Wanna be a Part of the 1%? Study Economics

Catherine Rampell of the New York Times has a nice little post on what the 1% majored in.  A little surprising to me is how big a percentage are economics majors.  But this is undergraduate degrees and lots of econ majors go into business, finance, law, etc.  Still the market has spoken about the utility and value of economics training (let the snark fest begin)!  Here is Rampell's table.:

Undergraduate Degree	Total	% Who Are 1 Percenters	Share of All 1 Percenters
Health and Medical Preparatory Programs	142,345	11.8%	0.9%
Economics	1,237,863	8.2%	5.4%
Biochemical Sciences	193,769	7.2%	0.7%
Zoology	159,935	6.9%	0.6%
Biology	1,864,666	6.7%	6.6%
International Relations	146,781	6.7%	0.5%
Political Science and Government	1,427,224	6.2%	4.7%
Physiology	98,181	6.0%	0.3%
Art History and Criticism	137,357	5.9%	0.4%
Chemistry	780,783	5.7%	2.4%
Molecular Biology	64,951	5.6%	0.2%
Area, Ethnic and Civilization Studies	184,906	5.2%	0.5%
Finance	1,071,812	4.8%	2.7%
History	1,351,368	4.7%	3.3%
Business Economics	108,146	4.6%	0.3%
Miscellaneous Psychology	61,257	4.3%	0.1%
Philosophy and Religious Studies	448,095	4.3%	1.0%
Microbiology	147,954	4.2%	0.3%
Chemical Engineering	347,959	4.1%	0.8%
Physics	346,455	4.1%	0.7%
Pharmacy, Pharmaceutical Sciences and Administration	334,016	3.9%	0.7%
Accounting	2,296,601	3.9%	4.7%
Mathematics	840,137	3.9%	1.7%
English Language and Literature	1,938,988	3.8%	3.8%
Miscellaneous Biology	52,895	3.7%	0.1%

The Market Value of College Majors

From the new report out of Georgetown University entitled "What's it Worth" comes a mountain of data about the market value of college majors.  Not surprisingly economics does very, very well.  It is not surprising because lots of previous data has shown economics to be a very valuable major and because of the skills that are developed in the course of an economics training - quantitative, analytic and expository - that are both rare and valuable across many professions.

Here is a look at the general data.  As usual, engineering comes out on top.  A fine and valuable skill and profession is engineering, but we often see engineering students who are quantitatively skilled but looking for some more social applications migrate to economics (and no doubt the reverse is true as well).

Social science is lower in general in the more general rankings, but when you break them up, you see the ascendance of economics as shown in the chart below. This doesn't show income for graduate degrees as in the one above, but the report says that there is a 50% salary bump in the data suggesting a $105,000 median income which is even better than engineering.

You might think that business would be even better (it is so applicable!), but you would be wrong. In fact the only business degree that is better is business economics. The rest are all worse than straight economics - probably because they don't emphasize the rigorous quantitative and analytical training that economics does that the market has determined is so valuable. The good news is that the OSU Economics Department offers both straight economics and business economics, which we call "Managerial Economics" because the business college wouldn't let us call it by its more common name. And you can get both of these degree options on line!

Having said all of this, I DO NOT suggest choosing a major based on market value, because a lot of what you are seeing is also a compensating wage differential. There are many people who are passionate about working in other areas that don't pay as well and are better off for following their passion than their checkbook.  Such folks are happy to make the trade off of a lower wage for a more personally fulfilling career.

Still if economics is your passion, it turns out to be a pretty good major choice both in terms of the likelihood of finding a job and of being paid well.

Why You Should Be an Economics Major

For those of you getting ready to go off to college (perhaps to OSU) and still wondering what to study, here are some data:

Best Undergrad College Degrees By Salary

Methodology Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

See the full report here. HT: Greg Mankiw, who notes that this is not necessarily value-added since it does not control for self-selection. For example studies have shown that more attractive people do better in the job market and everyone knows that the most attractive college students are always the econ majors. Oh, and it also does not account for people who got a degree in these fields and are unemployed. So, for example, Aerosopace engineering may be incredibly lucrative, but only for those who can actually land a job (get it? ... 'land' a job ... I crack myself up) - jobs are scarce. So, you'll be happy to know that the employment rate for econ majors is very good.

And what can you do with your degree? Here is a list of the most popular choices and the median salary:

Popular Jobs for Economics Degree

Methodology Jobs ranked by popularity among graduates. Annual pay for Bachelors graduates without higher degrees from all colleges. See full methodology for more.

Why Study Economics?

As an undergraduate at a small liberal arts college (Lewis & Clark), I studied economics.  I am very glad I did, but when I think back about the things my undergraduate education provided me that I find particularly valuable today, it has little to do with the specific economics content and more to do with the well-rounded liberal arts education in general.  First and foremost, the amount of writing I had to throughout my undergraduate career was invaluable.  As I progressed through graduate school at Wisconsin and then Cornell, I found that my comparative advantage in writing was pronounced and helped me succeed.  As a research economist, I have come to appreciate that, now matter how good the underlying research is, a research paper is only as good as the writing.

I also appreciate the exposure I got to many different ways of viewing the world.  L&C at the time had a core curriculum that emphasized critical thinking and I took courses in many different subjects that forced me to first understand how each discipline analyzed the world and then think critically about this particular way of looking at the world.  These writing and critical thinking skills formed the bedrock of my education, without which subsequent investments in my education would have been worth a lot less.

But that doesn't mean I regret being an economics major, in fact the opposite it true.  In addition to being a subject that interested me, Economics taught me to think logically and precisely.  When I started to focus on international development, I appreciated this level of intellectual rigor for a subject where there was an endless supply of 'good ideas' but a dearth of critical analysis.

This is all to say that I think this article in the Chronicle of Higher Education by David Colander about the popularity of the economics major at liberal arts colleges has it just right. [HT: Greg Mankiw]  In it Colander makes this statement:

Companies like to hire economics majors from liberal-arts colleges not because the students have been trained in business, but because they have a solid background in the liberal arts. What I hear from businesspeople is that they don't care what a job candidate has majored in. They want students who can think, communicate orally, write, and solve problems, and who are comfortable with quantitative analysis. They do not expect colleges to provide students with specific training in business skills.

I try and tell my OSU students this, but most choose Business anyway as they see it as a more useful major and a lot easier.  It is true that the econ major is hard, at my last job the economics department had the second lowest GPA in its classes (Physics had the lowest), but for me as a student this was part of the point.  I was intimidated by it but I wanted to challenge myself as an undergraduate and I think this too served me very well - it forced me to become a much better student which helped me a lot in graduate school.  Colander's research shows that rigor is a motivation for other students as well.

Consider the results of another question in my survey. We asked economics students to identify majors as hard, moderate, or easy, and we found that 33 percent viewed economics as hard, 3 percent said sociology was hard, 7 percent saw psychology as hard, and 13 percent thought political science was hard. Since other social sciences were the primary alternative majors that most of the economics students considered, that data is compelling evidence that the respondents perceived those other majors as too easy. Students likely reasoned that taking a "too easy" major would signal to potential employers that the student had chosen an easy path through college, thereby hurting their chances of being hired.

In my current job I see students that consistently eschew hard courses and majors for what they deem as more practical and more marketable alternatives.  This is part of what I perceive as a general moving away from the liberal arts based undergraduate education to a more vocational approach at large state universities.  I think we need to do a better job informing the students that this may not be the best long-term strategy and that basic skills in writing and math are incredibly valuable assets that you keep with you your entire life - especially as the economy evolves and the vocation you trained for as an undergraduate may not be there for you in the future.

Econ Major

There are many reasons to choose a major and at my undergraduate institution marketability and earning potential were definitely not considered good reasons.  Nevertheless, the economics major appears to endow students with a set of skills that the market values highly.  What I like about economics is the variety of things you can do with it.  It is not an easy major - when I was at the U of Colorado, economics and physics classes had the lowest grade point averages - but the effort is well worth it.

Returns to Majoring in Economics

You'll have to live with the stigma of being considered boring and part of a prefession that tortures undergrads, and you'll never get invited to a party, but at least in terms of average starting salary, economics is a pretty good choice (from CNN Money):

The average starting offer for seniors majoring in:

Economics: $51,631
Finance: $47,905
Marketing: $41,323
Business Administration: $43,523
Mechanical engineering: $54,587
Chemical engineering: $60,054
Management information systems: $46,568
Civil engineering: $47,145
Electrical engineering: $54,599
Computer science: $51,070
Accounting: $46,508
Logistics/Materials management: $43,294
Liberal arts (including psychology, political science history, English): $30,502

OK, so maybe engineering is more lucrative, but then there is the compensating wage differential to consider - economics is fun!