Georgetown University’s Center on Education and the Workforce has a new study out that compares undergraduate college majors with respect to their popularity and the salaries earned after graduation by race and gender. The study covers 171 specific majors across 15 major groups and is based on data from the American Community Survey. In 2009, for the first time, this survey asked questions about undergraduate majors making this study possible.
Before I get into the details for finance majors, let me share some of their main findings:
- On average, a full-time, full-year worker with a bachelor’s degree can expect to make 84% more over their lifetime than a similar worker with only a high school diploma.
- There is a huge disparity between the earning power of majors. The highest earning major (petroleum engineering — $120,000/yr) earns 314% more than the lowest earning major (counseling psychology — $29,000/yr).
- Business management and administration is the most popular major with median annual earnings of $58,000.
- Early childhood education is the major with the highest proportion of women (97%) while naval architecture and marine engineering have the highest proportion of men (both 97%).
- The majors with the highest proportion of Asians, African-Americans, Hispanics and Whites respectively are computer engineering (33% Asian), school student counseling (38% African American), biological engineering (22% Hispanic) and forestry (93% White).
So now let’s talk about those finance majors. According to the Georgetown study, the median earnings of finance majors is $65,000 which is slightly higher than the average across all business majors which is $60,000. Surprisingly (to me at least) business economics majors earn the most at $75,000. The caveat here is that many of these econ majors go on to pursue graduate degrees. Continuing with finance, 9% of all business majors choose finance as their specific major and 26% go on to pursue graduate degrees and that graduate degree increases their earnings on average by 43%. The ratio of male to female finance majors is 64% to 36% and the difference in median earnings between male and female finance majors is $18,000. Further, 77% of finance majors are white. Therefore, by considering joint probabilities, we can discern the following:
Finance majors by race and gender:
- White males: 49%
- White females: 28%
- Asian males: 6%
- Black males: 4%
- Hispanic males: 4%
- Asian females: 4%
- Black females: 2%
- Hispanic females: 2%
Given these statistics, I guess it’s no wonder that I’m only about the 10th African-American female in the United States to earn a doctorate in finance. I say that I am number 10 because I know all nine who came before me! To some degree, that is another of the many reasons why I do what I do. I don’t profess to be the best role model in the world, but I do like to think of myself as an example of what is possible — and I guess I like being unique. Perhaps if a few more young African-American ladies see me in the front of the classroom (peforming to the best of my abilities) they might be inspired to do what it takes to put themselves there at some point. Even if they choose a different path, I always make it a point to let all of my students know that I wasn’t all that different from them 25 years ago when I first set foot in a business class and no one should be intimidated by a little hard work or the prospect of being a trailblazer. With hard work and determination, anything is possible.
The real bottom line here is that education is still a powerful commodity and a valuable investment. While the choice of major will have a direct impact on the level of returns one reaps from that education, it is hard to suffer a loss. If you consider the fact that the College Board reports that college tuition and fees at a four-year, public institution cost $7,600 per year on average, it’s easy to see that the simple payback (the point at which we fully recover the cost of our investment) on this investment for a finance major is less than six months. Heck, even a counseling psychology major will see their investment payback in just over one year while a petroleum engineer will achieve payback in just three months. Of course, it may take longer for students at private institutions to recover their investment, but one could argue that their ‘pedigree’ might allow them to command higher than median salaries. I will always promote finance because that is where my expertise lies, but if you ask me, this is just more proof that investing in the betterment of oneself is akin to investing in an asset that never depreciates in value. It’s hard to go wrong.