Work Experience and Field of Study Matter for Graduates’ Earnings

Despite the growing sticker shock, the benefits of earning a college degree still outweigh the costs, at least for most people. Students' majors are one of the most important determinants of where college graduates fall on the earnings spectrum. But work experience and other factors also play a role. In this post, we examine how earnings differ between recent graduates and mid-career graduates, as well as how earnings vary across and within majors.

Recent graduates-defined here as bachelor's degree holders ages 22 to 27-earn on average 47% more than their peers with no more than a high school diploma. It's worth noting that this wage premium overstates the initial financial gains associated with earning a college degree for students who are paying down educational loans (most student loans have a repayment period of 10 years). More than one in five first-time, full-time undergraduates in California held student loans.

But a college degree is a long-term investment that yields a significant return over one's entire career. Among those ages 34 to 54, the college wage premium rises to 66% as workers with college degrees obtain jobs with greater opportunity for on-the job learning and wage growth.

Of course, not every college graduate earns the median wage, but even low earners (the bottom 25%) still do better than the typical high school graduate ($41,000 vs. $35,900). And for mid-career college graduates, low earners make significantly more than the typical mid-career high school graduate ($62,400 vs. $46,800). College graduates also see a much larger difference between low and high earners.

Among recent college graduates, those with majors that emphasize quantitative reasoning (like engineering and computer science) and math-intensive business fields (like economics, business, finance, and accounting) tend to have higher wages. In contrast, those holding liberal arts majors (like English, psychology, sociology, and communications) tend to see lower earnings, though their earnings remain significantly above those of the typical high school graduate ages 22 to 27. Recent graduates in some of these liberal arts majors are also more likely to be underemployed.

Importantly, as workers gain experience in the labor market and/or earn graduate degrees, the wage gap between STEM and liberal arts majors diminishes. For example, the typical recent graduate in computer science earns 60% more than their counterpart in English. But the difference among mid-career workers goes down to 40%. This is consistent with research showing that liberal arts majors develop critical thinking skills, problem-solving abilities, and adaptability that are highly valuable for mid-career success, though they might not immediately translate to high-paying entry-level jobs.

The chart above also shows considerable differences in earnings within majors, which are driven by factors such as the selectivity of graduates' alma mater, graduates' industry and occupation, and their geographic location.

For example, graduates with degrees in computer science see the largest difference between low and high earners ($74,000 vs. $165,000). When we look across institutions, we find computer science graduates from UC Berkeley ($150,100), UCLA ($130,200), and Cal Poly, San Luis Obispo ($113,584) see the highest earnings two years after graduation, while the typical computer science graduate from campuses located in the Inland Empire and San Joaquin Valley earn on average $74,000 and $68,000, respectively. This analysis focuses on the state's public institutions, which conferred 83% of the state's degrees in computer science in 2022-23.

Both UC and CSU provide detailed information on labor market outcomes of their alumni to prospective students and their families. CSU is also launching a new initiative, tentatively called the Beyond Completion Project, that aims to measure and improve the system's effectiveness at placing graduates into fulfilling careers in fields of their choosing or into graduate school. Tracking details about demographic characteristics should be an essential part of these efforts. For example, we know that Latino and Black students are not only underrepresented in the most profitable majors, but these graduates also see lower earnings relative to their peers in the same majors.

Estimating the return on investment of colleges and majors has become popular at the national and state level. But focusing only on earnings misses other key dimensions. For instance, some lower-paying fields in the liberal arts might lead to careers such as teaching or social work, which have a clear social benefit.

Nevertheless, financial well-being remains a vital consideration. Improving access to information on available jobs, wages, and typical career paths is a critical first step to helping students make informed decisions about the institutions they plan to attend and their selected fields of study.