Written by: Jillian Berman
America’s most popular major may also be one of the most lucrative.
Students who major in business, which for years has topped lists of most popular majors, earn between 81% and 130% more 12 years out of college than similarly talented students who don’t major in the field, according to a working paper distributed this week by the National Bureau of Economic Research, a Cambridge, Mass.-based research group
The study — based on wage and higher education data from Texas — looked at the earnings difference between students who just made the academic cutoff for being admitted to a school’s business major and those who just missed it. “A student who just barely makes the cutoff is pretty much identical to students who just barely miss it,” said Scott Imberman, an economics professor at Michigan State University and one of the authors of the study.
But students who just make the cutoff and choose to major in business “see very large earnings gains, in the order of pretty much doubling,” he said.
The findings come as the rising cost of college has pushed students to lean toward majors they think will help them find a decent-paying job. That strategy makes sense, given that a student’s choice of major may be a bigger factor in their life post college than where they choose to go to school. The difference in earnings over a lifetime between the highest and lowest paying majors is $3.4 million, according to a 2015 report from Georgetown University’s Center on Education and the Workforce.
It’s hard to say why exactly the researchers saw huge earnings gains for those students who chose to major in business, Imberman said. It could simply be because business as a field pays better, he said. But it’s also possible that students choosing to major in business are doing so because they know it fits their skill set and will, therefore, give them an advantage over others in the profession, he added.
Another interesting wrinkle: The greatest earnings gains were driven by the women who wound up majoring in business. Imberman said he and his co-authors couldn’t pinpoint why that’s the case, but they have some theories. The data indicates that it’s likely these women would have majored in a science, technology, engineering or math (STEM) field if they didn’t pursue business, which means they may have technical skills that would provide them with an advantage in business-related jobs.
“Alternatively, it could be that the STEM earnings for women are lower than those for men, but they equalize in business,” Imberman said, noting that that’s just a theory. STEM is notorious for its gender pay gap, but data indicates business has a large pay gap as well.
Though these women saw a big boost from their business major, betting on the field can be a bit tricky. The gap between the average annual earnings of the highest paying job for business majors and the lowest paying jobs in the field is about $25,000, according to the Georgetown Center. Business is also a field that’s often built on connections, so a business degree from a less prestigious university may not be a safe bet.
What’s more, employers are increasingly looking for students with communication and critical thinking skills. That’s put a premium over the past few years on liberal arts majors, who may be able to easily acquire the technical skills required for a business-related job.
Students should consider specifics instead of averages — like salaries and unemployment levels — when determining which major is best for them, Imberman said. His study indicates that students who are both interested in business and qualified to major in it are successful after they graduate, but that might not be true of a student who struggles with math or is interested in creative writing, but chooses to major in business anyway because they think it will be more lucrative