Where do STEM majors lose their advantage? Contextualizing horizontal stratification of higher education in urban China

• STEM majors are more lucrative than non-STEM majors in Reform-Era China.
• A smaller STEM advantage over non-STEM fields is detected among junior college graduates.
• Working in the state sector significantly narrows the earnings gap between STEM and non-STEM graduates.
• Significant cohort variation in horizontal stratification of higher education is detected.

While the average labor market advantage of college graduates with STEM (Science, Technology, Engineering, and Mathematics) degrees relative to non-STEM students is well established, how this STEM versus non-STEM income gap varies across institutional contexts has been understudied. From the perspective of new institutionalism, we investigate the moderating effects of hierarchically situated higher education institutions and labor market sectors on the economic disparity between STEM and non-STEM majors by pooling data from two nationwide representative surveys collected in contemporary urban China. The results of median regression models suggest that (1) On average, STEM majors are more lucrative than non-STEM majors in Reform-Era China, a pattern resembling that of many other societies. (2) The vertical stratification of higher education institutions, i.e., the postsecondary education sector's segmentation into “junior” and “regular” colleges, is relevant, where a smaller STEM advantage over non-STEM fields is detected among junior college graduates after accounting for potential cohort variation. Moreover, this moderating effect of college tiers declines across birth cohorts. (3) Working in the state sector, such as the Communist Party and government department and institutions, relative to the other sectors, significantly narrows the earnings gap between STEM and non-STEM graduates. However, this labor-market-sector heterogeneity in the STEM versus non-STEM income gap also declines across birth cohorts. Theoretical implications of empirical findings are discussed.