Much has been written lately about the cost of higher learning these days. As a fresh new crop of high school graduates looks to start their college careers this fall, the popular motif of "children as the future" and the ubiquitous mantra that "education is the key to success" is in vogue.
But what hasn't been in discussion much is the outlook for the demand for college graduates in the U.S. job market in the years ahead. After all, college is an investment and every worthwhile long-term investment must be plotted through careful planning based on the future expected supply/demand picture.
"College is a bad investment," writes Richard Vedder, Professor of Economics at Ohio University, in a recent issue of Forbes. Vedder points out that colleges "have devoted little new funding to instruction, preferring to assist research, support athletics and build luxurious faculties" instead. He further states that nearly 40% of enrolled students fail to graduate within five or even six years, "suggesting that many who attend universities don't much benefit from them."
He adds, however, that "College is still a decent individual investment." This may be true for some areas of study, but for others (think English, political science, psychology and business, for instance) it probably isn't. There was a time when attending college was a worthwhile investment, but such is no longer the case, at least for some disciplines. As we'll see in the paragraphs below, the prospects of obtaining a worthwhile return on the investment of a 4-year college degree is going to rapidly diminish in the next few years ahead.
When even the most basic cost/benefit analysis is applied, the prospects of new college graduates obtaining high-paying jobs in the U.S. economy between the years 2009-2014 are remarkably low. This is the time frame when most of today's younger generation will be graduating college and entering the work force. It's also when a massive wave of Americans are due to join the social security rolls as the Baby Boomer generation retires. By this time the ratio of workers-to-retirees will be unparalleled in U.S. history according to the statisticians. The college graduates of tomorrow will be laboring under a multitude of heavy burdens and Social Security is only the tip of the iceberg.
The massive economic unraveling that many forecasters are predicting should begin around 2009/2010 - just about the time that the freshman class of 2005 graduates college. Why then? This is when the final "hard down" phase of the 40-year cycle begins (the hard down phase being defined as the last 10% of a cycle's duration). Throughout U.S. financial history the final four years of the 40-year cycle (which is a chief component of the Kress 120-year cycle) has brought varying degrees of devastation to the economy. Consider:
1894 - The time of the previous 120-year cycle bottom and the end of a major industrial depression in the U.S.. David O. Whitten of Auburn University has described the Depression of 1893 as "one of the worst in American history." This marked the transitional phase of the U.S. from an agrarian to an industrial economy.
1934 - The next 40-year cycle bottom saw the four years between 1930-1934 bring about the Great Depression.
1974 - The following 40-year cycle brought the U.S. its worst economic recession since the Great Depression in the 1970-1974 period.
2014 - This is when the latest 40-year cycle is due to bottom along with the rest of the 120-year cycle components. The years between 2009/2010 through 2014 will likely rival those of the Great Depression. It is also likely to complete the transition of the U.S. from an industrial to a service-based economic structure.
From a fundamental standpoint, college graduates within the next 4-5 years will face the prospect that the U.S. economy will have been fully integrated into the framework of a global economy with a consequent lower standard of living. Domestic manufacturing by then will be a thing of the past as the U.S. will have slipped to a subservient service-based standard. With an increasing number of jobs (including services) being outsourced to the lowest bidders overseas each year, the prospects for gainful employment for meaningful wages are even dimmer. The competition for high-paying jobs requiring a college degree by the end of this decade will be super-fierce and only a small portion of the glut of college graduates will succeed in obtaining them.
It's no secret that the cost of attending college is getting more expensive each and every year and continues to high all-time highs. Interest rates alone on federally backed loans for college students are set to jump by a record amount on July 1, according to the Education Department. Based on the results of a Treasury bill auction, the in-school rate on the federal Stafford loan will rise by 1.93 percentage points to 4.7 percent. The rate for loans in repayment will rise by the same percentage to 5.3 percent.
Tomorrow's college graduates will also be at a severe disadvantage because of the heavy debt burden they'll carry before they even make their first dime. Depending on the college or university attended, the cost can be quite high and take several years to pay back the student loans upon entering the work force. That's assuming, of course, the college graduate is able to find work in his field that pays a worthwhile salary. The work environment between the years 2009-2014 will be extremely challenging if not downright unprecedented in the scope of difficulty that a young college grad will face in navigating it.
From the standpoint of a cost/benefit analysis, going to college for four years is no longer a sound economic investment for many high school graduates. Much depends on the particular career track the prospective college student is on. But for the humanities in general and for business-related studies an argument could be made that the pivotal 4-year time frame between ages 19 and 22 would be better spent gaining practical "real world" experience instead of wasting the time with unpractical (and in many instances downright useless) studies that will either be quickly forgotten upon graduation or else will have to be "un-learned" in the real world of business.
An article by Martin Wolk titled, "Teens seeking work face fierce competition - Older workers, immigrants taking many entry-level jobs" recently appeared on the MSNBC news wire. This article underscores yet another challenge that tomorrow's college grads will face (as it is already being faced by high school students). Mr. Wolk documents that teens are increasingly have a difficult time finding summer employment.
He quotes an expert from the Center for Labor Market Studies at Northeastern University in Boston, one Andrew Sum as stating, ""Teens are having a much harder time getting work. Not just in summer but year-round.... That is partly a new phenomenon. There is something structural going on in the labor market that has made it a lot harder for kids to find work."
That structural change Mr. Sum refers to is the consequence of the shift toward a global economy with its relaxation of tariff, monopoly, and immigration laws that encourages the build-up of overseas economies at the expense of the United States. With millions of highly educated youth in India and other Asian countries now competing for jobs with U.S. college graduates, the competition for jobs in the coming years will become even more fierce. This is the world in which the college grads of tomorrow will face.
Claude Hopkins, the master advertiser who inspired David Ogilvy, was a self-made millionaire and a legend in his field through hard years of real-world experience. He always made a point in recounting his life's story how he never went to college. In his classic book, "My Life in Advertising," he wrote, "I spent those four years in the school of experience instead of a school of theory....higher education appears to me a handicap to a man whose lifetime work consists in appealing to common people."
Hopkins felt it was a crime for universities to occupy someone's most impressionable, formative years in the impractical theories of academia instead of the real-world school of practical business experience. "If he spends four years to learn such theories," he said, "he will spend a dozen years to unlearn them. Then he will be so far behind in the race that he will never attempt to catch up."
Of course Hopkins was referring primarily to the benefits of practical experience in business and advertising over college learning, but his insight also has application to other areas. I believe the time has now come for prospective college students to weigh seriously the potential costs and benefits of the precious four years they'll spend in college. Gone area the days when one can automatically assume that with a college degree his place in the U.S. job market is assured. It's truly a "new-and-not-improved" economy, and from here on out every long-term investment (2-4 years or beyond) must be weighed with extreme care.
