Wednesday, November 4, 2015

Why do grads of liberal arts colleges earn less?

WSJ reports what those who have read chapter 9 knew all along:
Administrators at some liberal arts colleges say the disparity can be explained in part by the fact their students are following passions that may not yield high earnings, not because the graduates lack job options. They also caution that median earnings figures are skewed in favor of colleges that offer degrees in higher-paying fields such as engineering, business and health care.


  1. After decades of “follow your dreams” and “you can be anything you want to be” preached to children who are coming out of college in a slowly repairing economy, it is no surprise that liberal arts colleges are churning out adults that earn less. Studying the fields that have high earning potential and their required credentials, it’s easy to see why that is. There is less demand for many liberal arts professions, and many liberal arts majors find that their best option is to turn around with their Bachelor’s degrees and head for Masters and PhD studies so that they can teach. This, knowing full well that the skills they learned on a topic that they studied out of interest is of little demand in the job market. At a recent conference of other MBA students, there were three elementary school teachers, and one of their statements stuck with me…that school funding is dependent partially on how many graduating seniors plan to attend four year colleges. Pushing kids toward four year degrees that they are unsuited for is not beneficial to anyone but for-profit colleges. Furthermore, the system ignores those that would be better suited towards the trades, or two year colleges that suit their skills. At my workplace, we are a manufacturing facility, and are finding that trade schools have largely closed their machining programs, and we have difficulty replacing the retiring generation. Those presently retiring did not face the stigma of trade school, and were counseled towards their strengths, rather than a cookie cutter adage of getting a four year degree at all costs.

  2. Interesting data, I wonder if they would compare individuals considered Liberal Arts degrees with their own universities as well. Furthermore, Harvey Mudd may have been the first Liberal Arts college, but given its extensive engineering program perhaps it's not the ideal candidate for comparison. As an FYI, here is a political take from Jeb Bush which irked psych majors in South Carolina, enjoy!

  3. In the blog “Why do grads of liberal arts colleges earn less,” Froeb shares that 10 years post-graduation, students who earned liberal arts degree earned significantly less than students who earned degrees from research universities. The study cited attributed the difference to two factors: liberal arts grads chased passions versus high-yield careers and research universities offered degrees in fields with higher-paying jobs like business, engineering and healthcare.
    In Chapter 9 of Managerial Economics (2016) Froeb helps us understand this situation from an economic viewpoint. First, he explains that economic profit is zero because positive profit attracts entry and negative profit spurs exit. Entry and exit illustrate asset mobility in which assets move from lower to higher value uses. Labor and capital are assets. If profits are up in an industry, assets flow in. When they’re down, assets flow out. Assets will continue to be mobile until long-run equilibrium. At that point, any wage differences will simply reflect the level of attractiveness or unattractiveness of the profession. (pgs. 116-117)
    College students select their degree program by rating the level of attractiveness, potential future salary (riskiness of the investment), and by comparing the options. They may choose a liberal arts degree because they’d much rather spend their days being an artist, for example, than suffering through medical school and dealing with the unattractiveness of a future life where they work long hours and deal with sickness and death, not to mention a hefty monetary and time investment in school.
    Ironically enough, if we look beyond 10 years post-graduation, we see that a greater equilibrium is reached between the two types of degrees. Longer-term studies show that while salaries of liberal arts grads still lag behind math, engineering and sciences at peak earning ages (56-60) – which we can attribute to compensating wage differentials – their earning power rises to nearly $60,000/year, and if they pursue a Master’s Degree they can add about $20,000 on to that. (Grasgreen 2014)
    Grasgreen, A. (Jan. 22, 2014) Liberal Arts Grads Win Long Term. Inside Higher Ed. Retrieved from
    Froeb, L., & McCann, B. (2016). Managerial economics: A problem solving approach (4th ed.). Mason, OH: South-Western Cengage Learning.

  4. With no real ares of expertise, liberal art majors may find it difficult to acquire a high paying job at first. If you graduate college with a specific concentration, then you may be better off than such graduates who have broader degrees. This could change over time for these liberal art grads. They may find their niche once given an opportunity, however the opportunity may be difficult to find at first. I do not think that this makes liberal art grads any less of a student or worker, yet it just makes them less attractive than grads who have a area of concentration.


    It was interesting to read about how Froeb mentioned that grads of liberal arts colleges earn less. To read more about this, I found an article titled High-Paying Jobs for Generalists. It was an article posted on where Barada discusses how generalists are those people that have a degree in a typical liberal arts degree such as English, geography or history. It was interesting to read about how they has the same idea as Froeb. The higher paying jobs are for those that have an advanced degree enough that they can teach it or something that the graduate is passionate about or able to take a plunge into an uncertain job pool. The more lucrative jobs are those in real estate, management, business, finance and sales.

  6. I was not surprised by the idea that liberal arts graduates would make less than higher degrees. Let me be clear, I have nothing against people who choose to go for liberal arts, however, it's not all that shocking that someone with an engineering degree would make a higher salary. I think what it comes down to is that people go to school for different reasons. Some people find something that they love and they become passionate about it, and they don't care about the money. For these people, it's not about the money, its about going to work everyday and loving what they do. For others, it is about the money. It's about either providing for their family, or being able to buy nice things, or maybe even the prestige. There is nothing wrong with either idea. My point is, I don't think people go to school for liberal arts with the idea that they are going to be millionaires. In contrast to what the salary might imply, I feel that the world needs people in the liberal arts, we need all the areas that education covers.

    1. Hi Jamie,
      I completely agree with you. I think noting the discrepancy here with average salary only supports the idea that some jobs will pay more than others, and those jobs often require higher degrees or degrees in a more science based field. However, this is not to say that graduates from liberal arts colleges are not successful. I think the bigger and better question to pose is if graduates from liberal arts universities versus those from research universities are happy with their jobs or feel like they have found success in their field. It's often not the salary that is going to make employees content in their vocation but the kind of job they are doing, their success and their surroundings. People who get a degree fro liberal arts colleges often know the kind of vocation they are entering and will choose it regardless of the pay grade.

  7. Soooo many confounding factors here such as socio-economic status before college, gender, field, etc. Moreover, ten years seems right around the time that half of those people might be home with a baby. I remain unconvinced.

  8. Soooo many confounding factors here such as socio-economic status before college, gender, field, etc. Moreover, ten years seems right around the time that half of those people might be home with a baby. I remain unconvinced.

  9. In my view earning is totally towards the personal ability instead of these things. I believe good education can definitely help us in life, but above all this we need to be determined. I am doing Forex trading and for that I have gained a lot of education which has really helped me in working well, it also helps to be with a broker like OctaFX, it’s a magnificent company with having fantastic features which includes low spreads from 0.2 pips to high leverage up to 1.500 plus much more!

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