Tuesday, 3 March 2020

Why study economics? Return on investment edition...

When prospective students (or current students) ask me why they should study economics, I usually talk about the interesting and varied nature of the work (see some examples in the long list of links at the end of this post), and how it provides an analytical mindset and skills that are useful across many different occupations. Economics is a great complement to any other programme of study (in fact, thinking about recent tutors I have had in my papers or my research students, they've variously been studying economics with strategic management, chemistry, environmental sciences, political science, computer science, mathematics, and teaching).

However, another good reason to study economics is that economics graduates earn more than almost any other graduate. To illustrate, the BBC reported earlier this week:
Higher pay still makes it financially beneficial to go to university for most students in England, says research from the Institute for Fiscal Studies...
The study on projected earnings, based on tax data, shows wide variations in the financial winners and losers between different subjects.
  • For women, the financial gains of studying creative arts and languages are "close to zero"
  • Medicine will bring an extra £340,000 for women, economics £270,000 and £260,000 for law
  • Men studying creative arts subjects are projected to lose £100,000, compared to their counterparts who did not go to university 
  • For men in the top-earning subject areas of medicine and economics, the likely gain is £500,000
Those are the gains after you subtract the cost of studying, including the cost of course fees, and the foregone earnings while studying. It's based on real earnings data from England, but the results would be very similar in New Zealand (and anywhere else, for that matter). In case you're wondering why the returns are lower for women, the gender wage gap is important here, as is time out of the workforce (since the data are based on lifetime earnings).

If post-study earnings are important to you, then it is hard to beat economics as a programme of study, regardless of your gender. And you can double down on post-study earnings if you pair economics up with accounting or finance (although I maintain that the most interesting jobs probably pair economics up with something different from everyone else).

[HT: Gemma]

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