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Jul 10

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Should STEM Majors Receive More Subsidies?

As universities struggle to balance budgets, a recent innovation involves charging higher tuition for students whose majors are costlier to the university. In practice, Science, Technology, Engineering, and Math (STEM) fields, as well as majors in the arts, cost more relative to majors in the humanities and social sciences. These majors’ additional expenses cover specialized equipment (labs, theater stages), materials, and more personalized instruction. Universities cite these additional expenses as justification for charging STEM students more in tuition.

A recent study published by the National Bureau of Economic Research (NBER) finds that differential pricing alters “the allocation of students to majors.” In other words, increasing the cost of certain majors reduces student enrollment in these majors as a result. This finding is disconcerting since the job market values training in STEM fields and policymakers frequently bemoan the dearth of qualified STEM graduates. If such a policy is applied more pervasively, it would presumably reduce the pool of STEM students. For this reason, some commentators (e.g. here) advocate charging differential rates of tuition in the opposite direction, making tuition cheaper for students in STEM. The argument is that students majoring in STEM will likely provide greater returns to taxpayers’ current investment (via higher contribution to GDP and taxes), and therefore these students should receive more in subsidies, not less.

Critics respond that students are already incentivized to pursue STEM fields by the promise of higher future earnings. In fact, another recent NBER paper finds that while students often begin college quite optimistic about pursuing a STEM degree, they ultimately transfer to “softer” fields because STEM degrees are too difficult to obtain. Using this study, we might argue that the best way to satisfy the job market’s demand for STEM graduates isn’t using subsidies, but rather finding ways to improve the method of instruction for students who have an interest in STEM but are not performing well with the traditional teaching style.

About the author

Benjamin Bohr

Benjamin is a manager at Fulcrum Financial Inquiry. He specializes in statistics and data analysis for use in high-stakes litigation, business valuations, and other financial matters.

Permanent link to this article: http://betweenthenumbers.net/2013/07/should-stem-majors-receive-more-subsidies/

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