Whether you are a freshman or senior, finding a job is constantly on your mind. Whether it’s a part-time job as you complete your education, or a full-time job once you graduate, employment is a mainstay in your constant thoughts. When you are considering your job search, income, hours and job description are oftentimes seen as the most important factors to consider. However, one factor we often neglect during our major choice and our subsequent job search is understanding risk and reward in the job market. This article aims to unpack risk and reward in your career search and explain how and why it impacts our jobs and incomes.
First, let’s understand risk and reward in a general sense. Investopedia explains it in the following manner: “The risk/reward ratio marks the prospective reward an investor can earn for every dollar they risk on an investment.” (1) Stated simply, risk versus reward is a decision that an investor has to make with the money they invest. A very commonly accepted principle is that the more risk you are willing to take, the higher your potential reward will be. The inverse is also true; the less risk you take, the lower your potential reward.
Let’s use a real-world investing example to truly unpack this principle. Let’s say you wanted to invest in a specific company that you expect to do well in the coming weeks. Generally speaking, investing in specific stocks is seen as risky because you are putting all your eggs in one basket. However, because you are taking this increased risk, the potential rewards are substantial. On the other hand, if you invested in an ETF, your risk is substantially decreased, and as such, your potential for large-scale gains is decreased.
This same exact principle can be directly applied to picking your major and choosing your potential career. Oftentimes, careers such as acting, art, music, and journalism are looked down upon because of their low average and median wages. This is as a result of these fields being extremely competitive career choices. As such, it can be considered that such careers are high-risk careers. Many people who graduate with those degrees often find themselves with low-paying jobs in extremely competitive workplace environments. However, if they are able to become the best in their field, they may find themselves extremely wealthy. Some of the richest people in the United States are actors, musical artists and journalists. Think of Channing Tatum, Lady Gaga and Anderson Cooper. These three have a combined net worth of over half a billion dollars. Compare their net worth to people who major in those specialties. Theater majors have a median income of $49,000 (2). Music majors have a median income of $53,000 (3). Journalism majors have a median income of $46,000(4).
Put simply, these majors often carry a great deal of risk, as such, they also carry a great deal of reward. Let’s contrast this with majors that are accompanied with less risk. Standard jobs such as accounting, teaching, and nursing are often accompanied by much less risk because of the high demand for those majors. However, because of the lesser risk, those majors would find it difficult to increase their incomes in the long term as the risky fields are accompanied with comfortable pay to begin with.
Although this comparison is not perfect, it does explain why certain people choose to major in different fields. As you consider your future career, be sure to analyze the risks you are willing to take as you enter your career. Weigh your risk versus reward and be sure to choose a major in something you are truly interested in. Perhaps you might find yourself on the Grammy’s one day.