One thing we can learn from the latest credit driven recession is how overrated college is and how overpriced college-educated, white collar labor is.
First, let’s examine why people go to college. The main reason is to get a better job. There is a mountain of evidence that people get a good ROI by going to college. Their opportunities are expanded since employers view these people as more intelligent and competent.
Notice, I did not say college-educated people have more skills. No one learns anything important in college. Unless you’re an engineering degree or some other vocational degree, your college degree likely tought you nothing important. Not only does this apply to fluffy majors like sociology, art history, history and English, I mean this to apply to common majors such as business and economics. As a small business owner, I can tell you that college taught me absolutely nothing about how to run a small business. If anything, it taught you how to think incorrectly.
So the big question is, why do we need 4 years for essentially a signal to the labor market? And is this signal overrated?
First, I will definitely say that the ‘nicer’ colleges, the Dukes, Emory’s, high-priced liberal arts colleges, etc. are definitely overrated. Why pay $40k a year for these schools when you can pay $5k to go to a state college? Is the ROI that much more? Doubtful. The ‘experience’ is supposedly nicer, and it may help you get into graduate school (which is likely overrated too). Parents may be more willing to pay for their kids’ experience before their stock portfolios dropped by 50%.
Graduating from a decent state school and graduating from a liberal arts school or a Rice both imply competence, so the nicer private school isn’t going to help you in the labor force. Tough cookies.
Let’s take this a step further and look at where recent college graduates, especially from the private colleges, went to work. Many went to investment banks, consulting firms, and hedge funds. Well, the first industry is gone. For the most part, consulting firms are overpriced entities that make businesses ‘feel good’ about themselves, so that’s likely the next major bubble to pop. As for the hedge funds, Soros expects the industry to contract by 67%. So the major employers of these overpriced labor were themselves quite worthless and now out of business.
The industries that are surviving tend to provide basic services. The IT industry is doing ok, and a degree from ITT Tech will likely get you a job where you actually create value for your employer.
So let’s recap what college does:
1. It costs $160k for a private college and takes away 4 years of your life…so the costs are high.
2. The main reward is to show you’re not an idiot. Graduating from any half-decent college accomplishes that.
3. You don’t learn anything that you actually use for your job (in most cases).
4. The people that were paying the most for this product (college educated labor) are now out of business. So people will pay less for this.
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