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College Dropouts And Unemployment, At What Cost?
By EconMatters
The American Institutes for Research (AIR) published a report in August this year taking a look at the economic impact of college dropouts. The AIR analysis estimated that the cost to the nation from students who started college in fall of 2002, but failed to graduate six years later amounted to $4.5 billion per year in lost earnings and taxes to state and federal governments.
The breakdown is as follows:
• $3.8 billion in lost income;
• $566 million in lost federal income taxes; and
• $164 million in lost state income taxes.
(Check this infographic for a cliff notes version of the aforementioned AIR report, plus data from some other sources) .
A couple of months ago, we wrote about the United States could soon face a shortage of 20 million college graduates by 2025 putting the country's future at risk due to a low college graduation rate. However, the reality is while quite a few sectors like technology and energy are experiencing an increasing shortage of skilled professionals, new college graduates in the country are having a hard time finding a job. In fact, some of the protesters in the now two-week-long Occupy Wall Street movement are such youngsters.
This discouraging jobs picture is a reflection of a fundamental and structural issue in the American labor market execrated by the Great Recession, which has prompted some to seriously question whether it is even worthwhile to invest money and time in a college education. But based on a recent Census Bureau study which concluded that the estimated impact on annual earnings between a person with a professional degree and one without a high school diploma was about $72,000 a year, we'd say a college degree definitely pays off in the long run in terms of the quality of life, and a sense of self realization, although it may seem like the worst jobs market time for classes 2008 to 2011.
However, the more rooted issue is that the high college dropout rate has been a persistent trend in the U.S. for decades. The AIR study was conducted based on a sample group in 2002, six years prior to the financial crisis and recession, which suggests the dropout rate, and collective costs could be much higher by now.
Russia and South Korea now outrank the U.S. in terms of college graduation rate. President Obama has vowed that America will retake the lead in producing college graduates by 2020, and there are initiatives aiming to increase college graduation rate. Nevertheless, that timeline could be pushed back significantly amid the high national debt and budget / deficit cuts.
One interesting statistics contained in the infographic is that the college dropout rate varies significantly among different ethnic groups, and Asian is the group with the lowest dropout rate at 3.4%. One has to wonder if the Asian "Tiger Mom" (Trust us, it is for real.), which is essentially a cultural difference between the East and the West, has much to do with that?
Further Reading:
Are Silver and Copper Prices Signaling A Global Recession?.
College Graduates: Too Many In China, Not Enough In America?
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$72K more per year with a college degree? Bunk. Look at the study itself. This is for a "professional degree" (doctor or lawyer), not a Bachelor degree. Also, it doesn't appear to me that the study subtracts out any of the costs of going to college: the direct costs such as tuition, books; the increased cost of food and housing; and the loss of income while going to school.
http://www.youtube.com/watch?v=MwMPZR3sS2o
well if they can't find a job then they can always join up the armed forces and there they can be all they can be and be a army of one and discover the world....doncha know.....it is so sad, it beyond words....
but now the army is like this.....
http://www.metacafe.com/watch/3093200/monty_python_military_fairy/
For those of you who don't know how the student loan system works:
You can take out far more than is necessary for school. Many students take out an extra $8 - $10K beyond what they NEED. They blow that on going out to the clubs, getting a more expensive car, etc.
They are no different than those who took out mortgages knowing full well they couldn't pay it off.
If you take out the full amt of student loans for graduate school, and take 3-4 years to graduate, you end up with loan payments above $800 a month.
That information is available to you BEFORE you sign for the student loan. If students blow the money on buying big screen TV's then whine about the big bad banks who "fooled them" into debt, then FUCK THEM.
Get a job. Can't get one? Hire yourself.
Any student who has student loans and eats out even once a month, owns a car, buys Cox cable, etc, needs to wake the fuck up. They need to take the bus, eat Top Ramen, take whatever work they can get, and pay back what they owe. I'm sick of paying my tax dollars to bail these losers out, while simultaneously paying double the tuition because they've jacked up the price of school with their free money.
The students are not victims. They weren't whining while they were receiving the funds. Now that its pay-back time, they are louder than ever. The banks are at fault, yes. The Fed is at fault, yes. But the people who enjoyed the credit-debt expansion are the same ones asking to be relieved of the austerity that follows.
What about those of us who worked to pay off our undergrad before taking on more debt? Who go to school and eat on $3 a day? We'll end up paying for the rest of them when they default on their loans.
Where the fuck is my free ride?
What we have coming is the same thing with student loans as occured with housing. Some "special people" will be recruited, according to "need", and rewarded for not making payments, by getting forgiveness of all or part of their loan amts. While others who pay their mortgages/student loans are stuck footing the bill.
Moral Hazard. We created it and it is inescapable now.
so many have this monkey on their backs. i tell them. work your way through and if you can't afford to go, then don't go for crying out loud. go get a job and forget about it. college is a waste of time anyway.
"College is a waste of time anyway"
It can be. I studied economics and paid extra attention when we studied the tulip mania bubble and Keynesian economics. Read Rothbard and Mises and learned everything I could about fiat systems and how they rise and collapse.
Best four-years invested in my life. Could I have read all those books and discovered it all on my own. Sure. I know people who have. But it would have taken me a lot longer to figure out where to focus my attention, and to learn that information if I had done it on my own. So, I consider the 16 hours a day I waitressed while in school to be completely worth it. It has paid me back in spades.
I agree with you Drifter. Working through is the best way. And most of the time it is a waste of time. I have friends who went to Ivy Leagues and learned that Keynes is God. They bought houses in 2006 at the peak and took on more debt than they can handle. I have friends who started gardening businesses instead of going to school. They are buying the other guys' house at fire-sale prices. Who has the last laugh?
Too bad that the current situation shows that nothing is more worthless than a diploma in economics.
Would you like fries with that?
http://www.youtube.com/watch?v=_2QPrOwk6RI
Here in Australia (like Germany end elsewhere) they have a real trade school system that teaches skilled trades. Being a tradesman does not have the social stigma that it does in the US, probably because you can actually make a decent living. The minimum wage is something like $17 per hour. It has the other benefit that when you hire somebody to do a job, they actually have the skills to do it right, more or less. You can still hire somebody unlicensed but not on certain kinds of work.
They figure out the minimum wage here by determining how much it costs to have a decent life: small apartment, groceries, car, etc. Then they work backwards. What a concept. Fewer billionaires at the tippy top, and an actual functioning middle class at the middle. And a murder rate that is 1/4 that of the USA.
Not perfect but pretty good as far as i can tell.
Technology and Science facing labour shortages? Your article is full of shit. Most graduates in the past decade from science and engineering programs don't even get the 'time of day' from employers because the employers are hooked on the crack cocaine of using H1-B's from India or elsewhere that work for less than half price.
Geez, what's the problem? Humanity has finally returned to the idyllic lifestyle of millenia past: no time clocks, no commute, no work-related expenses. And this time around, no worries about sabre-tooth tigers! Jobs are a cruel joke. It's time we found a better way to exist.
Keep in mind some of the dropouts realized they can earn a living freelancing as computer geeks, working in restaurant and moving up till they're head chef, fixing people's cars for cash, etc.
Some of those "lost taxes" are circulating as cash on the underground market, and actually keeping this ponzi afloat. Every time a dollar changes hands in a transaction and circumvents the IRS, it creates real wealth by increasing the fruits of one's labor without getting sucked into the IRS and wasted on bureacracy.
Other dropouts, yes, are getting their food stamp cards and unemployment. But not all. Not all. Some of them deserve a huge "thank you" from the rest of us, for becoming plumbers and mechanics and actually being useful to society instead of graduating and getting a gubmint job and whining about their pensions being too small.
"Some of them deserve a huge "thank you" from the rest of us, for becoming plumbers and mechanics and actually being useful to society instead of graduating and getting a gubmint job and whining about their pensions being too small."
Testify!
College is both a "credentialing" racket and the next big bubble. You need a piece of paper to increase your chances of getting a job, but these days getting a degree is no different than getting a cosmetology license what with all the worthless degrees like "diversity studies", musicology, etc.
Why are there no serious studies about money, starting a business, entrepreneurialism? The answer is pretty obvious: College teaches people how to be good cubicle drones, not independent thinkers. That would be too threatening to the status quo.
Four reasons NOT to send your kid to college
Again, which college and what type of education?
An expensive, out-of-state, Ivy league humanities or arts degree (with which you are qualified to teach elementary school geography or trombone)?
Or a less expensive, in-state, engineering, medical, or legal degree?
UE with high-school diploma: 9.6%
UE with college degree: 4.3%
And yet there are thousands of newly graduated who can't get a break into the market. Something doesn't add up here.
I graduated in the 1960s with an engineering degree from an East Coast ivy league school. My family was poor, so I paid with scholarships and loans. By graduation day, only about 1/3rd of the freshman class was left. Of that 1/3rd, I believe that about 1/3rd were fit for employment in engineering. So that's a survival ratio of 1 out of 9 freshmen. The class was all male, nearly all white, nearly all from wealthy families. Compare that to modern student demographics.
So what do the rest do? They get jobs in areas where technical competence is less important, and social skills or organizational skills are more important: marketing, quality assurance, customer support. All vital, and sometimes higher pay than a design engineer. Marketers interface with customers. You don't want your design guys doing that, because most of them are like Dilbert (or worse), and you will end up with no customers.
Now let's say you've got a brand new engineering degree, but you are technically clueless. I interview them all the time. BS in EE, and they know NOTHING. (How can that happen???) If you are willing to move into a less prestigious position, you might find lots of jobs. If you insist on moving into design engineering, you're going to run face-first into an old fart like me, who gives you a technical interview, finds out you are useless, and shows you the door. So who is responsible for your situation? You. You are not being realistic about your skills. For maybe the first time in your life, someone is telling you that you are not good enough. That hurts. But you need come to terms with it. Adjust your expectations.
If you have severe lifestyle issues, do not go to a corporate interview. They will figure out that you are messed up, and you will have ruined your chances with that company. Get yourself together first.
Because they sit on their asses checking facebook every five minutes while e-mailing their resumes out to large corporations and then whining because they don't get a call.
You do not buy a diploma then sit back and declare a "right to be hired". If there is no job out there you go CREATE ONE based on a need you see in the market.
You don't "get a break into the market". Nobody GIVES you a break, dammit, nor SHOULD they. You have to graduate and wear out your shoes going door to door till you get a job. Many graduates are too proud to take work that they view as "beneath them".
I am currently in an MBA program. I see whiners all around me who are studying only as much as they "have to" to get the degree. They are the same ones who expect to graduate and get paid $100K right out of the gates. What am I doing? I'm absorbing every bit of information I can because I actually intend to use the information to run my own business. If nobody will hire me then I'll hire myself, dammit.
I'm sick of being put into the same category with all these losers who "deserve" to graduate and have a job. Student loans are an investment. If you don't intend to make the investment pay off, don't borrow the funds.
People, for the most part, get the job they deserve. My generation has become complacent and have a sense of entitlement that is outrageous. It is one thing to rant against the banks, but its another to rant against the banks while also claiming the same types of entitlements they do. "Something-for-nothing" cries coming from students is as sickening as demands for "something for nothing" coming from the banksters.
Get a job. Can't get one? Hire yourself.
The level of debt generated as a result of a four year degree has also gone up substantially. My undergraduate college, The University of the Pacific, charges almost $200,000 in tuition alone, resulting in massive outstanding loans. It is no wonder students are considering not going to college with that sort of a burden when they graduate.
Is that because to many of them are finding out the meaning of the term "income" and have decided they don't generate it?
Only employees of the Federal US Government and the officers of Corporations registered within the District of Columbia are liable to pay "INTERNAL" revenue.
Since the new breed seems to be getting it with regards to the IRS role as private debt collector for the IMF and their absence of jurisdiction within the freely associated compact states; it looks for all the world to Tunga that the NWO is fucked. In no small way. ;)
For everyone:
http://www.1215.org/lawnotes/index.html
Thanks for the cite tired1.
Exactly.
How can they garnish my wage, if I don't have a wage?
How can they put a lien on my house, if I don't have a house?
They can destroy my credit score if they want. I don't plan on getting any more loans.
H1-B, a national scandal ignored.
Please google H1-B, lots of offers to find you an employer in the US.
Also blatantly illegal, as the employer must certify no domestic worker can be found.
The whole system is fraudulent, intended to bury US in debt as debt slaves.
Bring on the 99%'ers
Yes, many folks in the tech sector know the H1-B visas are a government sponsored program to drive down US wages and subsidize multinationals. It's a scandal alright, and I always shake my head in disbelief every time the NSF comes out with their hysterical predictions of imminent labor shortages. Congress then lets in 100k people per year to compete with US citizens. Can anyone name another country that imports so many tech people? This is just crazy policy that is a massive disincentive for people to study computer science, tech, or engineering.
The real irony is best expressed in a 2/10/2009 State Department cable from Consulate Shanghai released by Wikileaks: U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL CRISIS. http://cables.mrkva.eu/cable.php?id=191254
That is, US Corporations were limiting layoffs in China! The irony is that the Chinese government successfully pressured US corporations to limit layoffs, especially among college-educated workers, with the cable saying "Companies want to hold onto their staff, as they are loath to slice into the talent pool that they have spent such great effort to build up in recent years."
As far as I'm concerned, these companies should be stripped of their US corporate "citizenship." Let them incorporate in China, oh, and let all the officers move there and take their families with them. Traitors. Enemies of the people.
@carlnpa; "domestic worker" is a term of art. Where the United States is concerned: domestic means inside or within the District of Columbia.
The term "non-resident alien" applies to all freeborn American Citizens born upon the land of one of the freely associated compact states. As long as the nra avoids transacting with the federal US government or habitats on it's territory for more than 180 days in a calendar year then there is an absence of liability to owe internal revenue.
You're right if you think H1-B allows the feds to play both sides to the middle to the detriment of the American worker.
College drop-out is actually a good thing. When you spend 100K to go through a 4-year program you expect it to be worthy. If it does not teach you a lot skills for your future employment to justify the high cost then get out or, heck, never take it on to begin with.
My 30 YO son palmed off his student loans to not complete a degree in Anthropology, and his loans to not complete "Massage Therapy" school onto my wife, his mother.
One divorce, a second wife and now 2 babys, he is living in his grandmother's house, while she lives with me (terminal Alzheimer's) and his mom gives them her SSI (97 YO) to pay for their food and electricity.
I must be NUTS to put up with this shit. :-(
Sorry to hear about your mom... my heart goes out to you. Keep her with you at all costs - she will become helpless and will need trusted individuals making even the smallest decisions for her. Hospice is a blessing when needed - don't wait to bring them in.
Your family sounds about normal, otherwise... or at least a lot like my extended family. Prolly like a lot of families today - the social fabric was rent in the 60's/70's and continues to rip. There's gonna be hell to pay - economic problems notwithstanding ... they merely exacerbate the situation.
Condolences.
But remember, it ends when you say it ends.
Thanks. It ends when I divorce my wife. Here in my jourisdiction, I would be lucky to get away with the shirt on my back. Been married 36 years, and terminal mother in law lives with us....
Might as well... never mind.
Yes, condolences. Especially since you did not create the monster but are forced to feed it.
However, he is right when he says it ends when you say it ends. Even if you still give them money, he better be at work 40 hours a week minimum.
I too am 30. When I was a teenager and I needed money my dad handed me a shovel and I worked 12 hours a day digging footings on his construction sites. Best thing that every happened to me. You can bet when I went to college I picked a degree that would earn me a living. Furthermore, having experienced firsthand where the money came from that fed me, I gained an appreciation for how hard he had to work to feed and clothe me all those years.
And now, nothing is sweeter than the feeling of freedom you get from knowing you depend on nobody for your living. I have never struggled to find a job, ever. I have lived on the UES of Manhattan and did it on $18,000 a year income. So people who claim they are "needy" and take advantage of others' generosity get little sympathy from me.
Mr Binkey, if you can, forget the stepson and do whatever you can to teach those grandkids. The dad may be a lost cause, but you can still teach those kids how to be independent.
I wish you luck!
Damn... sorry.
This "shortage of college graduates" has been thoroughly discredited many times already. I'm not wasting any more time debating this crap.
College is an approval certificate con.
Too many Americans are going to college. Many of them are not intelligent enough to do the work. A lot of this is due to political correctness. So the country loses four years of productivity from these people, and they are crippled with school debt, and they can't compete for professional jobs after they graduate anyway, because they still don't know anything. This is stupid. Let Darwinian selection play out.
Second, there is globalization. The new crop of graduates will not make as much money as their parents. As long as graduates demand very high salaries, the jobs will keep disappearing. The college graduates in China and India are very hard-working and very clever. The US grads don't measure up, and want 5x more money. So the employers that have to hire in the US go the H1B route. They still end up paying a lot, but at least they've got an employee who can do the work.
Third, US kids don't like heavy theoretical and math subjects. This was true even when I was in high school, back when dinosaurs ruled the earth. Now it's even worse. Let's face it, most people don't have strong critical thinking skills. Look at US politics, for example. And their abstract thinking skills are much worse. So the difficult jobs, like engineering and physics, are always going to be filled with a very small subset of the population.
So what do you do with all the people that can't do college-level work? This is a urgent social problem in the age of automation. Society MUST redesign itself so that there is a way for these people to have fulfilling work roles. (I am not talking about welfare here, which is a destroyer of nations. I am talking about WORK.) Otherwise, there will be too much wealth imbalance and suffering, which will lead to violence. Bring back trade schools. Get rid of immigrant labor and move the US poor back into manual labor. And don't treat them like slaves. They are human beings that deserve respect and decent work conditions. I don't understand what is so difficult about this. Not everyone can earn enough money to have an upper-middle-class lifestyle. Rearrange our economy so that manual laborers can live a decent life. We have no choice.
College and the attendant loans are the door to debt prison. An entire generation has been screwed by doing what is called "the right thing."
"Playing by the rules" makes you a sucker. I hope these kids learn from the experience.
Bruce,
Love your articles.
But, in the scheme of Obama's jobs creations costs per hire.When your spending taxpayer money at $200-400k per $40k job created, somehow it just doesn't seem to matter.............LOL
I regret borrowing ANY money during college and grad school. I had jobs throughout but still had to take small loans...it took me FOUR...4....VIER...years to pay that s-h-i-t off in the early 1990's when the economy was relatiavely good. Now it would be very very hard to pay off any loan. Almost everything can be outsourced...and when the Inidan (or whomever) can charge $6 an hour for doing the same work they pay you $60 an hour to do......you get the picture.
I highly advise a student NOT to fall into the trap of taking loans esp if you are going into something like history, social sciences, etc.
GL!..........................................better then GL is to think long an dhard before you borrow ANY money for anything!
Bullshit on the propaganda about a shortage of "tech workers".
Salaries in tech have been declining since ~1999.
Total employed in the tech sector has been declining since about the same time.
Doesn't sound like pricing for a good/service where there's a shortage.
That at the same time the media shill nitwits are whining about a shortage of "STEM" workers and lack of "STEM" education in the US.
It's long been policy of the US NSF to import as many non-US PhD candidates to US PhD programs as possible to suppress prices (i.e. -- salaries) for PhD holders. Google it. Testimony before US Congress.
And enrollment in "tech" programs even at the best universities is down. You wonder why? Would you invest that much money and that much effort for a field where salaries are declining, and your "career" is over at about age 35? Neither are new uni students and their parents.
What there is, is a shortage of managers who can lead w/o handouts from US tax payers that's routed through the surplus of loan sharks in US Congress and the FEDs various "loan" programs.
Definitely bullshit on the immigration crap: Blame outsiders for your problems, version 555.3
Lou Dobbs: Law Firm teaches how to avoid hiring Americans - https://www.youtube.com/watch?v=Fx--jNQYNgA
https://www.youtube.com/watch?v=TCbFEgFajGU - Immigration attorneys from Cohen & Grigsby explains how they assist employers in running classified ads with the goal of NOT finding any qualified applicants, and the steps they go through to disqualify even the most qualified Americans in order to secure green cards for H-1b workers.
The breakdown is as follows:
• $3.8 billion in lost income;
• $566 million in lost federal income taxes; and
• $164 million in lost state income taxes.
/////////////////////////////////////////////////////////////////////////
Made me laugh.
Based on what?
Those are careful results from the Bureau of Unsourced Statistics
The loss of income is zero if no one could find jobs anyway.
back to the Bible, a gun and no schools at all. I kinda like that actually. "Here...i just shot this turkey. I'll give you a leg for...5 dollars." What? What? Was it something i said? Why are you all running away?
I think the biggest threat for youngsters not being able to find a job is the boomers not retiring, and thus gen X not moving up the ranks freeing up positions. There's much ballyhoo about increasing the retirement age and what not, but we'll see shortly that boomers who are complaining about that now, will be very grateful that they are 'allowed' as in sanctioned, as in socally accepted now, to work longer...
In essense the boomer policians are doing their boomer generation a big favor, but the boomers fail to see that for now.. complainig that they HAVE to work till 66/67..
http://money.usnews.com/money/retirement/articles/2011/09/21/raising-the...
http://views.washingtonpost.com/leadership/guestinsights/2010/02/gen-x-l...
http://www.nytimes.com/2011/01/28/world/europe/28iht-spain28.html?_r=1
i would recommend the government LOWER the age of eligibility immediately myself. They're not providing actual health-care now anyways--that medicare/medicaid crap is the biggest sop to Wall Street profits in history and nothing more. Leave healthcare to the VA and have the government train and hire the doctors directly...other than that "here's my bottle of booze i made for ya' doc!" if we're talking payment from an actual customer. it's where we're at anyways. this entire nation is broke and all that remains are crazy schemes none of which have anything to do with creating wealth but destroying the remainder of it. "See reference Treasury Yields" in case you still don't get it.
The biggest thing is the wholesale exportation of the jobs that would have employed those graduates. That you can thank the entire "free trade" treaty insanity that encouraged corporations to move jobs out of the country . the mass exportation of good jobs for a boost in corporate profits (short term boost) has destroyed any hope of a realistic recovery or reduction in unemployment
This is one of the biggest problems. But the Pols will keep blaming illegal immigration, because they wouldn't want to upset the real voting (read as campaign contribution) base.
actually we used to call it "importing free labor" in the form of "immigration." that's why i've always found the idea of "outsourcing your business" a lunatic fringe idea. just look at the businesses that have done it. They're all bankrupt for all intents and purposes now. It's just a crazy "pay more for the CEO" scheme anyways.
http://www.youtube.com/watch?v=_VrFV5r8cs0&feature=player_detailpage
Yep...except I'm running into a lot of feddies lately who whine that they HAVE to keep working until 58 or 60. Well, that's what they get for taking on mega-mortgages at age 50, and paying for their babies' free rides to college and grad school...