Previously by Charles Hugh Smith: Students: You Are Exploited Debt-Serfs
Are there credible alternatives to $100,000 in debt for college? Yes.
Correspondent D.S., with one daughter in college and other children nearing graduation from high school, asks: what are the credible alternatives to $100,000 in debt for college? D.S. mentioned the relative paucity of apprenticeships in the U.S., and this is certainly a critical "missing factor" in credible alternatives.
There has been a spate of articles recently supporting the idea that college is overrated as a career path and the better alternative is to become an entrepreneur out of high school. For example:
In response to D.S.’s excellent question, I’d like to make some broad-brush points for context. Let’s first stipulate that there are no easy answers. Education, legitimate university degrees, blue collar skills and entrepreneural enterprise all have advantages and opportunities, but the reality is that the job market and economy are difficult and may get tougher in the years ahead. I don’t believe cheerleading or sugar-coating the realities is helpful.
I personally exited college in the recessionary year of 1975, and was savaged by the deepest postwar recession to date in 1981-82. Things were not that great circa 1973-82, but the current financial and political crisis is even worse.
1. A few generations ago, a college degree in any subject was a "ticket punched by an authorized gatekeeper" that qualified the bearer to enter the white-collar workforce. Those entering the blue-collar workforce either started work at a factory, entered a union-organized and operated apprencticeship program, or earned a two-year degree in a trade or skill at a community college.
2. For the past two generations, a liberal arts degree was a sufficient "qualifer/ticket" to work in the rapidly expanding FIRE industries – finance, insurance and real estate. The medical and education fields were also expanding such that training in these fields practically guaranteed the graduate a job somewhere.
Now the FIRE economy is shrinking – ultimately a healthy development for the economy – and the medical and education sectors are starting to be pared back as government spending has exceeded the carrying capacity of the economy.
3. As factories closed and production moved to Asia, factory jobs that could be learned in a few hours (or even minutes) have mostly vanished in a specific American version of globalization. I say American because the situation is quite different in Japan and Germany, two exporting powerhouses with much different trade and domestic labor policies. "Globalization" may be global but its characteristics are unique within each nation.
4. Dirty, repetitive work (slaughterhouses, construction, etc.) has been filled by immigrants, legal and illegal, a trend which has pushed wages down for broad swaths of blue-collar work.
5. A broad range of skilled blue-collar trades such as pipefitting are having trouble finding workers willing to complete the training. These are high-wage difficult jobs which are apparently no longer valued.
6. The kinds of jobs which cannot be exported are shifting to lower-skill/wage labor such as caring for the elderly, janitorial services, farm work, etc. At the upper end, work such as legal research that was once considered safe from globalization is increasingly vulnerable to software automation or offshoring.
7. The U.S. has an implicit immigration policy that skews wages down for most manual labor jobs and increases the value of high-tech skills: unlimited immigration at the low-skill level and restricted immigration for high-level skills. Thus the unfilled jobs in the U.S. are those demanding specific high-level software skills. At this level, Silicon Valley/San Francisco Web 2.0 start-ups are actively poaching senior software engineers from each other.
8. If education is viewed as an investment, then the cost of that investment should have a return that leverages the investment.
In other words, taking on $100,000 of debt to obtain a liberal arts degree that qualifies one to work at Starbucks is simply a poor investment. If you borrow $250,000 to attend law school and then discover you loathe the actual practice of law, that was a poor investment.
9. There is a "long tail" characteristic to the relative value of various university degrees. Below the top tranch of a dozen or so elite universities, the value in the marketplace for degrees drops very quickly. A second-rank university degree is worth considerably less than an elite degree, but not much more than a third-tier university degree.
All those "100 best colleges" lists are basically marketing material for the education industry. Once you’re out in the real world, what you know how to do in the real world and who you know is more important than the issuer of your diploma, unless you are brilliant and driven enough to have graduated from a top-tier elite university (Stanford, Harvard, MIT, Caltech, etc.)
10. The field of study is more important than the university. Those graduating with liberal arts degrees from top state schools have little advantage in the real world over someone with the same degree from a lesser-ranked university. To the person who is considering hiring you, it boils down to this: you have to be the lowest-cost, least-hassle solution to their problem. Whether you graduated from NYU or Central Florida State is not the issue.