Labor market returns to college major specificity

Abstract

This paper develops a new approach to measuring human capital specificity, in the context of college majors, and estimates its labor market return over a worker’s life cycle. To measure specificity, we propose a novel method grounded in human capital theory: a Gini coefficient of earnings premia for a major across occupations. Our measure captures the notion of skill transferability across jobs. Education and nursing are the most specific majors, while philosophy and psychology are among the most general. Using data from the American Community Survey, we find that the most specific majors typically pay off the most, with an early-career earnings premium of about 5-6% over average majors (15-20% over the most general majors), driven by higher hourly wages. General majors lag far behind at every age. Despite their earnings advantage, graduates from specific majors are the least likely to hold managerial positions, with graduates from majors of average specificity being the most likely to do so. It may be that managerial positions require a mix of specific knowledge and broadly applicable skills.