Thursday, November 29, 2012

Does An Education Guarantee Unemployment?

For many this is true.

Mish has an good article on college graduates going delinquent on their student loans.  Employers as a matter of insurance requirements check the credit history of prospective employees.  To note that someone is delinquent on a student loan is to disqualify them for employment.  That is scenario one in which an education results in employment disqualification.

Another scenario is say you "invested" $50,000 in an education.  The cost of the education, as financed, must be amortized over the life of the worker, in this case at 5% (I know, too low) at 30 years working, is $268.41 every month.  And not so fast, that is after tax.  Before tax dollars, that with which you are nominally paid, is more like $400 a month you must command.  In many instances, the $400 extra you require is too much for the employer, or in any event, there are similarly qualified people who do not need the extra $400.  And note, the more you make the more taxes you drain off, so paying you an extra $400 costs your employer at least an extra $30 in SS contributions every month!  It just doesn't quit.

Now normally if you malinvest the problem is solved by bankruptcy.  If you discharge the debt, then you do not have the sunk cost to amortize.  But welcome to capitalism, you cannot discharge student loans in a bankruptcy.

Now, I disagree with Mish that a English degree is pointless.  Mish is a raw talent, but he does not have the whole picture.  My three daughters are happily employed at what best challenges their minds largely because I forbid they get a "voch-tech" education at college.  So one has a comparative religion degree, another is graduating in Latin (she snuck in an apparel AA while in high school, the rebel) and the last in English. What more could a parent hope for? An education is about developing the human mind so it can see alternatives and be a lifelong learning machine.  Any parents who advise their kids to get a business, pre-law or pre-medicine BA should be criticized, and ratted out to child-protective services.  Let the master's degree be the voc-tech degree. Never waste an opportunity to get an education!

An education does not cost as much as they charge, they just charge that much because there are "loans" disguised as free money to be sopped up.  I know from kids in college all that money is not going into the classroom, it is going to admin triple dipping in wages and pensions and gold-plating smoothie machines.  I see a new student dorm with exercise machines.  "What?! You want exercise?!  I'll show you exercise...!?  Today we are going to learn to dig a latrine. Start swinging that pick and you will not notice the cold. Meet my teaching assistant, associate professor Bull Whip."

IN any event, it is not necessary to take a loan to get an education.  Another requirement I gave my daughters was "no loans."  Loans do not make an education possible, they just make it easier at the front end, but at a cost that society cannot bear.

Feel free to forward this by email to three of your friends.