In Part 1 of this article, we reviewed the benefits of Higher Education for both the individual and society.
In this post – The Paradox of Higher Education – Part 2 we will discuss the demerits or disadvantages of Higher Education.
1. No Guarantees of Employment
During the early 1960s only a handful of youth, (6%) went to university. Hence, having a university degree made one stand out of the pack & improved their visibility in the marketplace. As a result, they were able to obtain better employment prospects. In most instances, employment was guaranteed.
However, things are different today. Today about 43% of the youth (under 21) are going to university. This means a recent graduate will be competing with more people with similar backgrounds & skill-sets.
With globalization, there is an increasing trend of companies outsourcing jobs abroad. The democratization of the internet has made it even easier to outsource common job functions to the East.
A few years ago, a friend of mine was working for a well-known Telecommunications company. At its peak, most of the engineers & technical staff were working in North America. My friend was taken by surprise one day when he walked into the office and found out that the entire Engineering team in the Toronto office was downsized; and all their jobs had been outsourced to Hyderabad, India.
My friend had 15 years of technical/ Engineering experience – but in a flash, his career at the company ended. Like most down-sized professionals, he found himself back into the job market. He was now competing with recent graduates.
The Recent graduate now does not only have to compete with the other 43% of their recently-graduated peers but also with experienced professionals who were affected by the recent economic downturn and growing globalization.
An article by Maclean’s Magazine indicates that youth unemployment today hovers around 15.2% – this is a scary number.
There is also a huge mismatch between the jobs of recent graduates perform versus their obtained degree – also known as underemployment. Many of the millennials attended university with the hopes that their Expensive degrees would directly translate to guaranteed employment and higher income.
2. Inflated Education Costs
Recently Ronald Nelson made the news when he turned down admission from 8 American Ivy League Schools. Ronald Nelson had one of the most envious positions a high school student could ever imagine. He had numerous achievements (Grades, SAT scores, extra-curricular skills,etc.) but despite all that he passed on the big names- MIT, Yale, Stanford, etc. to enroll in the University of Alabama.
Do you know why? Ronald did not want to incur the financial strain from the higher cost of education from the Ivy League Schools.
On the contrary, the average household income has only doubled (200%) between 1985 and 2015. There is a huge disparity between salaries and the cost of higher education.
Let me ask you a question if I introduced you to an investment opportunity that would take you longer to recoup your principal, and also the rate of return was negative – would you invest with me? Probably not.
However, most students today graduate with massive student debts, which will probably take them longer to pay off than the time their parents/grandparents took to pay off their debts.
3. A Degree Does Not Guarantee Success
Mark Zuckerberg, Bill Gates, Steve Jobs, Henry Ford, Thomas Edison – all have something in common. They are innovators & entrepreneurs that have changed the course of modern history. They also have something else in common – all of them are dropouts. None of them obtained a university degree.
We have all heard the scary statistics about the risks of entrepreneurship – about 95% of businesses fail within the first 5 years. For venture-backed startups, the success rate hovers around 7%.
Despite the stats and the odds of success – more people are venturing into entrepreneurship – more than 500000 small businesses are started each month in the United States. With the democratization of the Internet and Globalization, more people are starting to strike it on their own because of the upside potential.
Today almost anyone can be self-employed. Companies such as Etsy,eBay, Amazon, etc. make it is easier for anyone to start and run a business. Many individuals are ditching their corporate jobs and degrees to venture on their own.
In 1996 Thomas J Stanley and William Danko published a book- The Millionaire Next Door. An interesting finding from the book was that close to 70% of self-made millionaires were either self-employed or Entrepreneurs.
The traditional path of going to college, getting a degree, and gaining steady employment – does not correlate to financial & business success.
We have discussed the two sides of the coin. We learned about the benefits of Higher Education for the individual i.e. Higher Income Potential; and the benefits for the society are a lower crime rate, stability, and progress.
We also discussed the disadvantages of Higher Education – increased unemployment among millennials, underemployment, ballooning education costs, and the mismatch between success vs education.
My personal opinion about Higher Education.
Is it mandatory?
My answer is that it depends on the individual. If someone has the mettle to be an Entrepreneur – it is best not to get deep into student debts & obtain a graduate degree. For such individuals, it is in their best interest to become self-employed. In this case, higher education is not necessary.
If someone is risk-averse, wants a stable career throughout his/her lifetime – then it is imperative to obtain a college/university degree & follow the traditional path.
Before making the decisions – today’s youth must take a step back to learn more about their motivations & strengths. Based on that they can make the best personal decision whether to pursue Higher Education or not.
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