More education is ALWAYS good…not

According to this Bloomberg article, teen labor force participation in the summer has dropped from 70% in the late 80s to 43% last year.

They offer a variety of reasons why. One reason they provide is that they’re studying more:

Over the last few decades, education has taken up more and more of teenagers’ time, as school districts lengthen both the school day and the academic year. During the school year, academic loads have gotten heavier. Education is also eating up teenagers’ summers. Teens aren’t going to summer school just because they failed a class and need to catch up. They’re also enrolling in enrichment courses and taking courses for college credit.

In July of last year, more than two in five 16- to 19-year-olds were enrolled in school. That’s four times times as many as were enrolled in 1985, BLS data show.

That’s a big shift in one generation.

I think there might be a few reasons whys.

Parents are wealthier now, so kids don’t have to earn as much of their spending/college money on their own.

Minimum wage is higher, so there might be more ‘off the books’ employment of students.

Lots of folks have bought into the ‘more is ALWAYS better’ maxim of education. As a society, we find it hard to rationalize diminishing returns on things that sound really good.

Last decade, more home ownership was ALWAYS better. Through financial market distortions, we pushed well past the diminishing return curve to the point where many decisions simply didn’t make economic sense, until it blew up. It turns out it’s not a good idea to ‘own a home’ if you can’t actually afford to pay the mortgage.

Now we are doing the same thing with education. The result is college graduates with mountains of student loan debt with degrees that don’t have the earnings potential to pay that debt off.

The dynamics of real estate and education bubbles are similar.

Can’t afford to pay your mortgage? Don’t let that stop you. Being a home owner is a good thing! It will all work out. 

Want a degree in neolithic cultural approbation even though you will have no marketable skills? Don’t let that stop you. Having a college degree is a great thing!

In the real estate bubble, there were many distortions. A big one was government backing loans for ‘non-traditional’ (i.e. people who had not yet demonstrated the ability responsibly manage their finances) borrowers.

Oddly enough, in the education bubble, we have the same thing — government backing student loans with no tie to whether the degree provides the student with the earning potential to pay that loan off.

Let me be clear. I have nothing against home ownership, helping people buy homes, education or helping people get college degrees.

It’s just that I believe that ‘helping people buy homes’, means teaching them responsible personal finance.

With college degrees, it means teaching them to evaluate job market and earnings potential of their degree so they can make choices that make sense.

It’s all about rationalizing on the diminishing returns.

Advertisements

Comments

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s