (#27; U$87,100), international business and supply-chain management (tied at #34; US$83,700), marketing management (#41; US$80,200), advertising (#44; US$79,400), marketing & communication (#46; US$77,600), accounting (#52; US$74,900), and general business administration (#60; US$71,000). Although often located within a mathematics department, or as a stand-alone department, computer sciences can be located in a business school, as it is at my university. The CS graduates achieve mid-career earnings of US$102,000 (rank #8 overall).

But, wait, wait! There is more than one source of information available. While PayScale.com says it that surveys about 1,000 colleges, the National Association of Colleges and Employers (NACE) compiles data directly from the U.S. Bureau of Labor Statistics (BLS) and the U.S. Census Bureau, which offer much richer, more detailed data. The open access part of NACE’s September 2014 report highly aggregates the information, however, e.g., across all business school disciplines, and the interesting detail gets lost. So, let’s turn directly to the BLS. Its latest survey data is from May 2013 and lists hundreds of occupations, including those requiring an undergraduate or graduate school degree, and computes average earnings across all workers in an occupation, regardless of when they finished school. Not surprisingly, medical specialties top the rankings. Imagine, as compared to the MD’s, the average business chief executive comes in only at rank #10 with a median salary of US$171,610. Petroleum engineers are at rank #15 (US$132,320), computer and information system managers rank #17 (US$123,950), followed by marketing managers (#18; US$123,220). If you are interested in the excruciating details, you can download the 80MB file here.

Median and mean earnings are different things. Very high-earning individuals pull the mean above the median. Thus, according to the BLS, for the petroleum engineers the mean annual wage was US$149,180, as compared to the median of US$132,320. But this can be given an additional twist by looking at life-time earnings. As Jordan Weissmann puts it in his reportage in Slate on 29 September 2014: “Want to guarantee yourself a steady, well-paid career? Major in engineering. Want to take a shot at striking it rich? Then major in economics.” Using interactive data from the Hamilton Project which, in turn, is based on Census Bureau data, it turns out that when looking only at the high-end earners within each college degree, economics handily beats all other majors, not only in computer sciences but all of the engineering sciences as well.

The idea is this. In 2013, the mean annual wage among all people with the economics degree was US$101,450. Obviously, the mean hides the variation from the low-earners with an econ degree who make but a piddling amount to the high-flyers with an econ degree who make millions. The same is true, equally obviously, for all other majors. Within each college major, there is variation in earnings. Now, for every given year after graduation, energy and extraction engineers (which include the petroleum folks drilling holes in the ground) on average out-earn both the economics and the computer science folks. The latter two bring in about equal average earnings through the first 20 years post-graduation, and for the remainder of their careers the computer people earn, on average, more than members of the econ tribe. But if one switches perspective and focuses not on the average earnings of a cohort of degree holders and instead focuses on what individual income earners’ bring in over their lifetime, the top-third earners among the econ graduates handily beat out the computer mavens. More amazingly, the top-5 percent of economics graduates out-earn the drilling-holes-in-the-ground people over their lifetime by a cool million dollars: US$7.07 million v US$6.03 million. (A note to the finance folks: Yes, these are present value numbers.) If one includes people with a graduate degree, the top-5 percent of economists pull in lifetime earnings of US$8.04 million while the hole-diggers manage “only” US$6.32 million (and the computer geeks earn less than half of what the economists pull in: US$3.93 million).

As Jordan Weissman says, “Want to be stinking rich? Major in economics.”

J Brauer is Professor of Economics, James M. Hull College of Business, Georgia Regents University, Augusta, Georgia, USA. He is also a Visiting Professor of Economics at the EBA Program, Department of Economics, Chulalongkorn University, Bangkok, Thailand.

Comments are closed.