Education and Making a Good Living

Economist Bryan Caplan has a new book out that argues higher education’s chief function is to sort, signal and certify. Caplan may well overstate his case; but his thesis, for those who wish to refute it, is a tough nut to crack.

We educators in the system are now tasked to demonstrate the value we add through measures termed “assessment.” Most professors, I think, would agree that whether this “assessment” we begrudgingly do (because it’s now demanded of us) actually demonstrates the value that we purport to add is questionable.

Rather we would argue that the grades we give and have always given should suffice for “assessment.”

And Caplan’s book argues that to the extent that real social science measures have accurately tested such, the “value added” (in terms of objectively demonstrable conferral of retained learning and skills) of a higher ed. degree is, again, questionable.

That last point is where most professors would balk. I’d like to think we are “making a difference.” And Caplan’s point, if true, is a disturbing one, at the very least.

But even if Caplan is right, we are “making a difference” in other ways. When I was a student at Temple Law, where the vast majority of us were “in state” (PA) and got the relatively affordable in-state tuition, I remember one professor remarking that we were getting a good deal because we were getting “status.” That’s presumably what we chiefly were paying for.

In a country whose Constitution bans titles of nobility and demands all citizens and persons to be treated equally under the law, higher ed. is a mechanism that helps to create a de facto social class system. Higher ed. really does open doors to moving up the latter. And in certain professions, the degrees are necessary. If you want to become, among other things, a medical doctor, lawyer or public school teacher, legally, you need the higher ed. degrees to be licensed.

So, at the least, higher ed. gives value to those who attain the degree by giving them a credential. It also gives value to employers. To an employer, “sorting” and “signalling” is not a mere thing anymore than attaining a valued credential is a mere thing to an employee. Employers rationally value the information that a higher ed. degree confers. Even if not legally required for a professional license, human resources departments will use higher ed. degrees as criteria for qualifications. Caplan doesn’t dispute this; but rather sees this as more of a bug than a feature.

Why is it a bug? Three words: At what cost? If we look at how much higher ed. costs a multitude of parties (whoever is paying for it, whether the student herself, the parents, the taxpayer, the employer, etc.), it’s a lot. Is what we get worth the cost? Given the questionable objectively demonstrable value in skills and retained learning added by higher ed., we could ask, rhetorically, isn’t there a more cost effective way of delivering the goods? Especially to those who don’t want to pay as much.

Some folks actually don’t mind paying that much. It has been argued that for some/many higher ed. is as much a consumption good as an investment. If you and/or your family can afford it. To those who have the extra disposable wealth, it’s viewed as a classier thing to do to invest in your kids’ higher ed. as opposed to getting another diamond ring or Mercedes.

Given the connection between higher ed., especially at the elite level, and social class, schools with huge endowments can afford to open their doors to the very talented but less economically privileged and bear their costs. Simultaneously, the wealthy can continue to send their kids to these schools at their own costs.

But what about the rest of us?

My answer is we are paying too much for what we are getting and therefore, a reform is needed. How it will come in this age of Uber-like technological disruption, I’m not exactly sure. But I do see it coming and I hope the venerable institutions manage to change and survive as opposed to die.

But even given Caplan’s thesis, as it currently stands and as noted above, college is necessary in order to get certain types of jobs that pay reasonably to very well. Again, if you want to be a medical doctor, attorney or public school teacher, legally you need to go to college to secure the requisite professional license. Likewise, as it stands, if you want get a decent job offer in an office, you probably need to go to college, even if the law doesn’t compel such as it does with professional licenses.

Corporate HR Practices.

Corporate human resource offices often require those degrees, for the sorting-signalling effect. And even when they don’t, if they receive a flurry of applications for positions, they end up using those degrees, again to sort and signal. The HR departments take all of the applications and put them into different piles. One pile is those that have higher ed. degrees; the other pile is those that don’t. And they throw those that don’t into the trash.

Given this kind of sorting isn’t legally required, it might not always be this way. But this is the way it currently is.

Obviously, if you want to go into the trades, you don’t need a college degree (and arguably we need more tradesman). But there is one profession that one might associate with a needed college degree but that doesn’t require one, and that’s when you become your own boss. I’m not just talking about people who get into Harvard, but drop out just before graduating because their brilliant entrepreneurial idea is already off the ground.

The case of Steven, the Entrepreneur.

Rather I’m thinking of my good friend Steven. He’s 66; he owns and manages a multi-unit building in a quaint but vibrant North Eastern town. His mortgage is almost all paid off (he’s had it for roughly 25 years). And it’s worth about 5 million dollars. He doesn’t come from a privileged background. He has no college degree.

After buying the property he took accounting classes at the local community college, not to get the degree, which he didn’t, but to learn what he needed to so he could do the books for his business. (He could probably learn it online for free today.) He learned bookkeeping so well he eventually got a 9-5 day job as a bookkeeper. Yes, the kind of job you can get without a college degree. But not a great job. Rather he was mainly in it for the benefits and extra cash. And then he was laid off (again, not a great job). He since got benefits from his partner.

Timing and opportunities

And here is the kicker, he worked mainly chicken shit jobs until he was 40 and bought the property. He worked usually as a cook at local restaurants. He partied a lot. But one thing that was consistent during all that time having fun was, he was always good with money. If he had bad credit, he would not have been able to get the loan to buy the property.

So his work, in order to build the wealth and keep the operation running, is very demanding, requiring both effort, plus the right skills. The skills could be termed business smarts or “acumen.” But he brings a lot of talent to the table. Just the other day he was telling me how he is revising his leasing contracts, and I’m thinking, wow you are reasoning like a corporate attorney.

When I went into his basement and saw the heart of property operations, I was overwhelmed at the detail, the pipes and wires, etc. He had all of the tools a general contractor would need to keep the place functioning. Of course, he uses outside contractors who specialize (plumbers, electricians); but he can do a lot of the legwork for them, saving them time and him money.

He also does a lot of the landscaping, which he excels at. He has an immunity to poison ivy. Last year, he came to my yard, got his hands into it, and removed in a remarkably short period of time poison ivy that had grown over a number of different trees and my HVAC.

Dog Eat Dog World

But back to the necessary business acumen … how can I put this? In order to protect his interests, Steven has to be a real son of a bitch at times. He’s probably too aggressively litigious when it comes to tenants who break leases and leave deficiencies. Though, if there is something wrong in one of the units, it gets fixed right away.

The parking lot he owns is in an area where parking is highly valued; so he constantly has to police it. His building is next to a Dunkin Donuts and folks sometimes think it’s okay to park on his property and block ingress/egress because they will be “real quick.” Nope. He will point his finger at them and say “get your car the fuck off my property.” (He is actually polite but stern with his initial request; he only gives the “fuck you” to the people who argue with him after being so alerted.)

It’s a dog eat dog world; I certainly wouldn’t enjoy doing many of those things. That’s why I am where I am.

So if you want to be your own boss and make a good living — get rich even — you don’t need a college degree. But you do need the right kind of talent and skills and, of course, luck always helps.