SPECIALISED DEGREES: Higher earnings but fewer entrepreneurs

23 Mar 2018

Graduates with specialised degrees have higher earnings, but are less likely to become entrepreneurs, according to research by Dr Margaret Leighton, and colleagues, to be presented at the Royal Economic Society''s annual conference at the University of Sussex in Brighton in March 2018. Analysing data from the United States, the study shows that:

• Early career graduates from the most specific degrees earn 8% more than graduates from degrees with an average level of specificity. Graduates from the most general degrees earn 4% less.

• Graduates from specialised degrees are 20-25% less likely to hold managerial roles or own a business. Graduates from the most general degrees are more likely to become entrepreneurs.

• The top five most specialised degrees are nursing, computer programming, economics, secondary education and finance. The most general degrees include environmental studies, mathematics, architecture, philosophy and religion, and accounting.

More…

Choosing a field of study is one of the biggest decisions a university-bound young person needs to make. Advice abounds on this issue: some say you should choose a broad degree, as this keeps many options open after graduation; others advise you to choose a specialised degree, which will prepare you well for a specific career. With recent policy discussions raising the prospect of differential tuition by degree field, it is all the more urgent to have a better understanding of the labour market returns to different degrees.

This study show that more specialised university degrees are associated with higher average earnings over the career. Using data from the United States, early in their careers, graduates from the most specific degrees earn 8% more than graduates from degrees with an average level of specificity – and graduates from the most general degrees earn 4% less.

A prominent theory on skill breadth predicts that those who have broad skills are more likely to become entrepreneurs. While this analysis shows that graduates from specialised degrees have higher earnings, there is also evidence that these individuals are 20-25% less likely to hold managerial roles or own a business. As predicted by the theory, graduates from the most general degrees are more likely to become entrepreneurs.

Which are the more specialised degrees? This analysis develops a measure of specificity that captures the transferability of degrees across different occupations. According to the measure, general degrees are those that are portable across many different jobs. Specialised degrees, on the other hand, have high earnings in some occupations, but low earnings in others.

Measured in this way, the top five most specialised degrees are nursing, computer programming, economics, secondary education and finance. The most general degrees include environmental studies, mathematics, architecture, philosophy and religion, and accounting.

These results demonstrate that scientific orientation does not equate to specificity. While science, technology, engineering and mathematics (STEM) degrees are, on average, considerably more specialised than arts, humanities and social science (AHSS) degrees, individual STEM degrees can be found among the most and lease specialised.

Furthermore, the association between general degrees and entrepreneurship is an important reminder that average earnings do not summarise the contribution a degree makes to the economy.

The authors conclude:

''Our study does not offer hard answers for the difficult decision prospective university students must make. Our analysis, which relies on average earnings from a large number of US university graduates, does not predict the earnings or eventual occupation of any individual.''

''What it highlights is that the specificity of studies in higher education has important implications for an individual''s career: before we enact policies based on the contribution different degrees make to the economy, we need to have a better understanding of the characteristics that define these degrees.''

Dr Margaret Leighton

Mal22@st-andrews.ac.uk