It was the beginning of my sophomore year when I changed my major from Marketing to Political Science, and fled the School of Business for the comforting embrace of the College of Liberal Arts. This choice, while a welcome change for me, caused a significant amount of hand wringing and anxiety for my parents.
In my own life, and as an admissions volunteer for my college’s honors program, I’ve found that there’s a particular brand of middle class angst surrounding major selection. Parents fear that if their children don’t choose the right major – one that’s likely to lead to a job, or to a well defined professional path like law or medical school – the family will lose its tenuous grasp on the American dream, risking financial and personal calamity. It’s a fear that’s not unrealistic, given the downward trajectory of upward mobility in the new gilded age.
Despite the fact that it’s a realistic fear, I scoffed at it with an overconfidence known only to current liberal arts students. Of course it didn’t matter whether or not I stayed in the business school.
Well, mom and dad, according to a new working paper by the National Bureau of Economic Research, you may have been right all along! My bad.
What’s In a Major?
Of course we’ve all seen articles smugly shared by our STEM counterparts showing their majors dominating median earnings lists, with maybe a space reserved in the top ten for finance. But these lists, while common, don’t show definitively that it’s the major that makes the money. After all, we know that certain majors tend to attract students with higher pre-college test scores and grades. These stats could simply be the result of a selection bias, showing that students likely to earn more are also more likely to choose those majors.
This paper uses data from the University of Texas at Dallas Education Research Center, and tries to isolate the impact of choosing a business major on earnings. To do this, researchers Rodney Andrews, Scott Imberman, and Michael Lovenheim exploit the fact that there’s a GPA cutoff for business majors at certain schools. By measuring the earnings of students just above and below the threshold, they can find what effect choosing a business major has on otherwise similar students.
A – Always, B – Be, C – Choosing (Business)
Those GPA cutoffs proved to be a great natural experiment. The researchers found that for students who didn’t initially major in business, those who were above the cutoff were 71% more likely to end with a business major than those below the threshold. They paired the university data with earnings information provided by the Texas Workforce Commission, and found that choosing a business major causes as 127% increase in earnings twelve or more years after enrollment.
And so with the caveat that this is just one paper observing only students in Texas with GPAs approaching arbitrary cutoffs, I admit that there is research that suggests I may have been wrong when I told my parents it didn’t matter that I changed my major.
But I’d also note that I wasn’t in the habit of reading NBER research papers back when I was a business major.
(Photo by Joe Campbell)
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