I took loans for everything not covered by scholarships or grants and I owe barely $20k.
OTOH, If you don't fit the mold, you may be screwed...
I've known any number of students who actually were paying full price for tuition at top-tier private universities [to the tune of $50,000/year] despite being quite poor. Some took out massive loans, others did full-time work and attended as best they could.
EDIT (reply to below): Your point about the estranged parent is valid; a wealthy parent refusing to pay is the only case in which a "poor" student does not get much financial aid.
Foreign students are not entirely excluded from financial aid, though they get much less. Studying abroad is a luxury, and the case of a poor foreign student whose family lives in the US who chooses not to attend an affordable state/local college is very much an edge case.
By and large, if your family is poor, you qualify for financial aid.
The "system" generally tries to support poor people, but there are an awful lot of rules in place to try and make sure people pay their "fair share" and prevent cheating. I think usually those rules have more or less the desired effect, but like any rules, they can be rather blunt instruments, and end up hurting people as well.
+ Foreign students are often ineligible for grants and aid (even those from the university itself), no matter how poor they and their parents are. [There are exceptions, e.g. Harvard (which has lots of money and extremely high admission standards), but my experience is that they are very rare.]
+ In many cases a parent's income is considered in calculating the student's resources, even if the student has no contact with or leverage over the parent and that parent is not willing to pay anything. The reason for such rules is obvious: to avoid parents pretending to be estranged in order to avoid paying their fair share. However it still can end up hurting students who really don't have any choice in the matter...
In the end my (paid out of pocket) associates degree, some luck, and a few Hail-Mary career moves put me in roughly the situation I hoped to be in post university and I didn't have to graduate at 25/26 years old with student loans.
If I lived somewhere like europe I'd be graduated and quite happy by now instead of really bitter.
Education about financial aid goes a long way. Just because someone qualifies for aid but does not seek it does not prove my point wrong.
Yeah it sucks to accumulate $50,000 / year in debt to maintain your social class standing by attending prestigious universities, if your parents could care less, but why is it some rich kids birthright anyways to attend some wonderful school, when there are probably kids a lot more hardworking, driven, and coming up from adversity, that are more deserving?
People fall through the cracks, and that's a problem.
The idea that getting a STEM degree is outside the reach of kids today without going into lifelong debt is a myth.
One of my gigs was Resident Assistant. While it may not have been the most lucrative job, it did cover room and board and included a stipend which easily covered textbooks and fees.
It was such a pervasive piece of propaganda nonsense that entire groups of my peers, with their wallet terrified parent's blessing, made long reaching life long decisions not to pursue an upper education but try and land in the best possible vocational job.
I personally was so terrorized by it that I flaked out and never even took the SATs, convinced that my mediocre high school GPA had damned me to a life of cleaning drainage gutters, resurfacing outdoor wooden structures or at best tech support in a call center that, defeated, I didn't even try.
It wasn't until several years after graduating High School, fed up with dead-end bullshit jobs that I signed up to the local community college almost on a dare. I met with a very old, nearing retirement, placement councilor who completely turned my world upside down.
He carefully and patiently explained to me that the myth the education system propagated, the one that I, my classmates and our parents had been fed, was a complete a total line of nonsense. I sat there, in raw disbelief as I found out that I could finish my first two years of my undergrad there, then transfer every single one of my credits and start as a junior at the local state university. And I could do it at some ridiculous price that I, even making next to nothing, could easily afford.
I thought he was a liar, a schemer who was trying to put me onto something. Everything he said sounded like such a polar opposite of the system described to me during my teenage years that I went to another campus for the school and spoke to a completely different councilor who only confirmed everything, and also told me that the degree program I was interested in was so close to another program that if I took 2 more courses I could get both degrees almost for the price of one.
It's like spending a fortune on off-sale, high fashion brand shirts only to find out that if you wait a season you can pick up most of the same stuff at discount clothiers like Ross for $10 a shirt.
It took me a long time, as I was working and had significant living expenses to handle, but I finished my B.S. in 5 and a half years and my M.S. in 3 and a half -- debt free, paid for either on my own or by spending 20 minutes filling out grant applications at the student aid office.
It was madness. And it was the truth.
a previous set of back of the envelope numbers
Books are another large cost.
The take-away seems to be "forget about getting educated, pick up a few O'reilly books, make a website, make sure your friends are doing the same".
Yeah a lot of stuff is tough for young folks. Yeah we probably have got some tough things coming. We've got a lot of collective debt, healthcare problems, student debt, global warming, etc etc etc.
I agree with avoiding debt - it should be every young persons first priority. Go to college, work on the side, take a year off, work full time, go back etc IF you want an education. Yeah it sucks but its better than coming out and realizing you essentially are enslaved for the next X years of life.
I also feel like these articles always skirt the issue that education has a very strong correlation to earnings - even still today. If you take on huge debt your actual earnings may be different but the macro-trend is that education increasingly correlates with high pay and high employment. At the same time, everyone needs to be realistic - look at the prospects for what you are getting educated in (ex. wanna-be social science majors and prospective law students should look before they leap).
Lastly I feel like everyone needs to get better at doing things themselves and being sustainable. Cant afford a ton of food - start learning to grow a small vegetable garden and cook for yourself - its cheaper and way better than the shit you are going to eat at Chiles. Cant afford a big screen TV - well congrats you dont need one, marketers are just going to tunnel shit to you through it. In other words, a lot of the things and systems that have been setup in US and integrated into normal living are really not needed and sometimes surprisingly undesirable - Im not suggesting we all live in huts but it wouldnt kill us to all be forced to learn skills that fall outside of going to work and swiping our credit cards for everything else.
I'm not sure how this makes sense, financially. You'll generally earn much more with a degree, so 4 years of college followed by 4 years of work will leave you with much more money than alternating years of college & work.
It's much more important to focus on increasing your income than decreasing your debt. Negotiating a salary increase once pretty much means an extra $X,000/year for the rest of your life, whereas growing your own food will save you $X00 and you have to do the work again each year. Do it if it satisfies you, but recognize you'll have a much higher (financial) RoI by focusing on earning more.
If an engineering major who genuinely wants to be an engineer said should I take time off school to pay for the next year - Id likely point him/her to exactly what you just said. Very much agree
The big problem is that many people do the following... they say say Ill take on debt for undergrad and get paid pretty well so I can pay it off. Then they graduate, work for a couple years, pay a bit off and then say "you know what if I get that professional degree Ill be making even more". So they go back to school and add more debt and then they come out and are making more money. And then they do something similar like say "if I pull out a big mortgage and leverage myself in the housing market I can live well and increase my net worth faster". I know this is hyperbole but its a common path for many many people - essentially trying to use debt as a tool...
And then when they have a lot of debt and are making a lot of money... something "unforeseen" happens. The market falls apart, lose their job, they decide they hate their profession, they get divorced, housing market falls apart, get sick, etc - thats when all the accumulated debt can really run you over.
I agree that debt can be utilized to do good but it can turn on someone real quick if they keep the cycle going.
Numbers for the non-HS degree went up to about 17% unemployment worst scenario. Grad degrees topped out at 4%.
The biggest differentiator was high school: that dropped outcomes by about 5%, iirc. Some college - not even completed college - dropped about 4% down in the outcome. People with BS+ degrees did quite well.
The big takeaway from that was, "education pays off".
Anecdotally, people who are willing to move and be self-motivated could do well even with a Humanities degree.
Of course, I only know one CS guy who couldn't get work.
If, for argument's sake, 90% of high school dropouts are dropouts because they were too lazy to go to school, it stands to reason that they will also do poorly in the workplace, being too lazy to go to work. That doesn't mean the remaining 10% who had to drop out due to unfortunate life circumstances will also have trouble finding and maintaing quality work the same way.
Because of that, it is really not clear what role education plays. Does the education and degree count for something, or does increasing levels of education just increasingly filter out those who lack the qualities that are appealing in the workplace, placing a bias towards those who have more education with respect to such interpretations?
The answer to that makes a huge difference in determining if education pays or not.
I've posted it elsewhere, but CR also had that graph in his blog: http://cr4re.com/charts/chart-images/EducationUnemploymentSe...
I find it quite an oversight that pando quoted the CR unemployment duration, but not the UE by education. The second graph makes the pando article look silly IMO.
Pretty amazing stat on its own. And this includes people who graduated with the minimum passing GPA (2.0?) from the worst college with the most useless major.
Also, you might be a 3.5 GPA Literature major employed at Starbucks. You wouldn't be part of the 5% unemployed, but that huge college debt didn't buy you anything, either. Or you gave up looking for employment, so you don't get in the numbers, either.
Unfortunately, only causation will pay back the $200K ;-)
Moreover, this is not, as he asserts, only true of top 25 schools.
On this front, he appears to be talking out of his ass.
I do agree that the world has changed drastically over the past 3 decades, and that the precedents for education and occupations have irrevocably changed for the worst.
I thinks some qualification is necessary for his contention about "making things." This is not necessarily a recipe for success, especially if what you make is superfluous. If the economy tanks, you'll still be the first to go. To ensure career resiliency, one needs to pick a field that 1) won't be obviated by technology in the near future, and 2) is fundamental to society and thus will never go away. If anything, I think that this skews towards more abstract fields that are removed from physical labor. All physical labor can or will be able to be performed by technology at far greater efficiency and far lower cost. Machines won't be able to think anytime soon, which is why coding is such an attractive profession. Computers aren't going out of fashion, and will, for the foreseeable future, require people to write software for them.
I graduated college in 2003 with a business degree from CMU and 10K in debt. I played poker professionally for about a year, then went to work for an ad agency for 18 months, then worked for a start-up doing marketing for 18 months.
At the start-up, I learned that you can work really hard at marketing, spin your wheels with all sorts brochures and websites and conference speaking and presos, and not do a bit of good. That's a scary thought - that you might just be useless, or at least that your job is only a multiplier to the people actually building the thing.
The start-up marketing experience (and living with two software developers) made me start to worry and yearn for change. As the start-up I worked for began crumbling in 2007, and I began to get whiffs of pending financial meltdown in early 2008, I made the switch to making software, instead of making brochures.
And that was either a very smart or very lucky choice, because if I had tried to find a new marketing job, I'm not sure where I'd be today. But making software sure does pay OK, and having people use your software sure feels a lot better than having people NOT read your brochures.
This is great advice. It was true when I started my career, some ten years ago - I think it's even more true now. The path I chose in life was, and probably still is, incomprehensible to my parents. They have the best intentions, I'm sure, but for the very long time they couldn't understand that my computer is for work, for example. And later they just didn't want to believe me that I am actually working (I was telecommuting) and kept repeating things like "get out of the room and go find some job".
Most parents wish all the best for their children, but they are frequently completely incapable of understanding the differences between their and our situations. And the worst thing is you cannot tell them this, because you'll be rude, and on the other hand they are not going to understand on their own, because they are "older and they know already".
So ignoring bad advice from parents while pretending to do what they wish is the only sensible choice, but a hard one. I have many friends who followed their parents dreams - mainly journalists, but also many others - who are really screwed now.
It's a real problem and someone should write a guide how to respectfully disagree with one's parents and how to convince them to at least stop complaining.
"Followers of the Way [of Chán], if you want to get the kind of understanding that accords with the Dharma, never be misled by others. Whether you're facing inward or facing outward, whatever you meet up with, just kill it! If you meet a buddha, kill the buddha. If you meet a patriarch, kill the patriarch. If you meet an arhat, kill the arhat. If you meet your parents, kill your parents. If you meet your kinfolk, kill your kinfolk. Then for the first time you will gain emancipation, will not be entangled with things, will pass freely anywhere you wish to go." - Linji Yixuan 
Before you object with something to the tune of "But I'm living with them!", I said it was simple, not easy.
: I'm fairly sure he doesn't mean it literally, but then I've never read the quote in context.
On the other hand, if you think that we do actually exist and that college might actually be worth something, then I don't think Buddhist philosophy is going to be helpful.
Yamaoka Tesshu, as a young student of Zen, visited one master after another. He called upon Dokuon of Shokoku.
Desiring to show his attainment, he said: "The mind, Buddha, and sentient beings, after all, do not exist. The true nature of phenomena is emptiness. There is no realization, no delusion, no sage, no mediocrity. There is no giving and nothing to be received."
Dokuon, who was smoking quietly, said nothing. Suddenly he whacked Yamaoka with his bamboo pipe. This made the youth quite angry.
"If nothing exists," inquired Dokuon, "where did this anger come from?" 
Secondly, a private school education typically runs around $200-240k, a number that is calculated to include room, board, books, and living expenses.
Third, you need to realize that most people get financial aid at private colleges (and state colleges). The irony is that top private colleges (i.e. Ivy Leagues) are actually more affordable options than state colleges for low-income students because of financial aid policies for which households earning even low six-figures can qualify. The only people who actually pay full price are people whose families have gross incomes of ~200k+. If they have a sibling in college at the same time, even then they might get financial aid!
Fourth, for middle-class families that straddle the line between "too rich for significant financial aid" and "too poor for parents/myself to easily pay," students should be aware of merit scholarships. Many liberal-arts colleges offer them. USC, despite its reputation as a wealthy private college, is well-known for "buying" good students by offering them generous scholarships (full-ride, half-ride) dependent on your performance on the PSAT.
That's not entirely correct. The tuitions at many private schools these days lists at ~$200k for a 4-year undergrad and does not include expenses.
Lists just tution at $45,735 while R&B is $10,530. So, assuming the rates don't change, tuition for an undergrad is $182,940 and other expenses run another $58,600 for a grand total of $241,540. So yeah, it's at around your upper bound, but just the difference between your lower and upper boundary was literally the entirety of my undergrad + grad degrees.
EDIT (reply to below): Okay, adding the un-cited items adds up to just about $240k (keeping in mind that some of those fees are one-time only). Which is right at my range.
Obviously, $200k-240k is not some sort of hard-and-fast rule. It's an estimate I threw out there, and it doesn't really detract from my point to nitpick at it.
My family has a gross income of less than what you describe, and I have no siblings.
Merit scholarships are non unique to your argument. By definition few people will get them.
College is still expensive, as demand for a degree exceeds the supply of high quality schools, prices have only gone up.
This is what I was saying when I said that many top private colleges are more affordable than state colleges.
Merit scholarships are in the context of alternatives to Ivy League educations. If you're not a star student, and are from a middle-class family, you should be going to your in-state state school anyway.
as a first generation college student, it's hard to say 'no'.
perhaps my circumstances are too unique.
Oh well ended up at a state school anyway.
Combine skills, networking and the leverage of reach (through the internet) and you might find yourself in a position where you are wondering what all the fuss is about. There is a ton of work which needs to be done out there, but too few people who have figured out how to change with the times.
Edit: In other words, things may change so much to be unrecognizable in ten years. So, networking is the only thing that you can really count on to always be important.
Same with a specialist doctor I see. When I met him, I was 17 and he was a fresh grad on his first week on the job. Now we have a 6 year relationship and we're kind of on equal terms.
I'm trying to think of more people in my life this way - people I previously thought of as unapproachable elders are becoming friends. Hope I'm on the right track.
And I agree with that. Your friends, much more than your network, define your outlook on life, your general attitude towards various successes and failures, the things you place the most importance in. If all of your friends are get-out-there-and-do-something people, it will rub off on you, even if not to the same extreme.
Furthermore, it's much easier to do something extreme or different if you have a friend group that wants to do it with you. Starting a business on your own is nearly impossible. Starting a business with a close friend is no cake walk, but now there is motivation. And regardless of what sort of way you try to be successful, friends can pool their networking resources.
I just get a knee jerk reaction to any article like this because it wholly overlooks how education is supposed to make you a better human being, not a money making machine.
Articles like this take the easy way and basically say ASSIMILATE or die. Yea, thats going to solve the problem...
I agree with you, but the supply side of the education system agrees with you all the way to the bank.
The real point is: the traditional education model is usually a bad financial deal. If you want to learn, do so -- but don't be swindled into taking out loans for it.
I think its also important to point out that the skills and concepts you learn in areas such as the social sciences and humanities are still financially lucrative. As long as our economy is dominated by big corporations there will be managers and CEOs whos only job is to delegate tasks to and organize the humans beneath them. Understanding human power structures and having the ability to persuade and communicate effectively with people will always be the real big money ticket.
It is the logical next step to tell the colleges:
"No, I will not pay the same for your Art History degree as for an Engineering degree - Engineering will pay for itself at that price by getting me a good job while Art History won't."
I think education is the answer, but not the type people seem focused on. I'm talking about life skills children can learn from good teachers and, much more importantly, good parents. Work hard, it's important. Learn life lessons, like cooking...all the basics that are more basic than the 3 Rs.
As someone who would like to own a house in the future, I find it quite unfair that the government is helping to maintain bubble prices. It is yet another way for current homeowners to to extract as much money as possible from the next generation. However, that is even not the main concern for my generation.
Here is an interesting fact: My house whenever I can afford it, will _not_ be the most expensive thing I will have to buy in my life. My retirement savings are.
With lower expected long term investment returns and interest rates, the expected cost of securing a retirement annuity goes up steeply and there is much less money left for everything else.
All the news article I read on the subject of house prices assume that low interest rates prop up prices since they allow for cheaper financing and lower mortgage payments. However, as a 30yo who would like to one day be a homeowner AND also one day retire, this is not the effect low interest rates have on my budget.
The low interest rates are currently more than offset by low expected returns on investments which make it much more difficult to secure retirement.
I decided to try to quantify the effects of low returns on my budget:
I calculated that if I managed to get 4% _real_ returns on my savings, which is what most online savings calculators assume by default and about what the previous generation got, I would need to save 23% of my income to maintain standards of living after retirement (This includes home equity and what the government saves on my behalf, those "entitlements").
If real returns were 3%, I would need to save 27% of my income, if they were 2%, I would need to save 35% and 1% would require saving 42%. This assumes a saving period from the age of 30 to 60 and retirement from 60 to 90. This is a somewhat optimistic scenario but with two equal periods of 30 years, it makes one data-point easy to calculate: With 0% real returns, to maintain standards of living. we would spend half the money before retirement and half after so we'd have to save 50% of our income.
Long term real returns going down from 4% to 2%, increases the amount we need to save by 12% of our income. This means we have this much less money to put on housing and other things. For example, if our after tax household income was $50 000. We would need to save an additional $500 a month ($6000 a year) for retirement.
Is it even possible nowadays to get a safe 2% real (~4% nominal) return? The investment opportunities I see are closer to 0.5% or 1%.
Meanwhile the cost of financing a $200 000 mortgage go down by about $4000 a year or $333 per month when mortgage rates go down by 2%.
If I bought the same house when returns and mortgage rates both went lower by 2%, I would need to find an additional $166 per month ($2000/year) to keep my retirement savings on track. If I decided to recoup this $166 per month by buying a less expensive house, at 4% interest, it would have to be $50 000 cheaper.
I realize that expected returns and mortgage rates don’t necessarily move in sync and it may be that mortgage rates have bigger downward moves than expected returns but this still all makes me uncertain about my ability to spend while saving for retirement.
Here is the graph I made showing how much we have to save relative to long term real returns on investments to maintain standards of living at retirement( https://picasaweb.google.com/lh/photo/d4vj9i43MIPd8H7MqUq_Bt... ).
Here is the math I did for reference (let me know if I made any mistakes):
I : Annual Income
S: savings ratio
The amount saved each year of my working life is I x S
The amount spent each year of my working life is I x (1-S)
For example, if our household after tax income I=50k and we save 10k for retirement, S=0.20, we get to spend 40k that year.
We would like to maintain our standards of living after retirement which means we would like the amount we spend I x (1-S) to be equal the amount of our retirement pension payments. That is, if we save 20%, (spend 40k, save 10k) we would like to get a 40k pension at retirement.
The value of our savings at retirement should be enough to give us this annuity. To calculate S, the proportion of our income we should save to achieve this goal, I take:
Future Value of my savings FV(I x S) = Present Value (at retirement) of the pension annuity PV(I x (1-S))
Taking the formulas from here:
I arrive at
S = 1/( x + 1 ) where
x=1/((1-1/(1+i)^m)/((1+i)^n - 1))
(See https://picasaweb.google.com/lh/photo/rdEbvkw5wx78_dnqZuL4Qt... )
i is the real (above inflation) returns on my investments which, assuming I don’t take too much risk, should follow the trend of long term real interest rates.
n is number of years we are savings
m is number of years we plan to be retired.
Lets say, that I start saving for retirement at 30, retire at 60 and live to 90. That’s 30 years of savings and 30 years of being retired, a somewhat optimistic scenario (n = m = 30).
Here is the graph showing how much we should save relative to long term real returns on investments ( https://picasaweb.google.com/lh/photo/d4vj9i43MIPd8H7MqUq_Bt... ).
Why is this ridiculous?
The idea that the poor should have leisure has always been shocking to the
rich. In England, in the early nineteenth century, fifteen hours was the
ordinary day's work for a man; children sometimes did as much, and very
commonly did twelve hours a day. When meddlesome busybodies suggested that
perhaps these hours were rather long, they were told that work kept adults from
drink and children from mischief.
Genuinely curious - I'm no economist, and don't understand whether Russell's argument is full of holes, outdated, both, or if rather his proposed reallocation and reduction (through technology) of work is something we should be aspire to.
Let me explain you what the problem is. The concept of work is relatively modern compared to the entire human history. Organized work is something that was needed to scale organized living, and growth of human population. Without agriculture, architecture, transport, communication and health care human kind wouldn't have made it till now. Hunter gatherers had it a little easy, each man for his own or at the max his offspring. But this was not scalable, then extremely unpredictable. To scale we had to get down to staying at one place for long periods of time[read: civilization], and then produce food in bulk quantities[Read: Agriculture/farming]. But no man would work for others, so then came in the concept of doing other kind of work. Like building homes, pottery, carts etc and then people would trade one for the other.
This was still OK, until the kingdoms and kings came along. And then automatically came the concept of slavery, then soldiers who are supposed to die for king. Misery was the norm in this era. A lot of people were stuck building large monuments and cities for kings. Its during this period the notion 'born into richness' and 'born into poverty' evolved and to a very large extent continues till today.
If you are born to some one poor, the world assumes you now have absolutely no 'right' to be rich. And if you do get rich by your work, the rick kids/people think of it as unfair to them. And now matter how lazy, unproductive some rich guy is he considers it unfair to him that he must become poor out of his own actions.
Tribes have specialized warriors, and also would raid other tribes for loot and spoils of war which included slaves. This didn't need the creation of Kingdoms to achieve this. Man will come up with this at the proto-civ stage because other humans beings are the best tools.
You also are drawing some sort of line of intent, that hunter gatherers knew to move towards agriculture, AFAIK the data on how the transition occurred is spotty and is still being debated.
EVEN then, from tribal structures and from studying nomadis/hunter gatherers its clear that "men did work for others", at the very least for the good of the tribe, and often because the village headsman would be able to mobilize people to work on mutually beneficial tasks like say, a granary, or even a juju enhancing spirit walk.
Bulk food also is something of a recent phenomenon, if you look at the chart of human population growth its balooned since around 1950, and before that the total human population of the world was nearly a billion people.
And thats with the invention of the plough, harness, irrigation and so on.
While agriculture was massively advantageous compared to whatever we had before, it wasn't without its own pitfalls - such as famines, droughts, pests, bad crops and so on.
Finally your last para is at odds with the entire ethos of the USA for a large portion of its existence, that you could get somewhere with merit. Matter of fact its only in the recent past that this has stopped being true.
This 'cult of work' needs to go. We're not here to use our hands to modify the structure of matter and energy, we're here to figure out why we're here, enjoy and love each other and have a good time.
Turns out we're here to work.
Seriously, I don't know about you, but I have a list a million pages long of problems I'd like to see solved by the human race, and I'm pretty sure everyone can chip in on at least one of them. Navel-gazing doesn't get anyone very far.
We look at how much food the human race produces and see that there is absolutely no reason why anyone should starve, yet many people do. We have plenty of water yet people die of dehydration. Why is this? Our technology is clearly advanced enough that these problems should not exist. Should we keep working to improve our technology?
My argument is that we should drop what we're doing, take a step back and think about how we got into this mess - that we stop working and consider where we're going and how we are getting there. Why, in a huge corporation, are there some employees earning minimum wage and barely making enough to survive while someone working the exact same hours has two houses and three cars? Why are there people living on the streets in what are apparently first world countries? Why is the inequality gap growing instead of decreasing? Shouldn't all this work be improving the situation?
My contention is that we cannot work ourselves out of this problem. We need to sit down, think and talk. We need to empathise with each other and share. I believe that the solution to the problems that plague people will find their remedy on the social level. That is, information, and access to that information, is the key to resolving them, not working hard to keep the streets clean or developing the newest iPhone or building new houses. Don't get me wrong, those things are important too, but we have the capability to automate a lot of them yet we have not done so. Why are robots not roaming the streets and keeping them spotless? Why are people working for pennies in factories to make our smartphones?
I believe that answering these questions and doing something about them will go a lot further than turning up to a 9-5 every day. It's all very good having an engine that can produce a thousand horsepower but if the steering wheel is not used to aim the car in the right direction, it will crash. The engine is already good enough - the direction seems to be terribly wrong.
> Why are people working for pennies in factories to make our smartphones?
Because it's a better alternative to subsistence farming, usually. I mean, whatever caused them to voluntarily choose to work for pennies in a factory must have been even worse. Now you want to put them out of a job?
Even if you want to redistribute the wealth, it still needs to be generated in the first place or the whole thing collapses. And you're not going to stumble upon a better social and economic system by not producing as much wealth anymore.
I would like to think that I can look forward to retirement - travel, family, personal projects, etc. - without having to also continually worry over my status at work. But I'm not terribly optimistic.
Ever notice how most small businesses deal with real-estate? Hint: they don't negotiate a thirty year lock-in.
Sometimes having one less thing to worry about can be the difference between taking a risk that changes your life in a positive way and not taking it.
The bottom line for me is that I've never heard anyone say "I wish I had more things to worry about."
If I was rich, I might like to own a house, but only for the freedom of doing whatever I want with it.
The same can be said of mortgage interest. The fair comparison to the renter with no savings is the homeowner owing the full value of the house to the bank, and the fair comparison to a mortgage-less homeowner is a renter with investments and savings equal to the price of the house they're in.
Better arguments for your position might be
1. Mortgage rates are lower than rental prices in many places,
2. Paying off a mortgage is "enforced savings". People leasing property mostly spend the difference instead of investing it.
3. Some kind of projection of house and rental prices rising more quickly than the market.
When this is true, this actually is a very convincing argument. Not only that, but you can effectively arbitrage yourself into a lot of wealth this way. You buy a house and move into it for awhile, but then you buy a new house, move into the new house, and rent out the old house. (You get better mortgage terms that way.) Rinse and repeat whenever you can afford to do so and you eventually end up with a large portfolio of profitable properties.
Of course, it's arbitrage--if enough people do it, it stops working. You can keep it going with more money, if you can make larger down payments, since at that point you're turning a one time lump sum into an ongoing cash flow. But eventually you have to have more money to make money, so not even this might be workable.
its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage.
I m not against renting - but i just don't want people to think that a mortgage is some baggage that they are better off not having, and instead just pay rent. I want people to make the smartest choices, so that the only way rent rises is because costs to build houses rise, not because the landlord got greedy. To me, rent is like a tax on being alive.
In some places, they are, and it is. However, I would be incredibly surprised if there is anywhere where the mortgage payments on a 100% LTV mortgage are lower than rent; and this is one of the reasons why many settled people don't own their own home. They can't (yet) afford a sufficient deposit to make the repayments affordable.
I have friends doing just that. All it takes is the initial deposit capital (which many people don't have, or take years to save up) and credit rating.
In any case, if you buy a house at age 30, and you get the standard 30 year mortgage, you'll effectively be paying rent to the bank until you're 60 anyway. You would be very fortunate to own a home outright for most of your life. Some people never do.
You can make a rational calculation of what works out better using local rental rates vs property prices (sometimes one of them is grossly out of proportion to the other), applying a liquidity and mobility premium and your expectations of what the rental and property markets will do long term.
The problem is that everyone casts it as an argument between renting and owning property fee simple. Actually, it's either an argument between renting housing and renting money, or it's an argument between having six to seven figures invested in residential real estate and having six to seven figures invested in anything else. Either way, it's not clear cut.
-The max quality or size of rental properties is not that high, you may not be able to rent a nice freestanding house in some places because culturally speaking, people with more than $X usually buy.
-Landlord-tenant law may be very favourable to the landlord and not to the tenant. That motivates people to buy rather than rent and deal with shitty landlords.
In addition to that, people like being able to invest their time and money into improving their home to just the way they like it.
Having a long term place that is "home" is very important and comforting to many people. There is a reason that residences have all kinds of special legal protections and treatment that commercial real estate doesn't neccesarily have.
Even if you are able to find a place to rent that is stable, now you have to deal with a landlord and (possibly) other tenants. You can't do what you want to the place, when you want to. I think this weighs on people.
I completely agree that too many people that shouldn't end up buying a place, and that buying a place is a lot of work. But it's about the only choice in most of the country.
I'm around halfway through the mortgage on my place and relish the thought that once it's paid, even if I eventually find myself between a rock and a financial hard place I'll have four walls and a roof and no obligation to anyone for them. I'll have a good 30 years (give or take) of earning potential left in me by that point which means I'll have plenty of disposable income on top of what I've been squirreling away all along for a retirement. Yeah, I've had to fix leaky pipes (and cursed the time spent doing it) but overall I find comfort in the thought that if current trends continue, I'll have a place to park FOREVER.
Oh god, yes! Do I ever! I would love to have a pipe spring a leak on Tuesday and fix it on Tuesday, instead of spending Tuesday, Wednesday, and Thursday calling the maintenance guy every two hours to nag him to come fix it.
We spent 48 hours without a working toilet once because maintenance was too busy to come over and unclog it. When I owned my home, I would just go out to the garage, get the auger, and clear out the clog.
The Realtor.com app has replaced pornography for me. I can't wait for our lease to be up. Just six more months to go...
"Why do you want to own a house?"
It's actually not a bad proposition now in the US. Housing starts are heading up, prices are rock-bottom but starting to budge upwards again, and the common wisdom on real estate is now strongly negative.
What I'm saying is that someone would likely be able to get their money back (+ inflation) if they get a house these days and sell it later. Of course, they've got to deal with the headaches you mention, which personally still turns me off.
It's also a predictability thing. In lots of metro areas rents can fluctuate pretty substantially, even if you're getting a good return on the money you're investing instead of buying moving is still a pain in the ass.
It is interesting how many people are misinformed about this. The government hasn't and can't do anything to "prop up" house prices. It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages), essentially the ability of people to "afford" housing, or the rate at which they'll be able to convert the debt behind their mortgage into equity.
Here is an interesting fact: My house whenever I can afford it, will _not_ be the most expensive thing I will have to buy in my life. My retirement savings are.
Again, not true. As you get older, as you're converting larger and larger portions of that debt behind your mortgage into equity, it should be close to being paid off by the time you reach retirement (the theoretical pie in the sky for our generation). So the amount of "retirement savings" one needs depends on what kind of housing situation one is in at the beginning of retirement. The sub-prime lending crisis occurred because people who HAD worked their whole lives, had accumulated their retirement savings in their houses or whatnot were literally swindled out of that savings by real estate people selling them "refinance" lemon loans and banking on the commissions.
What about implicit and explicitly guaranteeing higher risk mortgage through Fannie Mae and bank bail outs? By taking on some of the risks the government lowers costs which increases the number of people in the housing market increase price.
>Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment
Propping up house prices was done through the bailout by helping banks with the mortgage backed securities, sometimes helping underwater mortgage holders and through fannie mae and freddy mac.
Also the equity on my house will be just a small part of my retirement savings. This part should cover housing during my retirement. I also expect to need food and such.
What about the mortgage interest rate deduction?
It's even less than that. The Fed targets the Fed Funds Rate, which is the rate at which banks lend to each other overnight. ARMs are not based on overnight rates, but rather on rates of debt of duration of 1,5,7,10 yrs etc. (Granted the overnight rate may pull down the short end of the yield curve, but not necessarily.)
Negative gearing is a preferential tax treatment that has caused the Australian housing market to become one of the most expensive in the world.
I wrote a simple app which compares 12 month CPI to current Treasury yields. What is scary is in the past year CPI (which many claim underestimates true inflation) at times has been higher than the returns on 30 year Treasuries. This is a rare event, and is the result of the FED buying Treasuries on the long end of the curve to artificially depress interest rates. Typically investors wouldn't tolerate such a low rate of return on their investments. Historical bond yields vs CPI can be viewed here: http://yield.io/
On a positive note, it's my opinion that energy prices are a better indicator of economic growth than interest rates and energy prices should continue to fall for the foreseeable future. The only problem is how quickly the economy will artificially inflate after years of QE.
Stepping away from the startup scene and simply looking at businesses in general, it's ridiculous to think that an employer would hire you and put you to work with no training. Also a hire should be a long term strategy, turnover is very expensive and destructive to company culture.
"Building something" is a relative idea. Aptitude is not. My story isn't specifically important, just that hiring is maybe overly focused on buzzwords and the short term. But I don't know.
What changed from the past is that now businesses are focused more on the short term. They want someone who is plug and play right out of school. When the managers themselves might hop job in the next year, there is no incentive to do anything but what helps them right away.
The way to show you can do the job is to show you have done something similar. For software it is some side project or open source contrib. I'm not sure for your case, but you need something you can talk about.
The single best source of job listings you're going to get at this stage are the ones from your school's career services. That is a list companies that are trying to hire a recent grad from your school, which gets you through a filter. When dealing with general-purpose résumé drops online, you end up in a pile of thousands of résumés, and unless you have certain words on your résumé ("Harvard", "Stanford", "Google", etc.), it's a pretty lost cause.
Another big thing is to network. Go to conferences and meetups and such, find people who have a background similar to you doing something you want to be doing and see if they have any suggestions to fill in the middle.
Finally, find some way to demonstrate that you can "do stuff". Take publicly available data and produce something out of it. Build a model with some data in a kaggle competition. Also...
> On a positive note, it's my opinion that energy prices are a better indicator of economic growth than interest rates and energy prices should continue to fall for the foreseeable future. The only problem is how quickly the economy will artificially inflate after years of QE.
Here's a possible place to start. You're an economist - give me numbers! Turn it into a blog post or three. Demonstrate that you can find data sets, build a model/visualization/whatever, and communicate your thesis clearly. Don't know how to do something along the way? Learn it. Do it. Advertise the fact that you can do it.
> Ideally I'd like to be at an audacious startup.
> Stepping away from the startup scene and simply looking at businesses in general, it's ridiculous to think that an employer would hire you and put you to work with no training. Also a hire should be a long term strategy, turnover is very expensive and destructive to company culture.
Part of the problem is startups don't often take a long term view out of necessity. When you're 20% of the workforce of a company, you need to be producing from day 1, or at the very least demonstrate that you're a quick enough self-taught learner that you don't need dedicated resources from the company to get you producing in a timely manner - otherwise, the company isn't going to last long enough to realize your potential.
This is where the networking comes in to play. It's easy to get an interview after someone introduces you.
> After graduating from a top 25 undergraduate business program in 2 years and then going on to earn my MA in econ in another 2 ... I thought it might be easier than normal to get a job. Ideally I'd like to be at an audacious startup...
How do you expect that business and economics degrees will help you join a startup? Most seem to want to hire people to build stuff. Perhaps you'd be better-equipped for starting one yourself.
> ... all the while playing Division 1 football ... and even rode my bike 215 miles to a midwest tech event ...
We get it, you're athletic. It's not really relevant.
> it's my opinion that energy prices are a better indicator of economic growth than interest rates
I'm a developer, so I have it easy, but I just don't understand this mentality. If you're not getting any interviews, then you're aiming too high, right? Just point the nose down a tad and send out another 50 feelers. If that doesn't work, aim a little lower still. Follow up. Be a stalker.
If you played football, and have good grades, I guarantee UPS will hire you on the spot to throw boxes around. That's your lower bound. The question is where in the middle will you land. Then you start climbing.
Are you serious??
Just as one example: The author is cherry-picking CR's data. Here is the graph of unemployment vs education level: http://cr4re.com/charts/chart-images/EducationUnemploymentSe...
And still the author recommends avoiding higher education? Anybody who follows such clownish advice despite the data deserves what they have coming.
BTW: CR is an excellent source of economic information, but it will take you a year or so to truly digest some of what is being put in front of you. (The comment board is of mixed value. It used to be the best on the web.)
I think the problem is that marketing was overdone. Too much of a good thing so to say.
Here's an important insight that I definitely agree with:
"But won’t a college degree pay for itself? It probably won’t."
It won't. You probably shouldn't get one if your goal is to make money.
Here's some advice I disagree with:
"My advice to young people is to figure out how to make something. That means either working with your hands, or learning how to type code with them."
The job market is a game of musical chairs. You can give a person a strategy for winning at musical chairs, but it doesn't change the fact that there are fewer and fewer chairs each round.
It's not reasonable to tell young people (or any people) that their goal should be to find a job so they can be self-sufficient and they can support themselves financially.
Are you kidding? How am I supposed to parse this properly? It reads like you are suggesting that it is not reasonable to suggest that you should get a job to keep yourself secure.
There is no reason historically that people have not had to work to support themselves, and so to suggest that they not do this suggests either that you desire them all to become layabouts dependent on welfare or that you want them to stop working and die off. Please explain an alternate interpretation of this.
Historically, if you go way back, everyone grew/hunted their own food and built their own houses etc. This was a very brittle/brutal existence. Drought, disease, or a cold winter means I might die or my family might die.
So we learned to be efficient by dividing up tasks and specializing. This reduced the total amount of work that needed to be done to ensure our survival. Over time, technology (algorithms) continues to get more efficient thereby continuing to reduce the work necessary for survival.
Of course, this natural progression eventually leads us to point where the work necessary for our survival is completely automated. We're not there yet, but there will never again be enough jobs that everyone can have one.
That's a good thing. It frees people up to do what they want with their time.
I agree with your premise.
IMO, socialism, like or it not, is an inevitable result of a highly technical society.
This is a good thing in the long term but it is going to result in decades of horribleness, at least in the US, because so little of the population is going to accept this until it is clearly inevitable.
When talking about socialism, it's important to distinguish between goods and services that have a level of scarcity and those that don't.
We have the resources to provide food for everyone, but we don't have the resources to provide private jets for everyone. That means there should be a market for private jets. There should always be a market for luxuries. There should never be a market for things we can easily give everyone. As technology advances, old markets will collapse and new markets will rise.
The government should provide for its people as much as it can. No more. No less.
The good news is that once society recognizes that having a job is optional, we no longer need to worry about silly things like minimum wage, living wage, or unions. You'd be working at a job because:
A. You enjoy spending your time that way.
B. It pays enough that you're willing to sacrifice your time in order to gain access to luxuries.
If a job pays $3 an hour and you don't like it, then don't work at that job. It's in no way tied to your survival.
It's quite correct to tell any given young person or group of young people to do so! That doesn't mean that it works as a policy prescription.
To take your musical chairs model a bit further: I might like there to be more chairs, I'd like that quite a lot actually. It'd be great to get youth unemployment down. In the mean-time though, you bet I'll be working on my musical chairs strategy, and if anyone asks me for advice I'd tell them to do the same. Will that fix the lack of chairs? No, of course not. It will keep me comfortably housed and fed though, and while that is not the only thing I care about it is rather important to me.
Would a degree from Yale have value if everyone got in? Much less.
Would I advise an individual who got accepted to go? Yes of course I would.
What does the decrease in the number of chairs mean? It means that less work is necessary and fewer jobs are necessary to support our society. This is good. We should want it to continue decreasing. I would like there to be fewer chairs, and faster. =)
Also, the quality of free online education is not high enough to make it folly to go to Yale. Of course you still have to into account the cost, but for many people that will be much lower than sticker because of their generous endowment funded financial aid policies.
Regarding the Yale degree, I agree that it will always be useful and valuable to some people. But even then, the value of a Yale degree to someone graduating today is different from the value of a Yale degree to someone graduating four years from now.
For most majors, this is true. Absolutely not true for lucrative fields that effectively require one: engineering, medicine, finance
I just wish the gov't was more focused on creating jobs instead of all the other BS they're fighting with each other over.
What that graph really shows is how deep the Great Recession was-- it should be compared to the Great Depression rather than the garden-variety recessions we've had since then.
Starting the article off with post-apocalyptic imagery seems to be the wrong tone to make any constructive statement.
I think, and I could well be wrong, that the trend for successful companies is towards the latter. None of this is to say the field is bad or will go away any time soon, just food for thought.
You might argue this is just suggesting there is a greater demand for software engineers, and that may be true, but I would be very skeptical of someone saying sysadmins would be replaced. Why haven't we replaced plumbers/electricians? Clearly we have utilities/plumbing/wiring that has been deployed for decades with little to no maintenance? Yet the profession still exists. The reality is, it still takes these tradesmen to build new environments, and support the frequent changes that technology throws us.
I've been through this multiple times. In each case, I hired a good Devops guy and told him to work his way out of a job ASAP. Typically, he was down to spending 1/3 of his time on ops of any kind, including DevOps, within 6 months. At that stage I had him helping Prof Svcs, QA, and the Developers by directly writing product code.
It's true that we'll be able to get more done with fewer sysadmins, but that doesn't mean we'll have fewer sysadmins. The Jevons paradox suggests we might even have more sysadmins.
Good luck making things as a "little guy" with patents (software or otherwise) in the way. Patents and similar government-granted monopolies are all, by definition, obstacles to economic activity through an accessible and competitive market. They are also the most difficult to overcome for those starting at the bottom.
Want economic recovery? Break monopolies.
Our parents reached a fairly good finantial state that we may not be able to attain but I have to ask if blaming them for the current state of affairs is the easy way out. Is it not like blaming immigrants for lack of employment?
So after getting a Bachelor’s degree, you can be pretty much debt free.
Is this then only a problem for the USA?
A selective college is probably the best place to develop close friendships with people destined to be successful.
I don't classify myself as libertarian, I'm all about direct democracy and believe highly in sovereignty, however the ongoing regulations and the centralization and manipulation of the housing sector, the energy sector, and the food and liquor sector here in PR have gone overboard just like in the states and it has lead me to believe that all of this is caused by us submitting into conformity after we have generate a bit of passive income without focusing on taking down some barriers and instead we're maneuvering around them.
Why the hell does someone that has a self sufficient house, windmills, solar panels and all, takes water from a deep well STILL have to pay a minimum electricity bill or the government would regulate his energy and tax him like if he were to be selling it. To us country folk that do not like to be taxed on our own property, this sort of regulation is going to be taken down- it'll only get worse when more ways to decentralize markets happen and we get our hands in them like 3d printing.
I'm naive and you can justify calling me a fool but this is modern day slavery, and that's what the article is generally touching upon. Not sure if the above was the best example, but to me it's the most relational.
We're obligated, enslaved, to fix many problems that we haven't caused on top of worrying about the elderly before we retire, as shown by some of the comments here- no problem, people had it harder back in the days..Especially here in PR. Have you seen Clint Eastwood's Super Bowl Half time commercial? That's what came to my mind after finishing reading this..
Besides showing an interest in a certain market by crowdfunding capital and displaying market interest how can one influence non statist capitalists to invest lets say in informing the majority of the Puerto Rican population to take the current issues we should really be focusing on seriously? I know my kind and they're not generally inclined to think on these things day by day but please be kind enough to criticize my philosophy. Focusing on mostly the pharmaceutical market, the general PR'an population won't stand a chance to adapt to this change of thought on survivalism..
Again excuse this if it's OT, this is my first post.
I find this distress motivational.