Undergraduates Buck the Law of Supply
The “free college” drumbeat rolls on, with Vice President Joe Biden joining the chorus last week in his call for sixteen years of free public education. Senator Bernie Sanders (I-VT) took to the pages of the Washington Post to reiterate his call for tuition-free public college. Sanders claimed that free college would be “the driver of a new era of American prosperity.”
Sanders correctly notes that those with bachelor’s degrees undoubtedly earn more than their counterparts with only high school degrees. However, not all bachelor’s degrees are created equal. Some fields of study, such as engineering and computer science, will lead to much higher lifetime earnings than others, such as art or music.
A report from the Georgetown University Center on Education and the Workforce provides data on the popularity of 137 college majors relative to their expected annual earnings. In theory, college students should adhere to the Law of Supply, and higher-paying majors should be more popular. But in reality, there is almost zero correlation (an R-squared value of -0.0009, to be exact) between the popularity of a major and how much it pays.
The most lucrative major, with $136,000 in median annual earnings, is petroleum engineering. But only four out of every 10,000 college graduates majored in that subject. Meanwhile, several of the most popular majors—including psychology (404 majors per 10,000 graduates), general education (287 majors), and fine arts (148 majors) have median annual earnings below $50,000.
Perhaps higher-paying majors are more difficult to complete, explaining both their low popularity and the high salaries their graduates command in the job market? This is, at best, a limited explanation—according to the National Center on Education Statistics, lucrative STEM majors have attrition rates as low as or even lower than “softer” majors such as education, social science, and humanities.
A more likely explanation is an information problem. College students may not fully take into account how their choice of major will affect their earnings after graduation. (As a recent graduate, this policy analyst can attest that college students are not fully rational beings.) Colleges, which face little accountability for the value of their degrees after graduation, have no incentive to guide students towards making the right choices.
One initiative that could mitigate this problem is the Student Right to Know Before You Go Act, introduced earlier this year by Senators Ron Wyden (D-OR), Marco Rubio (R-FL), and Mark Warner (D-VA). The bill would make publicly available information regarding expected earnings and graduation rates for different colleges and fields of study.
This would be a great first step towards making the degree-earning process run more efficiently. However, free college proposals would actually make the current problem worse. “Free college” is not actually free—it is just a framework to pass along the costs to someone else. College students, who acquire human capital to increase their future earnings, are doing so at the taxpayers’ expense. Many of these taxpayers might not have college educations themselves.
Furthermore, by lowering the personal cost of obtaining a degree, students would have less incentive to choose a field of study that would pay off in the future. This would exacerbate the misallocation of society’s resources, and the Law of Supply would fall even further to the wayside.
College students should not abandon lower-paying majors entirely. Majors such as theology, early childhood education, and English literature have value to society that is not fully reflected in their expected earnings. The problem is that too many people are currently choosing these subjects, and as a result their median earnings are low. The Law of Demand also exists—if fewer undergraduates were to choose these subjects, salaries would rise, and the nation’s remaining theologians and English teachers would enjoy a higher standard of living.
Higher education in this country is undoubtedly in need of reform, but free college proposals miss some of the biggest problems it faces. Before launching headlong into a tuition-free system, policymakers should address some of the issues that do not make for applause lines in Democratic debates.
Preston Cooper is a Policy Analyst at Economics21. You can follow him on Twitter here.
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