Is an arts degree a good financial investment? #2

Earlier in the month I looked at median weekly income 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 income profiles to certificate III/IV holders.

The figure below looks at males with income around the 75th percentile for their qualification in 2006, and tells a different story. In their 20s, earnings are fairly similar between the three groups (in the rather crude way I have had to do this, the ‘all graduates’ aged 25-29 just missed out on the next income bracket, and if the test had been ‘all non-arts graduates’ may have made it).

By their 30s, arts graduates in this part of the income distribution are clearly pulling away from the certificate III/IV people. But they are not gaining on all graduates. Indeed, the gap is likely to be larger than shown at the median, because graduates at the 75th percentile are ticking the highest census income category of $2,000 a week or more. We can’t tell from this data source how much they are earning, other than that it must be over $500 a week more than an arts graduate in the same relative position.

5 Responses to “Is an arts degree a good financial investment? #2

  • 1
    Dave Bath
    July 20th, 2011 08:38

    One cause of this curve is that it’s a fair bet that, although many would qualify for commerce courses and a trajectory through business one expects would led to regular rises, (the same would apply to biologists and mathematicians for example), they chose a non-commerce degree for motivations other than mere money. I’d guess the motivations of the certificate types are somewhere between arts/pure-science and commerce types.

    So, apart from the carer path, one might also expect that when reaching a comfort level of income, they don’t have as much urge to keep climbing, want to keep doing work they like rather than shift to more lucrative management roles (again similar to many science but not engineering types) which has similar appeal to a pilot “flying a desk”.

    I’m just guessing at all this, but it would need a well-designed study (probably involving psychometrics of the different groups and attitude surveys) to see if there is such a factor in these figures.

  • 2
    Andrew Norton
    July 20th, 2011 15:10

    Dave – All quite plausible, since for most people money is not the number one priority. On the other hand, I think there is limited demand for the non-specific skills acquired and/or signalled by an arts degree, and so people who do not require other credentials are limiting the kinds of jobs they can do, and the amount of money they can earn.

  • 3
    derrida derider
    August 2nd, 2011 17:23

    Sorry, but those curves are an unreliable guide to the prospects of today’s graduates. Raw Mincer profiles (as these age-earnings curves are known) only tell you about PAST returns to graduates, simply because the older people in them graduated a long time ago. There were fewer graduates then anyway, although a somewhat bigger proportion of them were Arts ones (it’s hard to believe now, but there was once this quaint notion that education was about more than maximising aggregate GDP).

    What I’m saying is that you need to think about cohort effects when looking at these charts. And that’s without even thinking about screening or signalling effects that are very likely to have influenced the relative returns to different forms of education.

  • 4
    Andrew Norton
    August 2nd, 2011 18:47

    DD – All returns to higher education studies are about what past graduates earned, and while obviously the future may not be the same as the past, qualified with other relevant information (eg prospects for graduates in particular fields, given what we know about employment trends), historical data is the best guide we have. I can’t see an an obvious theoretical reason why the relative prospects of arts graduates would change much in the future.

    This data is already picking up cohort effects (or lack thereof) – it is showing people at the various ages in 2006, not the same cohort aged through several censuses (the method used by the ABS for in their returns study last year).

  • 5
    August 12th, 2011 20:24

    One should always choose the path where he/she is good at. When you are good at something the work stress will not get on top of you. The work will become a game that you enjoy. And you will not believe that you are getting paid for something you enjoy. Income in the Arts looks average, but I firmly believe that if you have the love in arts you can achieve milestones that is not reflected in that particular graph.