Written by: Donald Heller
Primary Source: The Dean’s Blog
If you use Yahoo for e-mail or other purposes, you will likely find yourself at some point on one of Yahoo’s landing pages that includes a cornucopia of teaser headlines. The other day, one in particular caught my attention: “Six foolish majors to avoid.” It was the word “foolish” that piqued my curiosity, so I clicked on the link.
The article listed the six foolish majors, and for each it listed an alternative major suggested as better for students. For example, rather than majoring in economics (one of my undergraduate degrees), Yahoo recommends majoring in business administration. Forget political science (my other undergraduate major); Yahoo says to go with criminal justice as an alternative. Psychology? Nope. Go for social work instead.
The criteria used for labeling the majors as “foolish” are taken from a report issued by the Center on Education and the Workforce at Georgetown University. The report, “Hard Times 2013: College Majors, Unemployment and Earnings,” looks at the unemployment rate and median earnings of people holding degrees in different fields. The data are taken from the U.S. Census Bureau’s American Community Survey in 2010 and 2011, at the height of the recession.
The Yahoo story asserted that students should avoid these six majors because the unemployment rate of recent college graduates (the label applied by the Georgetown report to those ages 22 to 26) holding these degrees is higher than for the alternative major it listed. At first glance, this may seem like a logical recommendation. After all, who wants to choose a major if you end up with a greater chance of being unemployed after graduating?
This first glance, however, is faulty for a number of reasons. Here are just a few:
- While it may be true that each of the alternative majors had lower unemployment rates among recent college graduates than did the “foolish” majors, the alternatives did not necessarily offer higher earnings. So it is true, for example, that among people ages 22 to 26, those holding business administration degrees had a lower unemployment rate (7.8%) than those with economics degrees (10.4%). What the Yahoo story does not say, however, is that the Georgetown report indicated that the economics majors had median earnings $10,000 greater than those for business administration students–$46,000 vs. $36,000. You may say to yourself, “Well, what good is it to have a chance at higher average earnings if my chances of holding a job at all are lower?” But the right way to approach it is to compare the projected earnings conditional on the probability of being employed for each major. For business administration, the conditional earnings are $33,192 (median earnings of $36,000 times the 92.2% chance of being employed). For economics majors, it is $41,216 ($46,000 times 89.6%).
- The Georgetown report also lists unemployment and median earnings for what it labels “experienced college graduates,” those between the ages of 30 and 54. And for some of the major pairs they compare, the earnings of these older workers are higher, and the unemployment rates lower, or similar, for the “foolish” majors than for the Yahoo alternatives. Among these more experienced workers, psychology (6.6%) and social work (6.5%) majors had similar unemployment rates. But those holding psychology degrees earned on average $50,000, compared to $41,000 for those with social work degrees.
- To borrow a favorite phrase of investment managers, “Past returns are no guarantee of future performance.” The recent college graduates were entering the labor market right before the onset of the recession, or right in the middle of it. Students who are 18, 19, or 20 years old and choosing a major today will be looking for jobs in a very different economy than the earlier cohort. Their labor market experiences, including their unemployment rates and average earnings, may be very different. And the experiences of each major may differ relative to their paired Yahoo alternative, i.e., for students in college and choosing majors today, social work majors may end up with higher unemployment rates than will psychology majors in their first few years in the labor market. We simply don’t know what will happen, so making recommendations into the future based on past experiences provides no guarantee.
Next to each of the suggested alternative majors in the Yahoo story, there is a button labeled “Find Programs” that the user can click, and this provides the reader with the real reason for the story. Clicking one of these links takes the user to a lead aggregator website. These are websites (there are scores of them on the web) that seek to funnel prospective students to colleges, usually for-profit institutions.
As with much of what you read on the web, the bottom line is caveat emptor.
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