How Unemployment Rates Shift Choices of Majors

New study shows with precision how students change academic directions when the economy is headed downward. While men and women both alter plans, they do so in different ways.

July 27, 2015

Conventional wisdom holds that in bad economic times, students are more likely to make academic decisions that favor fields perceived to be paths to jobs, and jobs that pay well. Despite plenty of evidence that liberal arts graduates also have successful careers, undergraduates (and their parents) tend in tough times to encourage majors in business and engineering or other fields that seem to promise employment.

A new paper backs up that conventional wisdom with precise data on how high unemployment rates shift students' majors. While both male and female students shift, they do so in different ways. And they both move away from the liberal arts and education when unemployment goes up.

In total, the paper estimates that every increase of 1 percent in the unemployment rate prompts a 3.2 percentage point reallocation of the major choices of men, and 4.1 percentage points for women. In periods of significant increases in unemployment rates, the consequences could be significant for many students' enrollment patterns.

The study (available here) was done by Erica Blom, a consultant with Edgeworth Economics; Brian C. Candena, assistant professor of economics at the University of Colorado at Boulder; and Benjamin Keys, assistant professor at the Harris School of Public Policy at the University of Chicago. The study was published by the Institute for the Study of Labor, a German research center known as IZA, but the research is about American students -- and in particular those of traditional college age.

The scholars used two major national databases -- the American Community Survey and the Baccalaureate and Beyond Survey -- to examine the relationship between the choices of major of people aged 20, and how those choices shift as unemployment rates go up. The database created for the research covers Americans who turned 20 from 1960 through 2011.

Their findings show that the share of men majoring in engineering fields goes up by more than 0.6 percent every time the unemployment rate increases by 1 percent. Other majors that show gains in the share of men include accounting (more than 0.2 percent for every point that the unemployment rate is up), and business (excluding finance), computer science and natural science (all up by more than 0.1 percent). Men respond to increases in the unemployment rates by shifting away from (in order of magnitude of the shift) education, liberal arts and history, literature and language, psychology and sociology. (Complete charts may be found at the end of this article.)

For women, the field seeing the greatest increase for each point unemployment goes up is business outside of finance, by more than 0.6 percent. That is followed by nursing (about half the gain of business), accounting, technical health fields and computer-related fields. Women are most likely to move away from education (by more than 1 percent share of women's enrollment if counting all education fields together), literature and language, sociology, psychology, and liberal arts and history.

Many of the shifts by women bring them out of fields traditionally dominated by women and into those that have been overwhelmingly male. But traditional gender patterns can also be evident. While women showed a significant increase in nursing majors (a field where jobs are plentiful), men saw only marginal gains.

Some fields showing marginal gains (for men and women) -- such as journalism and pre-law -- haven't been great job producers of late.

In explaining their findings, the authors write that "recessions lead to share increases among more difficult and male-dominated majors, even controlling for differences in earnings and the likelihood of finding employment. These additional results suggest that in response to anticipated weak labor demand upon graduation, students either devote more resources to learning about the career potential of majors or become more sensitive to the signal that their major sends about their ability to potential employers. The stark responsiveness to the business cycle suggests that many college students, and especially female college students, have sufficient ability to complete more challenging majors, such as STEM fields, yet choose not to do so in periods with stronger labor market prospects."

From a purely financial perspective, the authors write that the students are making wise choices, and that they are shifting toward fields whose graduates, on average, earn more. At the same time, the income shift (as a percentage) is modest.

"We find that a 3 percentage point rise in unemployment at the time of major choice leads to a distribution of majors that earns roughly 1.35 percent more, on average, for their long-run earnings," the paper says. "The results suggest that even brief recessions can have a long-lasting impact on the distribution of human capital in the economy and provide new insight into how labor supply adjusts in subtle ways to temporary disruptions in labor demand."



Back to Top