Author: Michael Tabone
Date: September 15, 2015
The Lie of College
Opportunity Cost as defined by the book is “the highest-valued alternative that must be given up to engage in an activity” (Hubbard & O’Brien, 2013). The highest-valued alternatives are outlined below.
In the opportunity cost/trade off debate between attending a full time college and not attending there has been a lot of changing to the landscape of academia, the world and the continued inertia which drives people into the idea of a four year college.
First, we have to make concrete what the idea of a four year college was and is. It was a place of higher learning, were someone concentrated their education in an area so that they can experience more of a topic. It evolved over the years as an idea that if you go to college, your college degree means you have a job waiting for you. As many of the college graduates over the last few decades have found out, this is a falsehood they are paying dearly for with terrible debt burdens for simply a piece of paper.
The falsehood also exists, mostly culturally in the United States, that all degrees are created equal to that purpose; i.e. – a degree in chemistry is just as valued as a degree in women studies. One is a very specialized concentration with many different applications in job environments; the other is a topic of interest with very little value in the market. That is not so say it is worthless from the concept of “knowledge” just that it is not applicable to the “women studies plant” that just opened up in Ohio next to the Dow-Chemical plant which hired the chemistry graduate.
So the idea that this piece of paper has value to employers is what we are buying with our time and money in college. The idea that the average person will make more in their lifetime is an idea that was perpetrated throughout my life time, but as we see from the figures, with the increased amount of people graduating with BA and BS degrees, their worth has diminished dramatically. It is now important to have a MA/MS degree in order to take place of the BA/BS place holder of twenty years ago. When my kids grow up they will have to be PhD and spend their entire life up to thirty racking up debt and all their youth chasing after a piece of paper which will be just as average as the other hundreds of thousands of PhDs around them.
And as we have seen, it is easy to pawn off jobs which are in digital service industries to educated people in other countries (which I am not against by the way). But what jobs have stayed? Trades jobs have continuously been in demand.
When we choose a full time four year college, we are choosing to put off earning a professional salary for four years, including wages, experience, 401k, vacations, no or little comparable debt and the peace of mind of knowing you are employable with a skill. If you factor this in, you will not earn as much over the course of your life as a plumber or an electrician would.
Take a plumber: the Mean Annual Wage is $54,620 a year.
From 18 years old to 65 years old that is $2,567,140 (assuming no pay raise, no cost of living increases, and all other factors which go into a wage/salary). (Link: http://www.bls.gov/oes/current/oes472152.htm)
The top ten most common majors in college according to USA Today are:
History, English Language, Liberal Arts, Accounting, Criminal Justice, Teach Ed, General Biology, Nursing, General Psychology, Business Administration. (Link: http://college.usatoday.com/2014/10/26/same-as-it-ever-was-top-10-most-popular-college-majors/ )
Take Business Administration (I picked Purchasing Managers, Buyers, and Purchasing Agents as it was a very large grouping, with the ability to work right out of college): the median annual salary is $60,550 a year.
From 22 years old to 65 years old that is $2,603,650 (assuming no pay raise, no cost of living increase, and all other factors which go into a wage/salary) (Link: http://www.bls.gov/ooh/business-and-financial/purchasing-managers-buyers-and-purchasing-agents.htm).
So if you graduate with the degree you will make $36,510 more in your lifetime. EXCEPT, you will not. You have to factor in how much money you spent on college in the first place. According to a U.S News and World Report, the average annual tuition for a private nonprofit four-year college is around $35,000. So $35,000 times four years equals $140,000 for your entire college career. If you factor the cost of that in, you make $2,463,650 from 22 to 65 or $103,490 more as a plumber!
As well, there is an added cost of having to spend your earnings per month on your debt instead of buying something else which you wanted. The plumber has acquired more with his earnings than the purchasing managers/buyer/purchasing agent because they did not have to pay back a debt.
A couple of articles to support my assertions:
On another point, college no longer has a strong hold on the concept of a “road to employment”. There are new ways in which kids out of high school are making inroads to high paying, stable and rewarding jobs without spending their time in college. Companies like Praxis (http://www.discoverpraxis.com/) place people into a job role for a year with a company where they learn invaluable skills and actually create demonstrable knowledge, proven track records and networking which is something a college degree often lacks. All a college degree can show a potential employer is that you have “paid to play”. Paths like Praxis are the real deal in terms of what you can demonstrably showcase to your potential employer through your dedication and worth ethic, while you earn an income doing it.
In this case, my trade-off is paying way more in college, giving up four years of my life instead of one in the Praxis program, all while not earning money for four years instead of earning money right out of the gate while building my career portfolio.
The ancient ideas that college opens up people’s minds to the outside world they never saw before went away the day Google maps allowed you to be in the Grand Canyon without getting dressed in the morning. The world we live in is smaller now than ever (or as one economist would say the “world is flat”). Different ideas, cultures, views, opinions, ways of life are a click away or often thrown down our face even if we are not looking through social media and other forms of current technology and communication.
You have me on the “free and wild” college times. I have no website or statistics for that. But then again, that was not the intent of college to begin with (see beginning of post). If you wanted $140,000 to party for four years, you could save up the cash with a job and live like a rock star for a while, then go back to reality if you wanted to.
I fell for the “lie of college” as I call it. I went to a college from 2000-2005 and graduated. After graduating, I spent a few years simply continuing what I had done for money while I was in college till I caught a break because someone spotted my work ethic and talents and I am in a very different position today. But not everyone can graduate with a degree in performing arts and end up as an engineer in aerospace making helicopters fly around.
If I had to do it again, while it was different times, I would have stayed with my original degree plan, and I would have already been an economist. People choose a traditional four-year college simply based on institutionalized inertia combined with basic propaganda feed to public school systems. The money of attending college is at an all-time high (http://nces.ed.gov/fastfacts/display.asp?id=372), and as government backed student loans make it ever increasingly easy to pay for college now only to be burdened with the debt later, prices have sky rocketed over the past four decades faster than inflation (http://www.bloomberg.com/news/articles/2014-11-13/college-tuition-in-the-u-s-again-rises-faster-than-inflation).
If I was exiting high school now, I would either sign up with Praxis or I would join a trade and earn money while attending school part time on-line. The old paradigms of a debt ridden 20-something need to change, or else more than just our individual microeconomic situation may crumble, but the entire macroeconomic situation as well.
(NOTE: This was originally written in my undergrad Microeconomics class September of 2015, as a discussion post on the topic of Opportunity Costs.)
Hubbard, R., & Brien, A. (2013). CHAPTER 2: Trade-offs, Comparative Advantage, and the Market System. In Microeconomics (4th ed., International ed.). Harlow: Pearson Education.