Pros And Cons Of Irrational Decision Making

Irrational Decision Making

One of the most important decisions an undergraduate will make will be deciding what they will major in. This academic and life choice will ultimately decide how an individual will view their college experience and help guide them with their future career choices. Choosing the wrong major can be too stressful and overwhelming for a student with more course work than expected. On the other side of the spectrum, the wrong choice in a major will not challenge the individual to bring out their full potential. “Ideally, a major will leave a student academically successful, as well as fulfill academic, personal, and vocational goals “(“The Pennsylvania State University Division of Undergraduate Studies,” n.d.). For most college students choosing a major is a difficult decision, especially when they are not mentally and rationally matured. When choosing a major it is implied that most people are logical and rational, and that they weigh the pros and

cons, labour markets, and expected salaries before they make a decision to pursue a particular major. This is not always the case. For some, other factors play into the decision making process that guide them to the choice of which major to move forward with. Posit that people do not use only rational measures when deciding on a career, rather emotion, intuition, and cognition work together to form the best process for decision making (Murtagh, Lopes, and Lyons, 2011).
As new students enroll into colleges and decide on what degree they are going to obtain there will be an influx in declared majors. Whether or not these students are choosing the right majors for themselves is debatable, and will only be determined in hindsight. In the case where students are not logically and rationally deciding their majors there will still be an increase in the labor supply for educated workers. Some of these graduates are the right fit for the jobs that they apply for, while some of the workers are not properly positioned for the jobs that they seek. The increase in higher educated workers is overinflating the labor supply in various market segments since a percentage of these graduates should have declared a different major. The overinflated labor supply in the different market segments has ultimately caused a market failure for educated workers. “According to the BLS, only 27 percent of us need college degrees for our jobs. Yet, 47 percent of the workforce currently has a college degree. This 14.9 percentage point difference equates to 21 million overqualified degreed workers in a workforce of 140 million; or the size of the 2013 fall postsecondary enrollment“ (Carnevale, Smith, and Strohl, 2010). With 21 million overqualified degree worker in the labor force it will lead to many job seekers to be underemployed or unemployed. “If these data are taken at face value, given an expected class of 2.1 million new first-year college students each year in the nation’s colleges and universities — at least from an economic point of view — we should consider shutting the nation’s two and four-year colleges down for the next 10 years to absorb the existing surplus of graduates” (Carnevale, Smith, and Strohl, 2010).
The abundance of educated workers in the labor force could have a significant impact on the labor markets in the years to come. Choosing major based on emotion and intuition opposed to logic and reason could impact the labor markets negatively and inflate certain segments where degrees are more popular than others. Students who are not aware of this can wind up hurting themselves in the future by choosing a major that has a saturated labor market or does not provide an adequate return on investment.
The majority of students choose their majors through an irrational process that does not match up with the job market after they graduate. “Today's students seek specific solutions for immediate concerns. If the student is undecided, his or her immediate concern is that uncertainty” (Bertram, 1994), rather than concerning the medium run regarding job placement. There are several other aspects that make it difficult for students to base their college major decisions on rationality. By basing decisions on the immediate they tend to focus on the choice of the university first and then the major.
According to Wiswall and Zafar earnings expectations and ability perceptions play a large role in choice of major (2014). However, even if students base their decisions on medium run job prospects they could eventually discover that their major does not hold them same potential as it did four or five years before.
The most significant contributor to choosing a major was “largely the result of heterogeneity in major specific and unobserved ‘tastes’” (Wiswall and Zafar, 2014). For them “tastes encompass preferences for major-specific outcomes realized in college (such as the enjoyability of coursework), or major-specific post-graduation outcomes (such as non-pecuniary aspects of jobs)” (Wiswall and Zafar, 2014). As students progress throughout their academic career their propensity to switch majors decreases, reflecting the higher trade off of switching later in college.
Nevertheless students seem to be basing their choice of major largely on tastes that don’t reflect labor market trade offs. Rather their decisions are based on non-pecuniary rational factors, such as college experience or quality of the working experience. In addition “an overreliance on computer technology may encourage some students to place the answers to questions above the process necessary to arrive at those answers” (Bertram, 1994). This is especially alarming considering how awash the Internet is with information regardless of how accurate or informative it is.

Inflow of new educated workers vs. Outflow of the Baby boomers
The delay in retirements for the baby-boom generation is an additional reason for the current mismatch in the labor market for college-educated workers, which has implications for both the demand and supply side.

With increasing life expectancy and a contracting retirement income system households face an immense challenge in ensuring a secure retirement. Working longer is often viewed as a safe bet way to increase retirement incomes (Munnell and Sass, 2008). Moreover, new patterns of retirement have started to emerge such as; gradual retirement, phased retirement, and unretirement (Choi, Goode, and Tang, 2012). These fruitions create more friction for baby boomers entering retirement, a friction that causes firms to become resistant when creating new jobs. For example, it is far more cost efficient for a firm to reduce the work of an older employee (think gradual retirement) without training and bringing in a new worker to replace the older worker’s role (Filipczak, Raines, and Zernke,

2013).
The combined market forces of the inflow of new college educated workers and outflow of the baby boom generation acts as a double-edged sword on the labor market. On the one hand you have a generation X—the most educated generation, flooding the stock of labor supply. On the other, is the delayed retirement of the baby boomer generation, which in effect gives firms incentive not to create new jobs. Put together results in over supply of educated workers and under demand for such workers.