The Recipe for Making More Money after College, and Two Surprises About STEM and Private Colleges
A recent article in The Economist proposes that students from American colleges can make the most money right after college by attending an elite school and earning a degree in computer science, math, or physics. This finding contrasts with a recent post on this site which suggests that going to an elite school provides less of a financial advantage than many people assume. An important distinction between these studies is the fact that The Economist is looking at salaries one year after graduation, while the National Bureau of Economic Research (NBER) paper, cited in my earlier post, examines salaries about fifteen years after graduation. It could be that graduates from elite colleges get an early financial benefit right out of college, but over time graduates from less prestigious colleges catch up in terms of salary earnings.
Another difference, of course, is that the NBER research is comparing graduates from elite colleges with graduates from good colleges. They do this intentionally because they intend to control for student characteristics. It's very likely that salary earnings may have nothing to do with what a school offers to its students, rather it could simply be that exceptionally smart, able students make more money in life because they are natural achievers. And because of this quality, these students are admitted into elite colleges more often than other types of students. In other words, it's not that Ivy League schools are creating successful individuals, it's that successful individuals are going to Ivy League schools. For example, the student isn't so much going to Harvard because it will make her into a smart person; but rather, she goes to Harvard because that's where the other smart students are and it will signal to others that she is a smart person since our culture believes that only smart people are admitted into Harvard.
The infographic from The Economist appears to compare salary earnings of graduates across the continuum of college selectivity, in other words, from open enrollment schools to Ivy League colleges. The article suggests that computer science, math, and physics graduates from elite colleges, institutions that admit less than one in four applicants, are payed an average of something like $65,000 to $105,000 their first year out of school. This is a much better financial return than graduating with a liberal arts degree from an open enrollment school (institutions that admit 100 percent of applicants). These kinds of graduates, on average, appear to make less than $30,000 the first year out of school.
So if you want to make lots of money fast, The Economist would encourage you to follow this suggested recipe, graduate from an elite college and major in a field like computer science or math. In a previous post I've explained the risk of pursuing a degree like computer science simply for the money. What I want to highlight in this post are the two points the The Economist touches on at the end of its article, but which are not particularly obvious in its infographic. See my video highlight for a quick discussion of these implications.
In a nutshell, they are: 1) A life science degree, like biology, does not lead to a higher salary right after graduation than a liberal arts degree. Hence, not all STEM majors offer an equal financial payoff in terms of expected salaries after college. 2) On average, an expensive college (that is not highly selective) will not propel you to make more money right after college than a less expensive school. If you are chasing after money, don't spend it unnecessarily on an expensive private college that won't increase your salary any better than a more affordable public university.