Thursday, November 14, 2013

Rethinking Higher Education

Americans grow up being told this idea that earning a degree means getting higher-paying jobs and having more job options. I think this is a conclusion people draw from a static they hear repeated on TV that college graduates on average earn more than everybody else by $1,000,000 over their lifetime.

Oil painting by Ragod Rustom
The problem with this reasoning is that it treats all college students the same, when they aren't. Students who take advantage of opportunities, do better than those who don't. And this is true for people both during and after school. More importantly, the people who seek out and take advantage of opportunities learn way more than those who don't -- and it's the lifelong learners that earn more than everybody else. So, going to college isn't the thing that increases a person's chances of success, because college doesn't make you seek out and take advantage of opportunities. 

So the relevant question should be, if you go to college, what are you going to do there? Are you going to wait for teachers and job placement counselors to give you opportunities and to tell you how to take advantage of them?

College-bound highschoolers?

Now some people choose to go to college because they got excellent grades in high school and they think that that means they will get into the best schools, which they think translates to being selected first for the best jobs. But this reasoning has the same problem as before -- it treats all jobs the same, when they aren't. It ignores that job availability depends on supply and demand. So if you place yourself in a pool of job applicants in an industry where there is way more supply than demand, for example attorneys (see this article for more), then you might be left with a job that doesn't require your degree, or worse, no job at all. When employers are choosing to fill positions, they would rather take their chances with experienced people over college grads with great grades.

But it's even worse than that. To illustrate how bad the situation is for so many college grads, let's consider two options that a person might have available to him coming out of high school; going to college, and getting a job.

The financial cost of college

The college option typically costs $80,000 in tuition for four years*. Now let's assume that you're still living with your parents as a means of saving money. Let's also say you chose not to work during that period so that you could put more of your effort into getting good grades without having to struggle with a job because that would consume some of your time and attention. So there's an opportunity cost on the college option since it's competing with the job option, and it amounts to whatever you would have earned had you been working a job for those four years. To make this conservative, let's say you worked as a full-time cashier at a fast food restaurant making $7.50 an hour -- that comes to $50,000 for the four years of take-home pay, taking into account taxes and social security and medicare. Going along with the theme of saving money, you would save all your take-home income by getting your parents to pay for your food and everything else, just like they would have done for you had you chosen the college option. So by the end of the four years, the difference between the college option and the job option is $130,000.

But that's not all. There are some variables that are harder to calculate. Had you been working for those four years, you would have been learning job skills that would have helped you get higher-paying jobs, because that's what employers want, job skills. To be clear, had you been working for four years, you would have been promoted a few times during that period, and with each promotion you would have gotten more pay and more learning opportunities -- while with the college option, you don't get that (see this article for more).

So not only does the college option set you back $130,000 compared to the job option, it also sets you back in time. That's four years that you could have been learning job skills that employers want -- so this is another type of opportunity cost. 

And to be clear, the $130,000 figure is conservative since it assumes that you didn't get any promotions during the four year period.

College is an investment

Now a lot of people think of college as an investment. But if you're going to think of it as an investment, then you sure better treat it that way too. So consider the analog -- an investment of your hard-earned money into a new business that you are going to start up. Now, you know the business might not become profitable. So you know that you are risking your money -- you could lose your entire investment! And the prudent thing to do is to do everything in your power to make this business a success -- short of anything immoral that is. So that means that you should seek out and take advantage of opportunities that could make you successful, because just putting in the investment doesn't guarantee that the investment turns a profit. It's the same with college -- if you sit back and wait for opportunities to fall in your lap, then your investment won't turn a profit.

Does getting a specialized degree help?

Now you might think that you can get around this problem by getting a specialized higher degree so that you could get specialized jobs, like being an attorney, but that doesn't work for most people either. Some attorneys who are just starting out, even if they ended up getting a job with their specialized degree, don't even make enough money to make their loan payments and so they resort to making hard decisions like working for the government in order to get their debt erased (see this article for more), or moving to larger cities where the pay is higher. To be clear, lots of government attorney jobs are competitive and lots of attorneys wish they could get those jobs.

Ok so that's a bad situation, but maybe there are other specialized jobs that fair better? Sure. You could be a physician. At least that way you could make enough money to afford the loan payments. But now we're talking about 8 years of school beyond high school and then you're only making $40,000 a year while you're in training in a residency program for at least three more years. And that isn't enough income to afford your loan payments unless you're still living at home -- which would raise the question: How long do you plan to be living at your parent's house?

So who should go to college?

If school is not for everybody, then who is it for? Well it depends on the situation. Let's say you've loved building things your whole life and you want to do experimental physics, then maybe a PhD in Physics is for you. But even someone like this might prefer to work as an engineer, which might only require a Bachelors degree. Or maybe he'd prefer to work as a computer programmer in order to fund his love of building things at home using 3D printers and other CNC machines without being paid for it (see Make magazine for more) -- although it's possible he invents something that people would be willing to pay money for, CHA-CHING! Also, being a computer programmer allows you to automate actions into the things you make -- that's robotics! And that's not the only advantage. Computer programming doesn't need any degrees (see this article for more), and it's something you can start learning as soon as your parents give you a computer.

When deciding whether or not to do higher education, some people have the opportunity to take advantage of scholarships for some or all of the cost of tuition, room, and board. For these people, the college option is better, but not by much. You still have the problem of not earning money, so by the end of four years, you are net neutral on money instead of net positive, which is what you would have been had you gotten working instead of attending college. You still have the problem of losing four years of learning job skills. A full-ride scholarship does not solve these problems, so it's important to make sure not to go to college just because you have access to a full scholarship.

Most people who want to improve their job options would do well to seek a job that requires only a training program at a trade school, say for welding or hairstyling, which is something people can do while working full-time. Similarly, lots of higher-paying jobs like paralegal, medical assistant, and message therapist only require an Associates degree and again, you can attend these schools while working full-time. Some of these programs can be done online which makes it a lot easier for full-time workers and for those who have children.

Social pressure as a reason to go to college

Now there is another dynamic at play here. Lots of people feel pressured to go to school, from parents and friends. When asked the question, "why do you want to go to college?" they answer "so I can say to people that I went to college" or "my parents never approve of anything I do, so if I graduate from college then they would get off my back." So they seek prestige because prestige makes them feel better -- because having prestige makes other people react in certain ways that they prefer. But these people are wrong that society is pressuring them. What's happening is that these people pressure themselves because they care what other people think about them -- they crave social approval. These people would do better to learn how to live their lives by their own opinions, as opposed to living their lives by the opinions of others.

Social pressure as a reason to not take a McJob

Just like going to college to seek prestige, lots of people also choose not to take minimum wage jobs as a means of seeking prestige. These people think of these "McJobs" as low-class and only for dumb people. They think that if they take a "McJob," then they will lose prestige. But this doesn't make sense. The cost of acquiring prestige is more than the potential benefit, so what's the point of having it? In fact, it seems to work against earning more money -- since the alternative of getting a McJob would help you learn job skills that you could use towards getting higher-paying jobs later. For more on prestige, see The Fountainhead, by Ayn Rand.

Having prestige does not improve your life. You should make decisions that add value to your life, and having the ability to say to your friends "I'm a college graduate" and "I don't work at McDonalds" may add perceived value to your life but it does not add actual value.

So, when deciding whether or not to do higher education, make sure you are making a choice that is right for you, that takes into account your situation, your interests, your goals, and that doesn't depend on how other people perceive you.


* The $80,000 tuition figure is for 2013. Currently tuition prices are inflating 10% annually.


people do actually lose prestige/status in the eyes of various people if they work a McJob for a long time
u can try and persuade people that prestige and status aren't worth having
This prestige won't help you get a job or earn more money, so what's the point of having it?
playing prestige and status games DOES get lots of people jobs, tho
its a life strategy
i don't think its a particularly good one
but u can't just pretend that it's totally ineffectual
When Rand wrote the Fountainhead, she didn't write Keating as totally failing at everything. She showed the miserable state of "success" by Keating's standards.

showing him just failing at everything would have been faking reality

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