Generation Serfdom: The World Wide College Bubble
Often Overlooked is the Next Big Economic Bubble
And this bubble promises to deliver a crushing blow that will make the tech bubble, the real estate bubble, and the soon coming commercial real estate bubble, look amateur by comparison. This is a bubble (which is the third stage of economic collapse) that will essentially put an entire generation in debited servitude, with no conceivable chance of collecting any collateral or declaring bankruptcy. Its acquired debt that cannot be traded, cannot be sold, and cannot be passed on. It's debt that has no conceivable or practical value. It's essentially debt out of thin air created by human perceptions rather than reality. It's a debt that many pay into knowing that it's a scam, but feel they must, because of the employer gatekeepers. It's the debt that if you dare speak out against, you'll be labelled as inadequate. You'll have a hard time getting a job. Neighbourhood propaganda will certainly shun you. You'll have a hard time getting credit. You'll have a hard time getting married. You'll have a hard time starting a business. If you do manage to get a job, you'll find it impossible to get promoted. All of this may happen because you spoke the truth against the upcoming bubble. Just what is that bubble you ask? The World Wide College Bubble.
A Time Bomb: College Bubble
Higher "Education" Might be the Next Bubble Burst?
There are some early warning signs in America to suggest the case:
With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable. According to the NationalCenter for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent — more than four times the rate of inflation and almost twice the rate of medical care. College is already grossly unaffordable for most low income and middle class American families, yet the government continues to dole out the loans, arguing that no matter the costs, college is always "good debt" and a safe return on investment.
The reality is this couldn't be further from the truth. A college education just may be the riskiest investment an individual can make. When I buy commodities, such as oil, silver, or gold, I know exactly what I'm getting. There are no surprises. An individual can study market trends and get a good idea where there are shortages in both the physical material and or production. We can read the news to find out if a new deposit of gold is discovered or that a new technology has recently been invented that may affect the market. I can't say the same for a college degree.
For starters, when you invest in commodities, or any other investment for that matter, very rarely do you risk 100% of your payment. Unless you play the derivative scheme, you should never have to risk 100% down. Even if the market goes bust, you can always sell right away to minimize your losses significantly. Although I don't recommend this practice, because patience is a virtue and one must buy low and sell high, that's always an option if you made a huge mistake by buying in an overvalued market.
The same collateral cannot be pulled off with a college degree. Once I pay those tens of thousands for a college degree, I'm permanently locked into that market. If the job for which I'm practicing my degree suddenly becomes trendy to be outsourced, I just lost all my initial investment, without any hope of getting it back. Now I must make the difficult choice of continuing my education in a useless degree or simply dropping out. Either choice, I lose out significantly, because I can't trade a piece of college paper. At least with the housing bubble, you had a nice house to live into for a while. You could possibly sell at a loss or rent to minimize the damage. On the other hand, with a college degree of a now outsourced job field, you have nothing you can use as collateral.
What makes college an especially risky investment is inflexibility. When you invest in a college degree (invest in jobs), you're restricted to that one job/field. You rarely have the option of switching when things get hot or cold. As a conventional investor, I have the option of constantly switching on a whim. If something isn't working out, I simply invest elsewhere. I can play the highs and lows across all fields. However, with a college degree, I have no choice but to ride out the highs or lows of this stock that I cannot trade, sell, or pass on. My financial well being is completely left to fate and out of my hands. Would you buy a specialized mutual fund from a broker that wouldn't let you sell it? Probably not, but that's what we do with college debt.
But surely smart students would pay money into a degree that has good job potential and prospects? One would hope students at least take the time to study market trends and labour demands before they invest into college, but the truth of the matter is this does very little to alleviate many of the risks I spoke about earlier. An educated student can get burned just as easily as the foolish. I can't think of one stock, one commodity, one industry, one nation, etc that has always gone upwards and or stable for 50 years running. When you invest in college, you're betting on an industry that will essentially never have a down turn for the rest of your working life. I have yet to come across such an industry, and if you know such an industry, be sure to inform me so I can put all my money into their stocks, rather than get a degree where I would have to lay aside a significant portion to a university professor. We're not fortune tellers, there's no way of knowing what may come the next year, two years, four years, ten years, etc. What seems like a good decision today to invest in college could turn out to be a disaster no more than 2 years after you graduate. You may even see this disaster on the horizon, but you're helpless, because unlike conventional markets, you cannot trade in your college degree for another. I should know, because the same happened to me when I worked for an I.T degree back in 1999.
Maybe you could invest in a less specialized degree to alleviate inflexibility concerns? In theory, you should be able to do just that, but only in theory. As many of the Liberal Arts students now flipping burgers and working at Wal-Mart will attest to, employers put little value in a general education. A Bachelor of Art is essentially a giant mutual fund of the entire labour market for your given geographical area. The argument is it's less risky, you'll never get rich, but you'll never be poor. You'll be an educated, well-rounded individual, who can always get a job. The "can always get a job" part may be true, but the rest is completely false. The truth is with a B.A you've invested tens of thousands to simply take a roller coaster ride of the entire economy. This is why people like Warren Buffet don't bother with mutual funds, you completely eliminate yourself from the decision making process. Only this mutual fund is much worse, because you can't learn from your mistakes, you can't sell off your mutual fund and invest into something else. You must accept this mutual fund, for better or for worse, your entire life until you die. Getting a bachelor's degree to get a slightly competitive edge in the entire economy may seem like a bright idea, but you're essentially no different than a High School graduate who he/she too will be seen as a generalist who must ride with the economy. Sure, your roller coaster may be eloquently polished to get some much needed extra attention, but ask yourselves is this truly worth $30,000? Remember, you'll be riding the high and low of the entire economy. Back at the time General Motors was the nation's largest employer, a B.A made sense, but today with Wal-Mart being the nation's largest employer in what is an ill economy, I question the value in any economic wide investment.
The truth of the matter is investing large sums of money into a job is a bad deal. You can't trade a job, you can't sell a job, and you can't pass it on to your kids. Multi-billion dollar companies have been started on less dollars than what someone pays for a Bachelor's degree today. People often say you should never have to pay in order to get a job, I agree with this statement, so why are you paying for college? The employer is the primary beneficiary, so he/she should have to pay for a college degree. If he/she doesn't want to pay the huge price tag for a college degree, then perhaps he/she will only demand a college degree for a given job unless absolutely necessary. I consider this a good thing, and a move in the proper direction. You shouldn't have to pay for a college degree, neither should the government.
There used to be a time there was a more symbiotic relationship between employer and employee. The employee took a huge cut in his/her own profits in exchange for security. The entrepreneur took all the risks and investments. Thus the entrepreneur was entitled to the profits. That useful relationship is now finished with the employee having to invest vast sums of money for a job. Call me old fashioned, but I believe much like my grandparents did, you shouldn't have to invest in a job. If you have to invest in a job, then all incentives for being an employee are now lost, you're better off trying to strike it out on your own. Say what you want, but the facts and arithmetic speak for themselves, investing in a job is generally a bad deal. This is a risk that needs to be taken on by the employer.
The Similarities Between The Housing Bubble and College Bubble Are Staggering
The college bubble has exactly the same elements as the housing bubble did:
- Easy access to credit regardless of the borrower’s credit-worthiness.
- Policies aimed at pushing all Americans into college, regardless of whether appropriate.
- A conventional wisdom that a college degree (like a house) is always a good investment
- An unsustainable mismatch between tuition increases and wage increases
The College Bubble is World Wide
The college bubble, much like the housing bubble, isn't strictly an American misadventure. Here is a video clip from the United Kingdom of the student protests on December 9th 2010 and December 10th 2010. I consider this a prelude of what is to come. There will be wide social unrest, riots, and desperate young people hitting to the streets burdened with anxiety over debts that can never be feasibly repaid. When I see this reality befalling my generation, I often find myself wishing I was born twenty five years earlier, hoping I was a baby boomer. Even without huge student loan debts, I often go through sleepless nights wondering just how I can financially survive, let alone thrive. My parents by contrast were much better off when they were my same age, despite their financial literacy being much weaker than my own.
A Prelude of What is to Come
The Worse Case of A College Bubble: South Korea
In South Korea, approximately 80% of people under the age of 40 have the equivalent of a Bachelor's degree or above. In such circumstances, it's physically impossible for all of these college graduates to find work in their given fields. I estimate that any given country will only have at most 25% of their jobs reserved for "white-collar" professionals. What often happens is these people don't get jobs at all, instead they pursue even greater amounts of education, all in the name of "qualificative inflation." The education levels have nothing to do with competency necessary in order to get a job; it's strictly a competitive base. It's all one big pageant. For those who fail to reach the top of the "education arms race", what often happens is they live at home with their parents or collect welfare. Because it's customary for many Asian families to have their children live at home until marriage, the situation isn't given much thought or is being silently marginalized, but long term the economic consequences of such a fiasco cannot be ignored. To make matters worse, much like many parts of the world, South Korea have a shortage of tradesmen. The college educated in South Korea refuses to do such jobs, instead they continuously compete in the classrooms, forcing the government to import several people from Vietnam or Cambodia to do such work. The 20% of South Koreans who don't have college degrees are mostly men from rural areas. They often run farms and have to rely on "mail order brides" from other countries in order to have marriage, because the South Korean female population that is nearly 100% college educated finds them undesirable.
Canada Has Taken a Different Route Towards Dealing With the College Bubble, But We're Guilty of the Same Sin
I could argue in many ways we're worse. Our students may not carry the debt loads as those in the United States or Briton. We don’t have the troubling situation that exists in South Korea. Psychologically, we've beaten down the college elitist path till the point of no return. At least in the United States, Briton, much of Europe and South Korea there is some dissent to this madness, from ordinary people to state officials alike, but in Canada we've "college-afied" everything imaginable. To deal with the skilled trades people shortage, our government in collusion with a few members of large industry, have made becoming a tradesman a process much like getting a bachelor's degree. How it works is you have to complete a 2 year "trade school diploma" before you're even allowed to apprentice. The 2 year diploma is misleading, because you're attending class full time and are expected to study during your off hours. When we calculate the time spent, this is the equivalent of a 4 year bachelor program that has often part-time class hours. When you graduate, you get the diploma and gown; have all smiles in front of the camera with your family. You hear speeches from the top students. It's socially and psychologically much like the college experience. Because you're still expected to apprentice the conventional three to four years before you can become a journeyman, I would go on to say that getting paid the average wage of a tradesperson here in Canada requires the education time line of the same as a Master's Degree or even a PHD.
What is truly sad about this entire situation is the kids who are not normally academically inclined are left even further behind. The trades used to be a good refuge for such kids, but thanks to now "college-afying" the trades; this is no longer an option for them. To make matters worse, I often read in the newspaper how employers are upset with the quality of trade school graduates. This comes as no surprise to me, as when I attempted to pursue a trade school degree, I never once stepped foot in an actual building under construction. Considering I was pursuing a degree in Construction Management, I see much wrong with this picture. What I did learn was a lot of filler courses to get "well rounded", much like a bachelor's degree, although it wasn't quite as intense. I can tell you that I failed to graduate due to being perpetually stumped on one of these filler courses.
Kids, who often don't excel academically, can often find themselves practically. However, in Canada when we did away with the traditional apprenticeship system, the trades are only open to those academically inclined as well. The reverse could also be said, because let me tell you, a bookworm usually doesn't make the best plumber, but our system is doing just that, pushing bookworm plumbers. This is all done in the name of "acceptance and equality." Everyone must go to and graduate from college is the prevailing mindset. I don't want to be equal and the same as everyone else, instead I wish we would build a society that promotes success rather than equality, but I doubt I'll see that any time soon. I won’t be seeing it during my life time.
So while the bubble in Canada may not be as deep, it's certainly incredibly wide, as almost every field by law now seemingly requires a degree.
In Conclusion, I'll Challenge My Own Arguments
In fairness, as I explained earlier, a lot of young people realize they're walking right straight into a trap when they go to college. It's a big catch 22, you know you're getting ripped off, but you have to do it because everyone has a college degree. Almost every job posting now has "bachelor's degree" as a minimum requirement. It has become the new high school. Through hard work, you can get a job without a degree, but it's a long road. In today's world, any job without having to pay for a degree may be the best one can hope for in what is a horrible situation. However, from experience I can tell you that having to send in an average of 268 resumes before you get a job can become quite disheartening. Often, my resumes and cover letters receive mass praises from human resource professionals, so my lack of skills in this area isn't the issue. My issue is I simply don't have a completed college diploma. When I do get a job, it's often a contract position of anywhere from six months to a year.
So while not getting a college degree can possibly be better for your bank account, perhaps the biggest investment in getting a college degree isn't in money, but in your health. The relief in getting a job within a few days, because you have a college degree, surely has to add a few years to a person's life. And while it may be stigmatic and shallow, there is something to be said in being more attractive to the opposite sex by having a college degree that certainly improves a person's emotional health.
-Donovan D. Westhaver
College Bubble Quote
"The internet is making college irrelevant. Colleges are like Playboy magazine. Why pay when you can get it online for free." -max
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