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A recently updated dataset from the New York Fed highlights a troubling fact about college graduates: around one-third of them do not work in jobs that require a college degree. Being “underemployed” in this way, however, is not synonymous with holding a “bad” job; 43% of underemployed graduates earn more than $45,000 per year.
As I argued in a post yesterday, these figures suggest that in some cases a college degree functions as a signal—a credential that gives college-educated job applicants an edge over the competition—instead of something that confers skills that are valuable in their own right.
One interesting feature of underemployment, though, is that it is not uniform across all fields of study. Nor do college majors with low rates of underemployment necessarily guarantee high salaries to their graduates. In the following graph, I plot the share of recent college graduates holding jobs requiring a college degree against the median wage those graduates can expect to earn early on in their careers for each of 73 majors analyzed by the New York Fed.
This framework allows us to divide college majors into four groups along two dimensions: whether the major provides high or low earnings, and whether the major has a high or low share of graduates working in jobs that require a college degree (hereafter referred to as “full” employment).
A few caveats apply to this analysis. First, the major-level underemployment data released by the New York Fed only cover recent college graduates, not all graduates. Second, the earnings data covered in the chart refer to early-career earnings; earnings for college graduates usually rise significantly throughout careers. Third, we don’t know if non-underemployed graduates are using skills relating to their major on the job; we only know whether or not the job requires a generic college degree or higher.
Thirty-one majors have both low earnings and low rates of “full” employment. This group includes the lowest-paid college major, theology, which has an early-career salary of just $27,000. It also includes the major with the highest rate of underemployment, criminal justice. Only 20% of recent graduates with criminal justice majors end up in jobs requiring a college degree. Humanities majors dominate this category; performing arts, English literature, history, and philosophy all combine low earnings with high underemployment.
At the other end of both spectra, 22 majors have both high earnings and high rates of full employment. The top-earning major is chemical engineering, which carries an early-career median wage of $70,000. The major with the lowest rate of underemployment, nursing, also falls into this category. Nursing majors have among the most useful credentials in the job market, with nearly 85% working in jobs that require a college degree. Other majors in this category include economics, accounting, and most majors in the STEM fields.
Very few majors combine low rates of full employment with high earnings. This group includes majors in the social sciences, such as political science, marketing, and international affairs.
Perhaps the most interesting category consists of majors with high rates of full employment but low earnings. Education majors dominate this category, suggesting that teachers need college degrees to do their jobs but also earn less than many of their college-educated peers. Early childhood education is the perfect example: 75% of graduates with this major need a college degree to do their jobs, but they also earn just $30,000 in their early careers.
The sum of these categories is a triangle-shaped region on the graph: majors with high rates of underemployment almost always have low earnings, but majors with low rates of underemployment have a wide range of earnings. One possible explanation for the variance is differences in supply: if education majors are more common than engineering majors relative to the number of jobs on offer, education majors might command lower salaries even if both majors are equally “useful” to the labor market (i.e., have similar rates of underemployment).
The bottom line? Your college major matters. But it matters in more ways than one.
