The college grad unemployment or underemployment rate is currently at 53%, but is a poor economy to blame or useless college degrees?
Before we get into that question, let’s step back and take a look a closer look at the unemployment problem for recent grads.
College grad unemployment/underemployment is bad, real bad.
The news has been awash in horror stories about recent college graduates not finding work. Many more are able to find work, but not in their chosen field.
“More than half of America’s recent college graduates are either unemployed or working in a job that doesn’t require a bachelor’s degree”.
The Atlantic (as most other sources I’ve seen) doesn’t break the number down, so it’s difficult to tell how many college grads are actually unemployed, vs. how many are considered underemployed.
This is an important question because I think it highlights a big problem in education in America today. It’s easy to point to grads who seem unwilling to take low level jobs that are available and say they’re lazy or have a sense of entitlement, and in some cases that’s certainly true, but there’s also a very real financial reason at play – namely, student loan debt.
But things are different now, and it’s a lot harder to pay off $30,000 in student loans when your working the line at a fast food restaurant.College degrees are more expensive than ever, and students have piled on the debt. There was a time when this was a smart move because the higher level of education would help you find a good paying job, and the debt was affordable over time.
This doesn’t just lead to higher college grad unemployment rates though. This also causes systemic problems in the economy since those highly educated grads are taking low skill jobs that could go to others. Those jobs would traditionally go to less educated workers.
Economy and the job market to blame or just useless degrees?
All of this sounds bad, hopelessly bad. But not all doors lead down College Grad Unemployment Row.
“…students who graduated out of the sciences or other technical fields, such as accounting, were much less likely to be jobless or underemployed than humanities and arts graduates.”
It sounds like going to school for math and science based degrees does still pay off in the end, so this begs the big question:
Is the college grad unemployment problem because the job market stinks and the economy has fundamentally changed? or is it simply due to useless degrees?
It used to be said that going to college was simply paying your dues and doing your time for a fancy piece of paper. Cynics would say that the paper didn’t mean much, but it opened doors because so many jobs were only available to those with a college degree -any college degree.
Times have changed.
It appears that you not only need that fancy piece of paper, but you also need the skills to do the job.
Here’s another quote from that AP article:
“I don’t even know what I’m looking for,” says Michael Bledsoe, who described months of fruitless job searches as he served customers at a Seattle coffeehouse. The 23-year-old graduated in 2010 with a creative writing degree.
They don’t go into how much student loan debt Michael has, but I’d bet it’s a lot – more than he’ll be able to manage on his coffeehouse job. But what was he expecting?
What good is a creative writing degree?
Don’t get me wrong, I admire writers and creative writing is not something many people can do well. It takes a certain innate ability and creativity that can be cultivated but cannot be taught. Not everyone gets to be Stephen King.
I’d say that Michael, and others like him, would be extremely fortunate to get a job somewhere making $30,000 a year with his degree, but what do you want to bet he has that or more in student loan debt?
A simple truth that no one seems to want to discuss is that for some degrees, debt doesn’t make sense.
I ask you, what would full employment be for a graduate with a degree in creative writing and do enough such jobs exist for the number of graduates seeking employment?
“Just what job does someone majoring in Political Science, English, History, Social Studies, Creative Writing, Art, etc., etc., etc., expect to get?
Arguably, graduates in those majors (and many more) should be thankful to get any job. … those who do land a job should therefore be considered fully employed, not underemployed.”
Is college education simply less valuable than in the past
I think the college grad unemployment issue raises the bigger question of whether college education is simply less valuable now than in the past.
A few years ago, I asked the question Who Are the Unemployed? The answer I found was largely those without a college degree.
But now it seems that we are seeing the effect of a bubble in college degrees.
When there were fewer graduates, a generic college degree used to be a valuable credential. Now that the market is flooded with applicants holding Bachelors degrees, those degrees count less, and specific skills count more. The result? – High college grad unemployment.
“the number of Americans under the age of 25 with at least a bachelor’s degree has grown 38 percent since 2000. “
The job market has not been able to keep up with this glut in the highly educated workforce, and this has led to falling wages and college grad unemployment we see today.
Lower student loan rates are not the solution – that only encourages even more debt.
The message here is clear: parents should encourage useful college degrees, or none at all for their children.
It doesn’t take a degree to be an entrepreneur, or the next Stephen King or Picasso. Either follow your passion and make it work, or get a useful degree to fall back on. The free ride is over for college grads.
There’s a new Lear Capital commercial I’ve been hearing a lot on the radio lately. I find it compelling because Lear Capital makes great use of the element of mystery in this commercial to sell a specific asset. The mystery of course is: what asset? For all the talk of this asset in the Lear Capital commercial – they never say what the asset is!
Here is an example of how they discuss this asset in the Lear Capital commercial:
This asset is up over 100% since 2008 and Morgan Stanly predicts it could rise another 30% for 2012!
Is your curiosity whetted?
If not, the ad department at Lear Capital does their best to do so.
This one asset is not a stock, and not a bond… Call Lear Capital to learn more about this one asset that has returned 18% per year for 11 years… Call Lear Capital to get a special report and video on this “special investment”
This “special asset” is of course gold. Lear Capital is a gold dealer and they’ve been aggressively pushing the precious metal for some time now. I have to say that they do a good job of piquing interest where other gold dealers usually resort to all out fear to sell gold. This Lear Capital commercial doesn’t avoid the fear angle altogether though. They have plenty of elements targeting uncertainty (and rightly so).
Tired of losing money in the bank? …Artificially low interest rates and high uncertainty have helped this one asset out perform all other investments. You can continue to live with market volatility or invest in a secure asset that’s kept its value.
This Lear Capital commercial certainly does their best to make gold seem like the “One asset to rule them all.” Over the past 10 years, it has been, but there’s still that line about gold being a “secure asset that’s kept its value” that implies it won’t lose value.
If there’s a bubble in gold, then a lot of people are going to lose a lot of money. The question of course is whether gold is a bubble.
To answer that, you have to consider what has been driving the rise in gold prices, and whether those factors will continue.
What is driving the price of gold?
Gold is typically used as an inflation hedge, and there has certainly been a lot of concern over inflation in the past few years, but prior to the numerous rounds of government “stimulus” and quantitative easing, fear of inflation was not the reason for gold’s rise. Uncertainty was. The War on Terror and general threat of terrorism created great uncertainty in the early half of the 2000′s.
Since the financial crisis though, the fear and uncertainty have revolved around the so called debt bomb of massive public debt and devaluation of the dollar due to the many “stimulus” programs.
What does the future hold for gold – has anything changed?
As an investor in gold, I think you need to ask yourself whether these factors are likely to persist, increase or abate. Is the U.S. government likely to significantly reduce its spending and reign in the deficit? The increase in national debt of 50% in the last 4 years suggests this is not likely.
Another factor at play here is the U. S. dollar as the reserve currency. While this is true, the U. S. government will be able to “monetize” its debt – that is decrease the value of the dollar through inflation and pay the debt down with less valuable dollars.
But what if the dollar is no longer the currency of the world?
Interest rates on the debt would spike and the U. S. government would no longer be able to print its way out of its debt obligation. Think Greece, Spain, Portugal, Italy and all the other bankrupt nations in Europe.
Don’t think it can happen? Check out Is the yuan the new dollar? from MSN Money. China would love to supplant the U. S. currency with its own. If that happens, the price of gold would probably rise greatly.
Is buying gold the right move? I don’t know. I’m no expert, but there certainly seems to be enough reason to at least hold some gold.
Given the reasons outlined above, conventional wisdom would suggest that gold is a necessity to preserve your wealth. Then again, conventional wisdom is often wrong in the end.
Rising rent prices are bad for renters but is it good for the housing market? I say it is, and here is why.
Rising rent prices and rental rates across the country
Rental rates rising across the country and prices are expected to increase 3.8% this year and 4% projected for 2013. That’s an average for the nation, which means the rise in rent prices could be much higher in cities with high rental demand.
In NYC for example, the rental vacancy rate is just above 1%. Demand is so great that renting often requires the level of paperwork usually reserved for mortgage applications! Rising rent prices have made the rental market so hot that it’s attracting serious investor capital with returns of 6-8%.
This is good, because it will drive rent prices up as more people get in the game.
How rising rent prices are good.
“How can rising rent prices be good?“, I hear you ask.
It does defy common sense up to a point. I mean, higher rent prices mean more of a financial squeeze on renters, leaving them with less disposable income. But this is a short-term view.
In the long term, this is how markets should work. Rent prices rise to point of excess as investors pile in. Higher rental prices make it more affordable to buy a home than to rent one. Especially when the amount of paperwork required to rent is on par with that required to rent.
It doesn’t take Warren Buffet to do the math at this point. When you’re paying very nearly as much for rent as you would for a mortgage, and you need to meet much of the same requirements to rent that you would to buy, it just makes more sense to get the mortgage.
This is of course assuming your lifestyle is suited to being a homeowner. It still doesn’t make sense to buy a home if you travel a lot or don’t expect to live in it more than 7 years. But if you’ve got strong roots in the community and foresee no geographical changes in your future then higher rent prices may be the nudge you need to get you moving.
This is a great time to buy a house – provided you use it as a long term shelter and aren’t looking for a quick profit.
But don’t just take my word for it, here’s a video from BankRate.com:
I was reading through an old copy of Eat the Rich: A Treatise on Economics by P. J. O’Rourke and came across this page which pretty much sums up view of the OWS crowd and many of their supporters…
The book was written in the late 1990′s, so it struck me how current and relevant this section is today.
In lighter times, I would have thoroughly enjoyed the above passage but in the current economic and political climate I felt a twinge of unease. It’s a reminder of how far off the rails the country has gone that this has become common discourse and even seems to be the basis of much of the recent State of the Union address.
Perhaps this excerpt should serve as some small consolation because it shows that the Occupy mentality was prevalent in the Universities even in the late 1990′s, when the economy was booming, and that it only has a voice now because of the times.
I suppose it’s always been an undercurrent, and we can hope it returns to that status quickly. Of course, if it truly is indicative of the majority view then we’re in for a much longer time of economic unease, uncertainty and non prosperity. I guess we’ll find out in November….
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