Wise Money Decisions

It seems everybody wants to know what the highest paying majors are.  Could it be that the school year is about to start? 

Here’s yet another one.  It lists the top five in demand majors according to the National Association of Colleges and Employers (NACE) Spring 2008 Salary Survey.

And this time Mechanical Engineering is #1 — woo hoo!

Following up on the post about Most Lucrative College Majors and this follow up post, see this from Yahoo News:

Graduates with technical skills do well in the short term. But in the long run, it’s the folks who move into management positions that take home the biggest paychecks. Top earners who majored in economics or finance have higher salaries than any other major, followed by chemical engineering, math, and physics, according to PayScale.com.

“If you can take technical skills and turn them into something entrepreneurial,” you have the chance to make a top salary, says Russell Miller, managing director at Executive Compensation Advisors in New York. “Lots of people who graduate from MIT start up their own technology firms.”

Regarding engineering schools:

Interestingly, median starting salaries for alumni of MIT, California Institute of Technology, and Harvey Mudd College, which have strong engineering programs, are the highest in the country ($75,500, $72,200, and $71,800).  But the salaries do not get as high for midcareer professionals from those schools as they do for graduates of the elite liberal arts schools. 

Sure enough, as soon as I point out how engineering and other college majors mean higher salaries, the Wall Street Journal tries to undercut me:

College-educated workers are more plentiful, more commoditized and more subject to the downsizings that used to be the purview of blue-collar workers only. What employers want from workers nowadays is more narrow, more abstract and less easily learned in college. …

A variety of economic forces are at work here. Globalization and technology have altered the types of skills that earn workers a premium wage; in many cases, those skills aren’t learned in college classrooms. And compared with previous generations, today’s college graduates are far more likely to be competing against educated immigrants and educated workers employed overseas.

However, lest anyone think college is now for chumps, WSJ points out:

To be sure, the average American with a college diploma still earns about 75% more than a worker with a high-school diploma and is less likely to be unemployed.  

WSJ singles out three professions, all finance-related and generally requiring education beyond a BS, as having seen unusual growth:

Indeed, salaries have seen extraordinary growth among a small number of highly paid individuals in the financial sector — such as fund management, investment banking and corporate law — which, until the credit crisis hit a year ago, had benefited both from the buoyant financial environment and the globalization of finance, in which the U.S. remains a leader.

Forbes recently came out with a story on the most lucrative college majors. 

Forbes considered salaries right out of school as well as salaries at various time periods after graduation.  I believe they ordered the top 20 majors by salary at 10-20 years after graduation.  Below I’ve listed the starting salary in parentheses (that’s why the salaries aren’t in descending order). 

Here’s the rundown:

1.  Computer Engineering ($60,500)
2.  Economics ($48,100)
3.  Electrical Engineering ($59,900)
4.  Computer Science ($54,200)
5.  Mechanical Engineering ($56,900)
6.  Finance ($46,900)
7.  Mathematics ($43,500)
8.  Civil Engineering ($52,600)
9.  Political Science ($39,400)
10.  Marketing ($39,400)
11.  Accounting ($44,600)
12.  History ($37,600)
13.  Business Management ($40,900)
14.  Communications ($36,400)
15.  English ($36,700)
16.  Biology ($37,900)
17.  Sociology ($35,700)
18. Graphic Design ($34,700)
19.  Psychology ($34,700)
20.  Criminal Justice ($34,200)

It is always nice to see the various branches of engineering near the top.  It makes all those late nights in college seem a little more worthwhile.  Not that it matters to me now as I haven’t been a practicing engineer for several years!

It’s not a surprise to see engineering near the top of this list year after year.  Low labor supply means high labor prices. 

Why is there a low labor supply for engineers?  The branches of engineering are tough majors, they take brainpower and dedication, and they have a reputation that scares away many high school seniors and college freshmen. 

As Forbes puts it:

If you’re looking for a big paycheck straight out of school, think about an engineering degree. The four highest paid majors for people with less than five years’ experience were all engineering-based, with computer engineering leading the way. “It is a matter of supply and demand,” says Lee, adding, “Engineers tend to stay at their jobs longer, so getting the good people right out of college is important.” Despite the high pay, the number of engineering degrees issued has barely budged the past 10 years; 67,000 degrees were handed out in 2006, the latest year available.

One reason the number of engineering degrees has not grown much is that the programs tend to be very rigorous. This benefits the engineering students who can complete the coursework, though–employers know they’re typically getting competent people straight out of school, and therefore are willing to dole out generous salaries.

An engineering degree also helps wayward engineers (like me).  I’m often asked whether I feel like I wasted my engineering degree by going to law school.  The answer is a resounding no.

I will never know with certainty, but I’ve always assumed my degree helped me get into the law school of my choice.  It also opened up doors when it came time to interview for summer associate positions.

If my kids wants to go to law school, I will encourage them to consider engineering as an undergraduate degree.

Over at getrichslowly.org there is an interesting post discussing the Economic Mobility Project.  The idea behind the Economic Mobility Project is to research and analyze the social, economic, and human capital factors that impact one’s ability to move up the economic ladder over a generation.

Before reading the post I had never heard of the Economic Mobility Project.  The topic is an interesting one, and if I had more time I would read some of the group’s work. 

Do the Silver Spoons Stay Full?

Getrichslowly provides a summary of some key points from an Economic Mobility Project press release.  One piece of data really jumped out to me.  Getrichslowly says, “If you are born into wealth, you have a 23% chance of remaining wealthy.”  A little later, he quotes from the press release: “About one-third of those born into wealth remain wealthy.” 

There is a discrepancy between the numbers, but either way I found it very surprising that only 23% or 33% of those born wealthy would remain wealthy.  I would have expected a much higher number, maybe 80%.

College is Important for Those Born Into Wealth

I went to the press release to see what I could find.  It turns out that the press release actually states: “23 percent of those born into the top quintile that do not get a degree stay at the top as adults” (my emphasis).  That clears up the discrepancy noted above.   [UPDATE: Getrichslowly has updated his post to clear up the discrepancy.]  Meanwhile, “of Americans born into the top quintile who earn a college degree, 54 percent remain there as adults.”   54% compared to 23% is quite a difference.  You better go to college even if you’re born into wealth. 

Later the press release states: “36 percent of children born to parents in the top wealth quintile remain at the top as adults.”  The 36% number makes sense given the 23% and 54% figures.  If I’ve done the numbers right, it means that slightly more than half of those born into the top quintile do not get a college degree.  I find that slightly surprising, but not overly so.

Read the rest of this entry »