 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. How are you doing, Ant? James, I'm doing well. This, uh, we're at the end of the school year, and, um, my daughter, who's a senior in high school, is graduating, which, um, brings up, I think, this week's topic, which is what high school graduates should be thinking about as they think about college. Yeah, you know, we actually think about this quite a lot, more than, uh, in terms of our own children, because one of the things people probably don't know about us is that we travel the country every year speaking at high schools. Right. And one of the things that high school teachers and students want to know is what's the inside word from a couple of college professors on how to pick a major. Yeah, no, right. And that's one of the things, that's exactly the thing that we tell them, right? We tell them, don't pay so much attention to what school you go to, although that's important. Um, pay attention more to what you choose to major in once you get there, because that's the decision that really impacts the rest of your life. Yeah, people say that a college major or a college degree is valuable, and that's actually the wrong statement. A college degree is not valuable. A college major is valuable, and the value ranges dramatically depending on what major you select. And to find out, there are all kinds of college majors that are functionally worthless. And this is something that I think students don't spend nearly enough time thinking about. You know, the thing that you're asked when you're a graduating senior is what college you're going to. Well, largely, it doesn't matter that much what college you're going to, but the question that really does matter is what are you going to study, and the reason it matters is because at college education, and people look at tuition, right? Those are the average private four-year institutions, like $40,000 or something. But it's not just tuition, you're throwing room and board. And the thing that people forget is you've got to also include foregone income. The money you would have earned had you not gone to school but gone directly into the job force. And when you add up all these things, the cost of a four-year degree is over a quarter million dollars. Yeah, no, and it obviously could be much more than that. It could be somewhat less. But on average, it's a little over a quarter of a million dollars. Right. And stop and think. How many other times in your life would you drop a quarter million dollars on something without being entirely sure about what sorts of returns you can expect from that thing? Or better yet, how often, and this is directed to the parents, how often would you fork over a quarter of a million dollars and say to an 18-year-old, you decide what's best? Right. Exactly. Exactly. As a parent, I find that thought to be rather disconcerting. Yeah, so what we'd like to do in this episode is to put a little bit of flesh on this question of what is an appropriate major. And we should underline here, when we talk about what we're going to talk about, we're looking strictly at the financial return to a major. There are lots of other returns. There's job satisfaction, there's what your talents are and all these sorts of things. And all of that does need to be taken into account when you choose a major. But what also needs to be taken into account is what is the financial return? Yeah, we're living here in the real world where people are spending a lot of money on a product that they don't particularly understand, right? We're not getting at, and Antony and I are both firm proponents of the liberal arts. We're not talking about the value of an education in that respect. We're talking about anticipated rates of return for an investment. Yeah. Sure and simple. This is absolutely right. And if you go in with your eyes open and you say, for example, my love is film studies, that's what I really want to do. That's perfectly fine. Just at the end of four years, don't complain when you've got a Starbucks job. Go in understanding that the probability of that is high and that's part of the trade-off of selecting that particular major. That's right. So we begin by painting with a very broad brush. And in broad strokes, Ant, what can people expect for rates of return on college majors? Because we can actually, we can kind of toss this one out there in a very soft way. There are actually pretty clear divisions. There are. Numbers we're going to quote come from payscale.com. So they do a survey of majors that students select and what their starting salaries are when they come out with a degree and what their mid-career salaries are. So these are the two figures that payscale.com provides. What we've done is move forward and made some assumptions like, let's suppose that you're absolutely employed. So there's no unemployment in the numbers we're going to quote. Let's assume that your wages move up in some linear fashion from start career to mid-career that you retire after whatever it is, 35, 40 years. Normal type of career. And if you use their numbers, what you find is at the high end, the number one major by far is petroleum engineering. That's worth over the course of someone's life adjusted for inflation a total of about $5.5 million. So that's the amount of money you can expect to earn over the course of a standard career, assuming you're not unemployed, adjust for inflation. That compare that 5.5 million to the $250,000 investment for the degree. And you see you're making about 24%, 25% return above inflation. That is really nice. Yeah, that's a return that no one should ever sneeze at. And we should mention real quick that if you want to see some of the data and the numbers, click the little I in the top right hand corner of your screen. So now of course that's the number one, petroleum engineering. You go down through what's called the STEM majors, science, technology, engineering, mathematics. You can throw in as well statistics, economics. Interestingly, government appears in the mix as well. And these majors are worth over the course of your career, around about 3 million, right? High 2 millions to the mid 3 million somewhere in that range. Those are the STEM majors, total income over the course of your career. Then you move further. We start getting into things like business, the liberal arts. The numbers start to come further down. You get into the fine arts, lower still at the very low end of the range. We get into what you might call broadly speaking, the studies majors, right? So child and family development studies, gender studies, these sorts of things. And at the very low end, the bottom of the line is early childhood education. That's worth over the course of your career, about $450,000. That's a four. You'd almost be as well off putting the money in a savings account. Well, that's the interesting thing. So that's $450,000 that you get back on a $250,000 investment. Do the math, and you're making about the same rate of return as you would make if you invested that quarter million in a typical corporate bond. You might do as well in municipal bonds actually. Yeah, and you definitely do better in equities, right? But you get to the low end of these majors. And what's happening is the rate of return on these things is actually falling below the rate of return you'd get if you just invested the money in a standard equities or bond portfolio. Yeah, and the rates of return on the careers on the far right side of the graph that we've made available to you here, really, you'd be better off just taking the money that you were going to spend on the college education, buying yourself a relatively nice house and getting a menial labor job. Yeah, this is true. And again, we're talking about the financial return, not the psychic return or the enjoyment you get from the job, but it's worth noting that several of these majors that fall at the very low end of the spectrum involve educating children, right? Elementary education is in here as well. And it raises the question, how can it be that there's something so important raising our children that pays so little? And the interesting answer here is not that the job isn't valuable, but rather there are so many people who are willing and able to do that job. That's what drives the wage rate so low. Yeah, no, as is almost always the case with almost everything, supply and demand really quite important here. This is true. Now, what we're talking about here are strictly undergraduate four-year degrees. What's interesting is if you start to look at the returns to some technical training, right? So if you become a licensed electrician or a licensed plumber or even a car mechanic, those jobs, two things happen. One, the return, the earning you can make on that is relatively high. Two, the cost of obtaining licenses like that, technical education, is way lower. On the order of one-fifth as much as what a four-year degree would be. Now, if we take those three occupations, licensed plumber, licensed electrician, and car mechanic, and throw them into the mix, they show up at the top third or the top quarter amongst the college degrees. So they're in the same range as undergraduate degrees in biology, in information technology, in civil, in construction engineering, right? These technical training things that we tend not to think too much about are actually quite valuable. Yeah, no, so much so that people need to rethink their attitude towards the trades, right? And this is something that a lot of people out there talk about, but probably not enough because everybody's become so inclined to say, you have to go to college, a college degree is worth quite a lot, trust us it's not. Certain majors are worth a lot, others less than nothing when it comes right down to it. But right at the top of the pay scale, right, once you get past engineering as a career, you've got these other things, electricians, plumbers, car mechanics, and there are some others that fit into that category. And these people make a very, very nice living. And it's time that people started thinking more about that than they do. Yeah, and not only is it nice living, but it's a much safer investment. If you decide you want to study to become a plumber, and after you're done with it, you decide, you know what, I really don't like being a plumber at all. You're out the investment. But the investment is like maybe $40,000 compared to if you decide that you want to be an elementary school teacher. And then when you finally get out, you decide, no, I actually don't like this. You're out a quarter million dollars on that. Yeah, yeah, that's right. So it's really food for thought. And here we are, the end of a school year. This is typically the kind of thing that people want to think about in August and September when they're heading back to school, but we thought it would be a really nice thing to give people something to talk about at dinner for the next two or three months. Right. Right. And why don't you give us a closing thought on this? Well, the closing thought will be, I'll tell you this, one of the saddest things I find as a college professor is when a junior or a senior in college takes for the first time economics and comes to me and says, oh my God, I love this. I would have loved to have majored in this, but I've spent three years studying this course of studies for this other major that I find out now I actually don't like as much. So my recommendation to people who do decide to go to college is spend your first year, the first year and a half if you can, just taking general studies, take all the courses that you need to take in the core curriculum and decide later what your major is after you have more experience. People really say they love economics after they take your class. They say it to me, James. That doesn't seem right. That's all the time we've got for today. Thanks for watching this episode of Words and Numbers. Leave a comment below and let us know what you think about college majors, whatever you like. And feel free to ask a question or two, we'll get back to you as best we can. If you like this episode, subscribe to the channel and come back every Wednesday around about noon for a new installment. Until then, check us out at fee.org and at fee online on social media. And have a good one. We'll see you next week. See you next week, James.