Giving the labor market too much credit

A recent article in the Washington Post covered a new report from Georgetown University that looks at average annual earnings by college major. This was made possible by the fact that the Census has just started asking people with bachelor's degrees about their major. The data showed that those who majored in sciences earned substantially more, on average, than humanities majors.

The individual major with the highest median earnings was petroleum engineering, at $120,000, followed by pharmaceutical sciences at $105,000, and math and computer sciences at $98,000. The lowest earnings median was for those majoring in counseling or psychology, at $29,000, and early childhood education, at $36,000.
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"I don’t want to slight Shakespeare,” said Anthony Carnevale, one of the report’s authors. “But this study slights Shakespeare.”

That Shakespeare jibe irked me a bit, but I was much more dismayed when I got to the kicker quote at the end of the article:

“The engineering major makes more money because he or she is more productive. In the end, the market is very discriminating,” Carnevale said.

Ugh. Productive in the strict economic sense, perhaps, but let's not confuse market value with actual value. I've no doubt the market reflects value in some useful ways -- for instance, the need for people with computer science training is very strong, which is probably a big part of the high median earnings of those in that major. But do we really think that earnings are a good reflection of the value of the work people do? It's convenient to think so if you have an above-average salary, but the link is tenuous.

Petroleum engineers make more than three times the salary of those in early childhood education. But I would submit that their earnings are so high because their work is related to the extraction of a commodity with a well-defined market value. The market for early childhood education, by contrast, is nonexistent. Child futures are not traded on the stock exchange, and the "market" determining how much early childhood educators are paid is a mishmash of government programs and affluent parents paying for Montessori preschool. The impact of their work is huge, and long-term, but it is not reflected in their pay in any meaningful way.

Or, to take an example from within a single field, lots of research has shown that primary care doctors are the most important players in ensuring that patients gets high-quality and economically efficient health care. But there's a shortage of primary care docs, in no small part because they get paid less than most specialists. (E.g. this site says that general practitioners report an average income of $118,000, while plastic surgeons report an average income of $203,000.)

My point is, there are lots of things that can make your work valuable, both in an economic and social sense, but only a small portion of them are reflected in the labor market. When it comes to picking a college major, future earning potential is something to consider, but don't mistake it for a proxy for the usefulness of your chosen field. The market is not equipped to determine that. But with a well-rounded education (maybe including some Shakespeare), you are!