Why the Job Market Is Slanted in Favor of College Graduates

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College graduates
make more money than non-graduates, unless the non-graduates own
their own businesses. Why? Your first guess is probably incorrect.
So is your second.

In this report,
I am going to reveal a few of the dirty little secrets of what
I call the college racket. This will get me into trouble with
politically correct readers. But at this stage of my career, I
don’t have many politically correct readers.

Have you
thought about going back to college in order to earn more money?
Have you thought that you should send your child or grandchild
to college — again, for monetary purposes?

Look before
you leap. Then leap smarter.


In the
August 24, 2004 issue of Early To Rise
, the editor
summarized the findings of a pair of authors who argue that the
reason why college graduates make more money than non-graduates
is that the college experience gives graduates the opportunity
to develop habits that help them in the business world. These
habits include:

  • showing
    up on time
  • paying
    close attention to assignments
  • completing
    assignments on time
  • doing
    more than the minimum required
  • struggling
    with difficult tasks
  • organizing
    tasks by priorities

To which
I would add:

  • going
    to fraternity parties and smoking whatever the
    two authors were smoking just before they compiled
    this list

Let me discuss
in greater detail the reality behind this list.

  • Showing
    up on time . . . for the first two weeks of the term, after
    which, having gotten a reputation for showing up on time, the
    student then cuts 50% of the remaining classes, and no one notices
    — especially in classes of 300 students, which are common
    for freshman and sophomores.
  • Paying
    close attention to assignments . . . beginning approximately
    24 hours before — make that the night before — the
    assignments are due.
  • Completing
    assignments on time . . . approximately 15 minutes before they
    are due, probably handed in by the student’s roommate because
    the assignment-completer is snoring after an all-night writing
  • Doing
    more than the minimum required . . . such as adding a couple
    of footnotes to the term paper that the student downloaded from
    or one of a dozen rival companies.
  • Struggling
    with difficult tasks . . . such as tapping buttons on the cash
    register at Wendy’s, where the student earns the money needed
    to pay for all those term papers.
  • Organizing
    tasks by priorities . . . fraternity party on Friday night,
    football game on Saturday, sorority party on Saturday night,
    recovering from a hangover on Sunday.

The main
reason why anyone would believe that these habits are best learned
at college is that he spent way too much time in college.


the list. Which of these habits could not be learned
in an apprenticeship program in a medium-size business, preferably
in a field that interests the student?

  • showing
    up on time
  • paying
    close attention to assignments
  • completing
    assignments on time
  • doing
    more than the minimum required
  • struggling
    with difficult tasks
  • organizing
    tasks by priorities

He would
be doing relevant work related to his interests. He would receive
instruction from a mentor who really knows how the job should
be done.

Added benefits:
he would be making a small salary. He would learn how to budget
his money. He would make the break from his parents at his expense,
not theirs.

I call this
win-win-win: apprentice, employer, parents.

Why should
any rational person believe that these habits are learned best
in a non-profit, sheltered environment that is run by bureaucrats
whose top priority in life is attaining tenure — the ultimate
shelter from the free market? Which of these habits is learned
best in 50-minute classes, three days a week, with a four-week
vacation between terms, a one-week Easter vacation, and a three-month
summer vacation?

If these
habits are best learned in a college environment, then why doesn’t
any business on Earth adopt a collegiate format to promote its
workers up the corporate chain of command? Why do businesses use
weekend seminars, week-long conferences, and other time-constrained

The envelope,
please. And the answer is: "Because non-collegiate formats
produce profitable results."


The typical
business has routine tasks that are used to screen candidates
for higher positions. These tasks require little personal initiative.
They require the list of skills we have already read about.

A businessman
reduces his cost of hiring someone to do these tasks by hiring
a person without much experience, because most people have already
gone beyond these basics if they are even remotely successful.
They are not entry-level workers. They can charge more per hour.

The businessman
also wants to hire someone who will not quit the crummy entry-level
job. The businessman wants continuity.

He looks
for someone who has done boring grunt work without complaining,
and has finished the work.

A college
graduate has shown that he has been willing to suffer enormous
boredom, broken only by weekend parties, for five or six years.
(Very few students get through in four years, as their savings-depleted
parents will tell you in private.)

Here is someone
who has survived years of a system designed by bureaucrats to
produce bureaucrats. He has either been subsidized by his parents
(50% of college students) or else has paid his own way (that’s
the one I want to hire). He has put up with years of academic
nonsense spouted by left-wing bureaucrats who could not hold a
regular job in industry, let alone run a business.

Here, in
short, is a certified drudge. Better yet, he has been certified
at someone else’s primary expense: parents, taxpayers, and collegiate
donors with more money than sense.

Back to the
list. Which of these is not learned in high school?

  • showing
    up on time
  • paying
    close attention to assignments
  • completing
    assignments on time
  • doing
    more than the minimum required
  • struggling
    with difficult tasks
  • organizing
    tasks by priorities

Anyone with
a B-average has done all this. Anyone with an A-average has done
it even better.

Then why
not hire students just out of high school? Why not hire them,
put them in a college-degree-by-examination distance learning
program, split the expenses ($6,000/$6,000, total), get some work
out of the students in entry-level positions, see which ones are
actually productive on the job, keep the students in the company
for four to six years because of this minimal, corporate tax-deductible
academic subsidy ($6,000), and gain their loyalty — a commodity
in short supply?

Why not?
I have no answer. I know that’s what I would recommend if I were
the head of the personnel division in a large company.

Would you
rather have a college graduate on your staff who learned the business
in your firm while getting his degree by correspondence or night
school, or would you rather hire a graduate who may have downloaded
his term papers, spent his weekends in an alcoholic haze, and
spent his parents’ retirement plan?

Some businesses
do understand this and are part of what is known as Cooperative Education. It is basically a work-study program, where the student
alternates semesters: work/school. It operates on many college
campuses. Hundreds of corporations participate. It takes longer
to graduate, but the student can pay his way through college and
also gains valuable work experience. Few students know about it.
Fewer parents know about it.


In the controversial
book, The
Bell Curve
, the authors’ main argument — ignored
by most of the book’s reviewers — is that America’s elite
four dozen universities and colleges, with a mere 60,000 freshman
students out of 1.2 million nationally, attract the elite students:
60% of all students scoring 700 or higher on the SAT verbal (1990
— before the upward revision of SAT scoring). These students
are then educated in the same academic outlook. The danger, the
authors wrote, is that this process discourages intellectual diversity.
The best and the brightest think alike (chap. 1).

Before the
mid-20th century, no societies in history had skimmed
off their brightest young people in order to run them through
the bureaucracy. There were always bright people down on the farms.
The brains were distributed geographically and socially. No longer.
They go to elite colleges and get hired by elite businesses. Or
they start their own businesses. They associate with people like
themselves. They support the same sorts of causes. One of the
main ones is to give to the alumni associations.

The Bell
Curve also committed a major offense. It reported on the effects
on corporation hiring policies of racial legislation: non-equality
before the law. There are state and Federal laws against businesses’
use of employment tests that screen for brains if the tests screen
out racial minorities. The Bell Curve stated the obvious:
these tests do in fact screen out disproportionate numbers of
certain politically protected racial minorities (Appendix 7).
The Bell Curve was savagely attacked by political liberals
for saying what everyone else knows is true.

So, elite
businesses that want to attract the best and the brightest hire
from the elite universities and a handful of professional schools.
The schools administer the tests at their expense. This is how
the old boy network works today.

businesses that want to hire reasonably competent people hire
graduates from non-elite universities.

Why do they
specify "college graduates only"? Because if they didn’t,
the Equal Employment Opportunities Commission would take them
to court for racial discrimination. The EEOC’s argument: "If
this job does not require a college degree, then any favoritism
shown to college graduates is a disguised form of racial discrimination
and illegal." So, businesses that would otherwise promote
from inside the company dare not do this. They therefore discriminate
against non-graduates.

know, for example, that a Ph.D. in economics or an MBA from one
of the best business or management schools has imparted little
or no practical knowledge to their graduates. It takes five years
of on-the-job experience to make them useful. About all they learn
of immediate value in grad school is how to use Microsoft Excel,
which is the digital grandchild of VisiCalc, which a Harvard Business
School student coded for the Apple II computer as a way to get
his classroom assignments done faster. Companies are not hiring
the mathematical, arcane drivel that these students have learned.
They are buying the brain power that was required to master academic
journal articles written by tenured professors who could not hold
a job in private industry at their present salary level.

Oh, yes:
one more thing. The business gets indirect access to the digital
Rolodex that the student presumably acquired while in school —
a list of the best and brightest. The graduate is part of a network.
Businesses lease these networks by hiring key students.

College screening
is how the NBA and the NFL have recruited players for decades.
Unlike baseball teams, which use a farm club system, the NBA and
the NFL have used colleges to screen the biggest and the fastest.
They let colleges make big names out of key players. Then they
bid for the services of these players. The result is skewed hiring
racially. Hardly any white guys, no Jews, and no Eskimos.

One of these
days, the EEOC is going to take the NFL and the NBA to court.
If you believe this, you probably also believe that college is
where students learn to pay close attention.


The way to
become a good manager is to spend years under the direction of
a good manager.

Any firm
with a good manager should try to hire student interns who are
not out of college. They should apprentice under this manager.
This may mean offering summer jobs to students recommended by
professors at a community college or local university. Or it may
mean adopting an apprenticeship program that involves paying a
student half of the expense of earning a college degree by correspondence/Internet.
Or it may mean recruiting on campus in a conventional way.

The key is
to leverage the business’s most skilled managers. The multiplication
of managers is the way to increase the company’s rate of return
on investment.

This is what
large companies in theory do, but corporate bureaucracy seems
to dip such programs in cement. I don’t think entrepreneurship
can be taught, but skilled management can. Out of systematic training
through apprenticeship to skilled managers, a few entrepreneurs
will emerge. A business should joint-venture projects with these
people. The 3M company does this. The most famous result is Post-It

I would rather
hire a non-graduate who has initiative, screen him on the job,
and get him enrolled in a local college part-time or in an on-line
degree program at one of the handful of distance-learning programs
that cost under $4,000 a year. I have written about this before.


Instead of
going to college full time at 18, a wise student will seek employment
by a company on a part-time basis and take his college work by
examination. His college degree will cost him $12,000 instead
of costing his parents $35,000 to $140,000. He can pay his own
way through school. He can gain his independence at 18.

He will be
trained on the job by people who know how to make a buck. He will
have a four-year to six-year head start on his peers. At age 22
or 23, he will have a college degree and work experience that
will impress a would-be employer. He will be in a position to
rise in the existing chain of command because his employer knows
he is now a marketable commodity in the business world. The employer
will have to pay him more money.

Very few
students do this, and very few parents even consider asking their
college-bound children to do this. By the way, 60% of all students
who start college fail to graduate with a bachelor’s degree. The
money spent by their parents on tuition, books, room, and board
goes down the drain. Talk about a high-risk crap shoot!

If parents
would set aside half of the money they planned to spend on a child’s
education and give the child this money as a college graduation
present, the parents would be far better off, and the new graduate
could make a down payment on a house or start a business.


College graduates
make more money because they have been screened at college, at
their expense or their families’ expense. Then businesses pick
up the newly minted graduates and stick them in low-paid, entry-level
jobs. (I am not speaking of engineering graduates.) The screening
process is bureaucratic, which large, bureaucratic companies appreciate.
In the case of the elite universities, the screening process is
IQ-based, which the premier companies appreciate. "Racial
discrimination? Us? Perish the thought! We are ready to hire as
many of Those People that Harvard or Yale or Princeton can produce."

A cost has
been imposed by this government-regulated employment system on
people without a college degree. They are not given a shot at
entry-level management jobs.

Most companies
that screen exclusively by a college degree are bureaucratic companies.
They place more emphasis on obedience than innovation. This is
not the kind of company that an innovative person should work

If I were
18, or if I had no college degree, I’d earn one as cheaply and
as fast as I could, probably by correspondence, while working
part-time at a firm in a field I was interested in. I would learn
the business while getting paid. My goal would be starting my
own company in (say) 10 years — or taking over the one that
has employed me.

Every system
has loopholes. This includes the collegiate system. I have outlined
my recommended strategy in a free report, "Never Pay Retail
for a College Education." Order it by sending an e-mail to:

If you don’t
have a college degree, you can earn one. If your child doesn’t
have a degree, he or she can earn one. Earn it cheap, fast, and
on the job. It rarely matters what you majored in. It only matters
that you earned the degree. The degree is a screening device,
not a training device.

3, 2004

North [send him mail]
is the author of Mises
on Money
. Visit http://www.freebooks.com.
For a free subscription to Gary North’s newsletter on gold, click

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