Is an arts degree a good financial investment?

Last week I spoke at a seminar on the public funding of the humanities and social sciences. In my presentation I showed a slide of the earnings of male arts bachelor degree graduates compared to all graduates, showing that the median male arts graduate earned significantly less than other bachelor graduates (less than the slide suggests, since I did not extract arts graduates from the total).

What I should also have done is added median earnings for the upper vocational qualifications, which I have now done in the figure below (due to limitations in the way the ABS publishes census data, I have taken median as the mid-point in the income catgory in which the median person appears). Overall it shows a quite similar earnings profile with the arts graduates, with the effects of earlier full-time workforce entry showing in the higher earnings for certificate III/IV qualified workers in their 20s.



This data does need some significant qualification. It is based on a 2006 census question about main field of study in the person’s highest qualification, and takes as arts graduates men who gave as their main field of study language and literature, philosophy, politics or an ABS category that includes history. Many people with bachelor arts degrees do higher degrees, in their own or other fields. And people who did double degrees including arts may have put their other degree on the census form.

Nevertheless, it does suggest that a straight arts bachelor degree in traditional academic fields should be viewed sceptically as a human capital investment. This data is consistent with the main benefits being consumption and personal development. Underlying ability and screening effects would explain much of the premium that we would find if we compared arts graduates with people with school-level educational attainment.

24 Responses to “Is an arts degree a good financial investment?

  • 1
    Andrew Carr
    July 7th, 2011 07:33

    Interesting finding.

    Ideally this could lead the way for getting rid of the degree in place of a citizenship-education-structured ‘Liberal Arts’ course as the degree for people who don’t know what degree to do (or even all to do before they go on to grad specialisation). But that’s way off topic.

    Thanks for the data.

  • 2
    Debt Consolidation Nation
    July 7th, 2011 08:26

    cert III / IV are vocational course done to either obtain employment or to earn more money. An arts degree is done to feel intelectually superior to those who’ve done study for the gruby purpose of earning an income. So it does have a value it’s just not monetary.

  • 3
    Andrew Norton
    July 7th, 2011 09:11

    I should add the census is finding very low numbers – this is based on 32,500 males. While the vast majority of arts students are women, this figure seems too low, even taking into account that many arts graduates will upgrade their qualifications or get a more vocational qualification. There are data quality issues with the census. But I can’t immediately think of reasons why there would be particularly skewed results for arts graduates relative to people with other qualifications.

  • 4
    Tom N.
    July 8th, 2011 07:24

    I think the post already made the non-monetary benefits points, DCN. Of course, many other degrees also provide participants with non-monetary benefits, in addition to the significantly higher incomes.

  • 5
    Russell
    July 8th, 2011 10:21

    I don’t get it. If an arts degree is the qualification for occupations which pay less, why do you say that they “should be viewed sceptically as a human capital investment.”? Do you think the occupations are worthless?

    If the occupations are necessary, and people choose them because it’s what they want to do, or are suited to doing, where’s the problem?

  • 6
    James
    July 8th, 2011 11:51

    I assume age category here means ‘people who are currently 35-44 with an Arts degree’, not ‘a person with an Arts degree when they are 25-34, then when they are 35-44, etc’? If that’s the case, this graph captures both the changing returns to these degrees over time and the changing returns over a person’s age, when what we really want is just the latter. I would expect the selection effects of good people into Arts degrees is less now than it was in the 60s, so presumably the gap would be even wider with age increasing.

  • 7
    Rafe
    July 8th, 2011 11:56

    I would like to see the population of Arts graduates disaggregated to separate traditional lit/history/politics degrees from degrees in media/culture/gender studies and POMO related courses. Some of those courses would make students less thoughtful and employable on exit than when started.

  • 8
    Andrew Norton
    July 8th, 2011 14:28

    James – Yes, all ages as people were in 2006. As there are well-known age patterns in earnings, also showing in this figure, dividing into age groups limits the chances that earnings differences between populations may be due to age rather than some other factor.

    There could be a cohort effect, though work by the ABS last year using census data going back to 1980 suggests that returns to education have been pretty constant over time.

    Russell – I am not saying that there necessarily is a problem in the real world. But I had attended a seminar in which it was claimed that arts qualifications produced similar human capital gains to other degree qualifications. The reason for the low median is that relatively high numbers of people with these qualifications are not working or working in occupations for which a degree is not normally required.

  • 9
    Corin
    July 8th, 2011 18:27

    Far off topic, just saw the CIS mail out and advert for a new editor of Policy, so wishing you the best and hope that Policy continues to be an interesting publication as you pass the baton. I think your editorship has raised issues even where they don’t entirely sit within the CIS frame, especially the piece by David Alexander. I hope it’s the sort of piece that will still be seen under different editorship and wish you well. I think those types of writing are worth reading as well as the more standard line.

  • 10
    Russell
    July 8th, 2011 20:42

    “I had attended a seminar in which it was claimed that arts qualifications produced similar human capital gains to other degree qualifications”
    .
    which could be true, if we could measure completely the benefits resulting from this wonderful arts human capital. Are you using only individuals’ income as the measure? Would this capture all the benefits to an organisation or community from the brilliant, creative, original contributions of the arts graduates, formally employed in the ‘correct’ occupation, or not?
    .
    Also “The reason for the low median is that relatively high numbers of people with these qualifications are not working or working in occupations for which a degree is not normally required”.
    .
    Yes, given that an arts degree can be, as you said, a finishing school for middle class girls, shouldn’t you, to be fair, take into account that, unlike most other degrees, many arts graduates never were going to make much of an effort as far as career goes.
    .
    So, perhaps you should subtract a number of the unemployed or underemployed arts graduates before you work out the average income of arts graduates. After all, what other degree is taken up by so many people who aren’t seriously thinking of using it as a career?
    .
    You might think that that’s an argument for not publicly funding arts degrees altogether, but of course that’s just an opinion. I for one don’t want unfinished middle class girls being tipped out of schools into society.

  • 11
    Russell
    July 8th, 2011 20:45

    Darn! when I quickly wrote ‘Would this capture all the benefits to an organisation …’ I should have written – capture all the economic benefits – since I imagine the unpleasant phrase ‘human capital’ refers to just tedious economic stuff.

  • 12
    Russell
    July 8th, 2011 20:47

    BTW, Policy is a very nice looking magazine. The content is, well ….. maybe you should move into the design field?

  • 13
    conrad
    July 9th, 2011 06:17

    “given that an arts degree can be, as you said, a finishing school for middle class girls”
    .
    I think this is a poor assumption — the fact that people are working in jobs that do not require a degree doesn’t mean that the degree didn’t help them get it. Perhaps unemployment rates should be on the graph too. This is one of the long term problems of deliberately increasing pass rates without any increase in standards — an arts degree now doesn’t mean that you are even especially literate, although it’s no doubt better than proving you can memorize 6 essays for Year 12.
    .
    Not that I want to use anecdotes, but I also think there are areas where people could be more well educated. One of my friends works in area where some parts of the world requires a degree (which is what she has), but not Australia. I can’t help but notice that she often comments how useless the Australians are and how little they know. This reminds me of the people that think nurses don’t need degrees — it would be very interesting to compare outcomes in places where nurses do and don’t require degrees. I’d bet they are different which suggests to me that even defining what does and does not require a degree is somewhat slippery.

  • 14
    Andrew Norton
    July 9th, 2011 08:56

    Unemployment and participation for cert III/IV are about the same as for degrees, so that is not going to help the case for arts (or any other degree, for that matter).

    And while it is true employers may sometimes use a degree – any degree – as a screening device, that doesn’t provide a case for public funding or arts degrees over other degrees.

    The best evidence for the value of arts degrees is revealed preference – people want to do them. Unfortunately most people who spoke at the seminar are so committed to public money that they reject the strongest argument in their own favour.

  • 15
    Russell
    July 9th, 2011 18:39

    “The best evidence for the value of arts degrees is revealed preference”
    .
    I’ve never thought much of revealed preference. Arts degrees are the sort of default degree. If you haven’t got the maths you’re excluded from a range of degrees. If you don’t get enough marks to get into law, if you don’t really know what to do ….. arts seems like a place to start. I don’t think it reveals much in the way of preference, of school leavers, at least, more like uncertainty or lack of planning.
    .
    On your ‘arts degrees offer a bad return on investment’ slur … perhaps we’re not putting enough into arts degrees. Are they not a lot cheaper to provide than medicine or dentistry or engineering etc? If so, why would you imagine they would return the same dividend? I think the answer is to spend a lot more and make the courses better.
    .
    When I was first at uni, back in the golden 70s, we (about 120 students) went on the grand tour of Europe (accompanied by about 10 lecturers). We had to read things and go to lectures in very posh places and write an essay – this sort of thing should be a standard part of an arts degree.

  • 16
    Baz da ordinary Aussie
    July 10th, 2011 20:34

    ‘When I was first at uni, back in the golden 70s, we (about 120 students) went on the grand tour of Europe (accompanied by about 10 lecturers). We had to read things and go to lectures in very posh places and write an essay – this sort of thing should be a standard part of an arts degree’

    Says it all doesn’t it Rusty ? While your kind are out there eating cheese and observing the cows and living off the public teet, ordinary Aussies are bustin a gut. You know how I got through Uni ? Working full time, studing full time. No socialising with the hippies, hard work and yes a few drinks with me old school lads on occassion. But no french sojurns thats for bloody sure. Bloody damn near killed me. But tougher for it now.

    But yeah, anyway, Arts degrees are a total waste of time. Courses for people who can’t stop playing with themselves ! In fact, my biggest laugh was when the Arts faculty so badly managed their finances, they had to have mid-semester two-week study breaks and at other times they had to shut down their heating. Yet, despite all my crudeness, I still got copies of Homer, Shakespeare et al in the book shelf. Reckon me and my brickie mates are more cultured than the self-hating hippies you find in today’s art’s schools.
    Cheers

    Baz

  • 17
    Russell
    July 11th, 2011 09:55

    “Bloody damn near killed me. But tougher for it now.”
    .
    Bitterer too, it seems. Look Baz, a lot of the politicians we have in Parliament now have arts degrees. Don’t say there’s no benefit for you there ……

  • 18
    Lucy
    July 11th, 2011 15:21

    Given this, do you think it is unfair that having an arts degree disqualifies people from getting the government subsidy to study for a diploma at TAFE, but having a Cert IV doesn’t?

  • 19
    Andrew Norton
    July 11th, 2011 15:56

    Wasn’t the new Victorian government reviewing that rule? It’s similar to the debate over SLE in higher ed. I’m not against some rationing device, but I don’t know enough about the costs and benefits of altering current arrangements to offer a firm view.

  • 20
    Geoff Robinson
    July 14th, 2011 11:59

    My experience as a former university manager is that Arts graduates may start in low-level admin jobs for which degree qualifications are not required. But they are notably more innovative and less procedural in their attitudes than non-degree holders. Yes universities are a particular environment where having a degree is a help but I am inclined to think this would hold in other admin work.

  • 21
    Club Troppo » Missing Link Friday returns (now with flaming kittens!)
    July 15th, 2011 10:27

    [...] degrees: Is an arts degree a worthwhile investment in human capital? Andrew Norton is sceptical. He suspects the major benefits are "consumption and personal [...]

  • 22
    Migraine
    July 15th, 2011 12:58

    I did two undergraduate degrees in the old days when this meant one after the other (with a gap), not concurrently. The first degree was in science, including maths. Apparently Australia has been crying out for scientists and mathematicians since forever, yet I experienced several protratced periods of unemployment. The second degree was in Arts – in English – and I capped it off with a PhD in something frivolous, self-indulgent and entirely economically useless (no, not media studies – Dead White Males). I have not been out of a job since, and I’m on a bloody good income. If you think this is because I have the science degree underpinning things, your’re bloody crazy.

    Was the Arts degree a good financial investment? Absolutely. Not just because of the impact its had on my career and finances though. It also means I have interesting things to do, read, experience and share when I’m not at work. I have, in fact, a life – and *that* is where it’s paid off in spades.

  • 23
    All those jokes are right. « Sophist In Training
    July 16th, 2011 19:38

    [...] Norton on his blog has an interesting little graph which displays the median weekly income of Arts graduates compared [...]

  • 24
    Andrew Norton » Blog Archive » In an arts degree a good financial investment? #2
    July 20th, 2011 05:18

    [...] Earlier in the month I looked at median weekly earnings for arts graduates, all graduates, and people with certificate III/IV qualifications, as reported in the 2006 census (note the various data caveats in the first post). I found that arts graduates had similar earnings profiles to certificate III/IV holders. [...]