Lies my Teacher Told Me

I was always told that getting a liberal arts degree would pay off in the long run in both psychic and monetary rewards.  Who knows about the psychic/intellectual rewards.  But I've always been skeptical about the monetary rewards.  Most data that's available shows that the quant fields--math, finance, econ--do much better than the soft disciplines for the first job (some of the skills premium for postgraduates was probably mispriced because of asset bubbles, excessive leverage, and poor risk models on the finance side--more on this later).  Again, the liberal arts partisans claim that this is unique to your first job, and that the liberal arts majors dominate over time.  This would actually be somewhat odd to see, as most people receive a similar, small annual increase every year regardless of major.  

Well, this is easy enough to check.  The government collects stats on the profile of around 8k graduates 10 years out of graduation.  As the chart shows, the math/quant/sciences dominate the liberal arts guys income-wise.   

Some weird stuff does happen in the distribution of income separated by major, shown left.  Engineers aren't as well represented as you might think at the top bracket given their high mean.  But the social and biological scientists dominate the humanities.  Psychology does abysmally, trailing even Education with .31% claiming an income in excess of $150,000 (2003 Dollars).  At the very least, this is good evidence that the liberal arts are not a great path to riches.  

The better question is whether this reflects knowledge learned in school, or whether majors serve to filter students along measures of intelligence and career preference.  Unfortunately, I can't correct for all potential problems as they don't release the full data, but I can look at some things anyway.  

First-I checked SAT/ACT grade variation by gender.  There's not too much resolution--I only have scored by quartiles, and many are missing---but this data would suggest a higher mean score for males as well as lower variance.  However, this group has already been preselected, so data at the bottom tail is unlikely to be perfectly representative.  Interestingly, this pattern is reversed for GPA: Females dominate the top end of GPA.  However, GPA is not as directly comparable between people, especially given the stark differnences in major choices by gender, and the differences in average GPA by major. Interestingly, given this difference, undergraduate GPA and test scores correlate.  The top quartile on the SAT/ACT had a 3.45 while the bottom received a 3.13. 

I also have SAT/ACT quartile by College Major.  Business majors don't do so great on standardized tests, but obviously make plenty of money.  The quant majors disproportionately pull in the top scorers.  But the Humanities, History, and Psychology do well enough test-wise.  But given another result from this data--that SAT/ACT predicts future income--it's clear that the liberal arts are underperformers in future earnings, taking intellectual ability before College into account.  

This isn't entirely definitive, and I'd like to run some real regressions here.  A big issue is personal preference for career--how much you make is a function of how much you want to work, and what you want to do as much as raw ability before or after College.  And obviously, there's more to college than becoming employable.  I really don't even know how much I could say from this data.  It's not clear what is contribution of a major to earnings outside of personal initiative and intellgience, or even to what degree College gives people skills or labels people as belong to various levels of quality.