(Photo: Bloomberg)
(Photo: Bloomberg)

Why STEM may not pay in the long run

The high economic return to applied STEM degrees declines by over 50% after the first decade of working life, finds a new study

Science, technology, engineering and math or STEM degrees are highly coveted partly because they earn high returns in the job market. Yet these high returns could be short-lived with earnings decreasing over time suggests a new National Bureau of Economic Research (NBER) paper authored by David J. Deming of Harvard Graduate School of Education and Kadeem L. Noray of Harvard University.

Using detailed online job vacancy data collected between 2007 and 2017, the authors show that jobs requiring STEM skills change very quickly. This rate of change in STEM skills is driven both by more rapid obsolescence of old skills and by the requirement of new skills. For instance, Deming and Noray find that the share of STEM vacancies requiring skills related to machine learning and artificial intelligence increased by 460% between 2007 and 2017.

Jobs where the required skills change rapidly, may have high wages initially but they stagnate as new skills are required and the skills of older cohorts become obsolete. Such jobs disproportionately employ young workers, the authors observe.

As a result, the earnings premium for STEM majors is highest at labour market entry and declines by more than 50% in the first decade of working life. This, they argue, forces such professionals to eventually change careers or exit the workforce.

However, while this pattern holds for “applied" STEM majors such as engineering and computer science, this may not be true for “pure" STEM majors such as biology, chemistry, physics and mathematics.

As such, the authors argue that it is the new job-relevant skills that are the scarcity in the labour market, not necessarily the STEM workers themselves as is commonly perceived.

Also read: STEM careers and the changing skill requirements of work

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