To College Grads: It's A Different Economy

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

College Grads: It's a Different Economy

The economy has changed in structural ways; preparing for the old economy is a sure path to disappointment.

Millions of young people will be graduating from college over the next four years, and unfortunately, they will be entering an economy that has changed in structural ways for the worse. It's easy to blame politics or the Baby Boomers (that's like shooting fish in a barrel), but the dynamics are deeper than policy or one generation's foolish belief in endless good times and rising housing prices.

1. Getting a college degree, even in the STEM (science, technology, engineering and math) subjects, no longer guarantees a job. As I have often noted, producing more graduates does not magically create jobs. The economy can only support a certain number of jobs in any one field. Producing 10 times as many graduates in that field does not create 10 times more jobs.

According to this analysis of supply, employment, and wage trends in information technology (IT) and other high-tech fields, Guestworkers in the high-skill U.S. labor market (via B.C.), only half of those graduating with STEM degrees get jobs in STEM fields.

Interestingly, 36% of IT workers do not hold a college degree, and only 24% of IT workers have a four-year college degree. As one would expect in a nation with a strong tradition of immigration, many "guest workers" (i.e. people seeking citizenship via working in the U.S.) also have degrees in the STEM fields.

This report Where are the STEM jobs? (via B.C.) predicts 8.65 million STEM jobs in the U.S. by 2018, which is a mere 6% of the current workforce of 142 million.

2. Those millions of Baby Boomers clinging to their jobs can't afford to retire, partly as a result of Federal Reserve bubble-blowing and zero-interest rates. Now that cash earns nothing, having a $300,000 nestegg of lifetime savings generates only enough interest income to pay a few bills. In the days before the Fed manipulated the economy to serve the interests of the banking cartel and the state, such a sum would earn roughly $15,000 a year at 5%.

Those days are gone, thanks entirely to the Fed, which is blowing new asset bubbles and engaging in unprecedented financial repression, distorting the entire economy in self-reinforcing negative ways.

It's easy to blame Boomers for buying into the fantasy of ever-rising real estate, but it's not a generational issue; plenty of Gen-Xers also drank the "housing never goes down" Kool-Aid. The issue is: who inflated the bubbles with lax oversight, easy money and low interest rates? The Fed and the U.S. government's housing and financial oversight agencies.

3. Many of those Boomers clinging to jobs are doing so to support you. Yes, it's a fine irony, isn't it? If you got a decent full-time job, Mom and Dad could stop sending you money for rent, gas, etc. But since millions of Boomers have to keep their jobs to be able to support their unemployed offspring, there are fewer openings than there would be if Boomer Mom and Dad could quit and retire.

4. We now have a bifurcated economy: we have what's left of the open-market economy and we have the cartel-state economy of various rentier arrangements. A rentier arrangement is one in which the input costs can keep rising due to political power/protection while the output declines.

Our economy is now dominated by rentier arrangements. This is one of the core reasons it is stagnating, the other being a parasitic, corrupt financial sector that depends on phantom collateral and accounting trickery for its survival.

Rentier arrangements include the financial sector (hated by the public but politically sacrosanct), the National Security State (you can never have enough people spying on the world, including Americans), healthcare (costs triple while the availability of care and the health of the populace decline) and education (college tuition rises 600% when adjusted for inflation but a third of the graduates learned essentially nothing).

Protected from the discipline of the market, these quasi-monopolies vacuum up an ever-increasing share of the national income while their output/yield declines. Where $200 million bought four top-line fighter aircraft a decade ago, now it buys one; we have reached the point where we can't afford our own fighter aircraft. And many in the military conclude the $200 million-each F-35 Lightning (by some estimates of full program costs, $300 million each) is an underpowered, bug-ridden dog, less capable than competitors and the aircraft it replaces at four time the cost, the F-18 E/F Super Hornet.

For decades, those entering the rentier cartels were assured of lifetime security. Get a job in healthcare or education or the defense/national security sectors, and you had it made. But these bloated rentier arrangements are bankrupting the nation.

Lacking any limit on their cost inputs, these sectors have expanded at rates far exceeding the growth rate of the economy that supports them. Healthcare once absorbed roughly 5% of the economy; now it is consuming 18% and is on track to consume 20%. Healthcare alone will bankrupt the Federal government and the economy.

As a result, employment in the rentier arrangements will be less secure going forward. Right now, the Federal government can borrow $1 trillion every year because the Fed has manipulated interest rates to zero. At some point, rates will rise (for one reason or another) and the "free money" will become costly. That will eventually limit the state's ability to fund its favored cartels and rentier arrangements with borrowed money.

5. The private-sector economy is bifurcated as well. The sprawling global corporations can draw upon talent from around the world, so competition for those big-bucks corporate jobs is fierce. Small business, under pressure from higher taxes, global competition and skyrocketing healthcare costs, cannot afford to hire anyone who can't generate a net profit for the company on day one--if they hire anyone at all.

Mentoring, on-the-job training, all of that good stuff--everybody wants somebody else to have given you that. They want you productive on day one.

6. The older generations will have to adjust to demographic and financial realities. That the promises made for Social Security and Medicare cannot be kept is "obvious," but so politically dangerous that we cannot discuss this truth openly. As I have maintained for years (Boomers, Prepare to Fall on Your Swords June 2005), the Baby Boomers will have to let go of the impossible promises made to them by an expansive Savior State. If they refuse to do so voluntarily, then the younger generations will have to insist via political means.

Or we can passively do nothing and watch the whole entitlement system implode. That works, too, but it's messier than just dealing with demographic and financial realities.

7. There are two sets of laws now: one for the Elites and the state, and one for the rest of us. If you wonder why small business growth has shriveled, look no further than the over-regulated, legalistic thicket that awaits anyone starting or operating a business. It no longer makes sense to have employees; contract workers or arrangements between sole proprietors is the only way left to do business for most of us.

The rule of law has been undermined by corruption, political favoritism, and mindless regulation. That systemic failure leads to stagnation and cynicism.

8. We are a free-lance nation. Many people bemoan this, as they want everyone to have the security to be unproductive and never be fired. But that's the problem with the entire rentier cartel-state economy: cartels are skimming operations that are immune to market discipline or any limits on their cost structure. Incompetence has no cost in cartels, and neither does inefficiency.

These bloated fiefdoms and cartels keep growing while the economy stagnates, increasing their share of the national income at the expense of the rest of the economy (and there is an opportunity cost to this malinvestment--what else could we have done with these trillions squandered on rentier arrangements?). The cartel-state economy will collapse under its own weight.

There are opportunities, but they require a deep understanding of risk and security. A livelihood with day-to-day low-level insecurity and volatility is actually far more stable and secure than the cartel-state one that claims to be guaranteed.

The burdens of Fed manipulation and the cartel-state rentier arrangements will come home to roost between 2015-2017. Those who are willing to seek livelihoods in the non-cartel economy will likely have more security and satisfaction than those who believed that joining a rentier arrangement was a secure career.

There is a price to joining a parasitic rentier arrangement, a loss of integrity, agency and independence. Complicity in an unsustainable neofeudal society has a cost.

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JustObserving's picture

Now if you had invested your education money in stocks, you would be partying in Vegas.  It is a rigged-casino economy and that is all you need to know.  The rest you can learn by yourself for free on the internet.

ghandi's picture

WTF. Is there nothing sacred anymore?


How many ZHer's have degrees?  Hum. I bet it is a decent number, so it seems hypocritical to suggest not to go to college.

I know the arguments suggested here...overpriced, hippie-lefty profs, and you learn nothing but what you could for free;

But still, it is hard to imagine a world where the smartest do not get college degrees.

TwoShortPlanks's picture

Don't worry, Gen-Y have all of this in hand. They're working on an App to fix everything.

kaiserhoff's picture

7. There are two sets of laws now: one for the Elites and the state, and one for the rest of us. If you wonder why small business growth has shriveled, look no further than the over-regulated, legalistic thicket.

At the most fundamental level, this is the problem, and it cannot be allowed to persist.

true brain's picture

People deserve what they get. They voted for G.W. Bush, a verifiable moron, whose English skill is no par with my gardener. Then they voted for Obama, the most twisted hypocrite that came out of the delusional elite class. Until they're enlightened, they will not be saved. And if they are not enlightened, they will perish. The laws of nature supercede the laws of man.

The silver lining is that when masses go down, they'll take the elite with them.

kaiserhoff's picture

I have a feeling that the power grid will go down for a few months.

   That will solve many problems.

FEDbuster's picture

One year of grid down = 50% population reduction.  All major metro areas would be burned and looted, essentially a wasteland. Grid down is really ugly, but maybe those evil fuckers will give it  a try?

I think manufactured pandemic is more likely.  Designed to thin the right side of the population bell curve.

BooMushroom's picture

If the rothschilds do it, a pandemic seems likely. If Mohammad does it, grid-down seems much more attainable.

John_Coltrane's picture

Yes, we're overdue for a coronal mass ejection (CME) event that will take out most of the transformers on the energized portion of the grid.  And we don't have enough replacements so the grid could be down for months  or longer assuming we can remanufacture them.   Our only hope is enough time to deliberately shut the grid down when solar weather suggests an CME is going to occur.  Faradays law of magnetic induction can be a bitch, but without it we wouldn't have a grid.

fockewulf190's picture

Funny how the "elite" politicians always managed to have bunkers built for them...from taxpayer funds of course. You can bet your last $500 million dollar Federal Reserve Note that the Jamie Dimons of the world have their own escape pods, ala Dr. Evil, primed and ready for departure.

James_Cole's picture

People deserve what they get. They voted for G.W. Bush, a verifiable moron, whose English skill is no par with my gardener. Then they voted for Obama, the most twisted hypocrite that came out of the delusional elite class.

The problem is clearly systemic - it doesn't make much difference who you vote for.

Some candidates are more insane than others, but it's minor shades of difference. 

Andre's picture

The problem I have with this statement is not the assessment of the GW and Obama, it the other question - who were we allowed to vote for by the DNC and RNC?

Face it, Obama wwas chosen for his race, and Hillary in 2008 was competing based on her sex. The DNC wanted a candidate with lots of teflon - question anything they do, and you're labeled racist/sexist.

economics9698's picture

College is a waste unless your parents have money and you are from the upper classes.  For the poor it is a complete waste of time and money.

James_Cole's picture

College is a waste unless your parents have money and you are from the upper classes.

This is true, until you bother looking at facts.

iDealMeat's picture

5% of college is a worthy educational value.  95% is just partying and a total waste of both time and money. The moment you wake up and learn how you educate yourself you don't need a degree. Like all fiat its just a piece of paper.

skills matter bitchez

LetThemEatRand's picture

"Never saw a single classroom but I drank a lot of beer.  My friends still love to listen to me when I talk about that year."  Charlie Robison.

ChanceIs's picture this mean that I can correctly conclude that Charlie Robinson and Barrack Obama were classmates at Columbia?

Doug Casey makes interesting remarks about having been classmates with Bill Clinton at Georgetown.

Some recently deceased English commentator was at Cambridge (?) with Bill Clinton dueing the later's Rhodes Schloar years.  Said what he couldn't get into his bloodstream through inhalation, he more than made up for with brownies.  Apparently he really couldn't inhale.

LetThemEatRand's picture

Barack Obama didn't so much go to college as college went to him.

 “'The president-elect is coming into office at a moment when there is upheaval in many parts of the world simultaneously,' Kissinger responded. 'You have India, Pakistan; you have the jihadist movement. So he can’t really say there is one problem, that it’s the most important one. But he can give new impetus to American foreign policy partly because the reception of him is so extraordinary around the world. His task will be to develop an overall strategy for America in this period when, really, a new world order can be created. It’s a great opportunity, it isn’t just a crisis.'”

-Henry Kissinger, who not coincidentally employed young Barack for a while.

ChanceIs's picture

Gag.  Kissinger showed up at some important conference recently.  He is still playing the game.  Still trying to be president.  That "new world order" phrase makes my knees rattle.

LetThemEatRand's picture

The problem is that these guys really do believe their own bullshit. 

newworldorder's picture

And why not... they control US, EU and British governance. A large part of the world is their oyster. Who will stop them and how?

Cloud9.5's picture

I have 3 even though I can’t spell worth a damn.  My kids both have JD’s and they are doing well.  They also have student loans out the wazoo and if the cash flow stops, within ninety days they will have to move back in with me.


TwoShortPlanks's picture

Better get the linen out, this is gonna get a little bumpy.

Parrotile's picture

"Secure for Deep Dive" works for me!

ChanceIs's picture

I was privileged to go to a hgih end prep school in the mid '70s.  I received a great education.  I was shocked getting o colleage (Ivy League) that my classmates really didn't know squat.  I taught half of my dorm mates calculus.  Oh the wailing and gnashing of teeth.

I studied engineering.  I took a few econ courses as electives and thought it was conjured BS.  Many is the hour I have spent since trying to get my mind around the concept of the velocity of money and its implications.  You know...I have $10 and buy your beans, and you buy them back for $10 then the GDP has bumped up $20.  It's BS.  You read about these famous investors who say things like..."I had the advantage of never having had and econ course," or "after I unlearned it all, I became successful."  You can get a real economics education by going to the von Mises website and reading all of their great texts and publications for free as opposed to Samuelson's 100th edition of Econ 101 for about...what...$200 from the college bookstore. Keynes only made it big because he taught that you could get something for nothing and the politicians wanted to hear that.  If you question Keynes in the halls of ivy econ world, you may as well swallow some cyanide.  Accounting is worth study.  Then you could have sussed out Enron, and Solyndra.

I became technically literate because of my formal engineering education.  I know i can pick up a book and bootstrap myself into technical worlds unknown.  (It would be easier if the computer geeks learned how to write, but I digress.)  This is incredibly valuable.

Bottom line is that there are certain skills you need in life.  That paper might get you in the door, but if you don't have the goods then you get hosed.  Most of these skills you should have learned by the tenth grade - and in good free public schools.  We have somehow stretched that out eight years to a graduate degree and $100K.  The bottom line for me is that you shouldn't be allowed to enter college unless you can do the NPV of what you propose to studt and come to the proper conclusion.  You should also have to succesfully refute Doug Caseys arguments against going to colege as a prerequisite for admission.

The price of college will crash, and then you will see some real wailing and gnashing of teeth amongst the faculty and administration - especially those handling student loans.

sun tzu's picture

If you really want to get to the top, do alot of ass-kissing. In the corporate world, that's more important than hard work and knowledge.

LetThemEatRand's picture

If you really want to get to the top, start there by choosing the right parents.  That's the model that worked for the large majority of the truly wealthy in the U.S.

FreedomGuy's picture

Well written ChanceIs. My observations and educational path is similar to yours. Self-taught in econ which includes lectures, letters and long thoughtful conversations with smart friends who are at different parts of the learning curve. In fact, economics has sort of been the door into libertarianism from regular conservatism for me.

I would offer an alternative to your view as to why Keynes was popular. The governments of the world jumped at Keynes because he essentially argues that you need an elite to direct or even control an economy. Their is a pavlovian response to things like the "Commanding Heights" of an economy that appeal to the naturally arrogant and power thirsty political leadership. If you read Von Mises you know it is the delusion of government genius.

My boss is getting read to send his girls to college and we discussed many of these issues. I think one has to be circumspect about these things and not just push kids into college or think it automatically leads anywhere. There is the other side of the issue in which academically gifted students often do not perform all that well in real life. It is a very different environment and skill set that makes ofr success in private life versus the highly controlled environment of academia.

ChanceIs's picture

Interesting thoughts on Keynes and elitism.  He was certainly part of the "in crowd."

I get beaucoup mileage out of the current von Mises school.  There has been a recent shake-up over Menger and the concept of value being subjective.  I need to study more before commenting further.  The GoldMoney folks are great as well.  They often collaborate.  Here is a GoldMoney interview with Harry C. Veryser.  He teaches econ in Detroit.  Says (about 2/3 in) that he teaches Keynesianism as a formaility so his students have the exposure but cautions them against taking it seriously.  GoldMoney is wonderful.  They come out with a few podcasts a week.  I am on their tickler and take them in on the treadmill at the gym.


It didn´t have to be this way: Why Boom and Bust is Unnecessary

We have a lot of prejudices in our society.  One is that the college degree is a requirement.  My dad was a doc.  One of his closest friends from the second half of his life might not have finished high school - definitely no college.  He founded a trucking company and did much better financially than my dad did.  He used to give my dad parts of his art collection because he thought so much of him.  I inherited a few and keep them out on display. is how you play the game.

In actuality, one really can't read Zero Hedge without significant education.  I first ran into Heisenberg in my jumior year high school chemistry class.  You hear Schrodinger's cat, Prisoner's dilemna, Nash equilibrium, etc here.  That is sophisticated stuff.  It applies.  If it isn't correct, it is at least important to understand that TBTB believe in it - or don't understand/believe in it - which is maybe why we are in such a splendid fix today.

Law97's picture

Very true that an education doesn't buy you a guaranteed seat in the top 1%.  I went to a high-end prep school in the 70's and 80's where I formed the life long-friendships I still have today.  I've kept up with them and so have a pretty good sampling of how our paths turned out. 


I happen to know about a dozen of them who are now very wealthy (which I define as $20 mil on up).  Two of them are self-made, having dropped out of college, never graduated, and started companies.  The other 10 inherited their wealth, and most of them added significantly to their wealth mostly in the last five years by virtue of simply being invested in stocks and other dividend/interest generating financial assets.  Those who inherited their wealth never finished college or, if they did, barely did so and from a second rate institution never going further. They pretty much all retired or became "investment managers" right out of college and never worked.


Those of us without large family money or without the entrepreneurial streak, like me, are the ones that loaded up on advanced degrees.  Without exception, all of us secured good-paying middle class to upper middle class positions as college professors, senior executives in government, bank officers, accountants, docs, etc..  Still, none of us has "hit it big," although we enjoy incomes in the low six-figures for the most part.  The truly big bucks went to those with no or limited college educations.


So my personal experience bears out what you are saying.  Formal education really has nothing to do with achieving the big bucks.  The big bucks go to those who start successful businesses or inherit their wealth, neither path having much to do with educational achievement.

FreedomGuy's picture

Nice post, Law97. Your experience agrees with my instincts and observations over time. It is risk taking, situation analyis, the ability to grasp an opportunity and run with it that seems to work. I come from a blue collar middle class family and the thinking is similar to what you write about your background. I actually call it the 9-5 mentality. The idea is you get good work. You give good work/productivity. You work hard, keep your head down, become good at what you do and maybe advance by degrees in a job or profession. It is not bad. It is completely honorable but it is also opposite to making the financial breakthroughs to wealth in real life. It is actually more of an employee rather than employer mindset, even if you become a doctor. It also makes you subject to the decisions of others and your fate depends on their judgements. Not good in my experience.

The entrepreneurs are really a class of people to be admired. Not just for success and money but the attributes to get new things off the ground and all the employee types can then become productive and better off in their schemes.

I do not think college in any way prepares you be successful in an entrepreneurial way. It just exposes you to new things (good and bad) and perhaps thinking and reasoning to some degree. However, it is still a protected and flitered environment, not at all like the real world.

AldousHuxley's picture

Education can provide you middle class income

You will have to take extraordinary risks for true riches

They say "good luck" because luck is all that matters

Degrees give you better odds but you can't beat a guy born to owner of the casino or gets handed royal flush multiple times

Capitalism 's Achilles heel is in the unmerited inheritances and sheer luck

Poetic injustice's picture


my personal advice would be to go European way - work couple of years in field, and then go and study because you will know how hard money comes, you will know more in which field you want to study and no, we have enough "14th century romances" literature majors.

And you have to calculate if your field will give you any good return with degree.

Stuck on Zero's picture

Oh the horror.  Just think, Aristotle had no college degree.  Nor did Bethoven. Nor Mendel, or Luther, or Gauss, or Michael Dell, or Henry Ford, or Bill Gates, or Steven Spielberg.


garypaul's picture

Good point. I'm not against going to college, just that it is overweighted in society, almost to the point of propaganda.

ugmug's picture

A college education is nothing more than learning how to look smart while staring at a stationary object like a 'blackboard/whiteboard'.

Regurgitating someone else's thoughts all your life is tantamount to watching a cow eating its cud.

Poetic injustice's picture

They didn't have any Nobel prizes either.

Oh the credibility of them!

ugmug's picture

Wasn't Nobel a bomb maker? Oh, the irony of that shit prize!

Dingleberry's picture

Ghandi many of these idiots went into massive debt for bullshit degrees and managing kiosks in the mall.


Aeternus's picture

I work for a mechanical engineering firm, not once was I asked to provide proof of a degree from a university, taught myself solidworks and the rest with used books purchased on the cheap.

Freddie's picture

Hope & Change.  A lot of these kiddies voted for this. 

sun tzu's picture

The problem is that they think we need more hope and change. It's like the delusional politicians who spend $500 billion only to fail and claim it was because they didn't spend enough.

Freddie's picture

The kids see no irony in that they are debt serfs for life paying for the libturd tenured college "professors."   Stupid kids.

FreedomGuy's picture

JustObserving, I agree with you but add a finer point to it for consideration. It is not so much a rigged game but my observation is that the entire economy of the world is now a political economy. A political economy is a controlled one. That is where your "rigged" observation comes in to play. Actually, it is worse than rigged. You have genuinely stupid people who genuinely believe they are smart making decisions based on proveably false economic theorems and of course self interest.

To me, all investing in anything is at risk these days. What a prime minister, central banker or EU leader says now will do more to the markets than the P/E ratios or demand forecasts for any particular company. At any moment, any change in policy could blow a hole in the world economy. Just have Ben Bernanke withdraw QE for any reason. Let him and others quit artificially suppressing the bond market. I could see a scenario where bonds, stock, and commodities all crash simultaneously which tends not to happen in a free economy. Change government policies and payments and you can crash healthcare, defense, college, agriculture, energy, and many others. All these sectors are dependent on government "drugs" if you will.

Invest anywhere you want. Invest with inflationary or deflationary expectations. It actually doesn't matter. Governments can drive any scenario and leave your portfolio shattered. What matters is the next official pronouncement, announcement or monetary scheme. Worse, none of it is really based on honesty, the public interest or even sound financial thinking. It is based on political survival and political profit.

I personally think we are all screwed until the great reset and until we stop once and for all believing in the genius of government and the "great man" that will save us.

Cloud9.5's picture

Ladies and gentlemen look around and trust your lying eyes.  Every strip mall and shopping center in the country is dotted with empty store fronts.  Every neighborhood is blighted with distressed homes and vacant houses.  Just like in the 1920’s, our sky lines are graced with grand structures that were built on dashed dreams and failed expectations that will never be utilized to full capacity.  Every year we drive less.


There has been a slam down of paper gold that resulted in a corresponding flight into precious metals and hard assets.  Hard money is moving out of vaults and into private hands.


The bubble of borrowing has now moved to student loans enslaving a whole generation to a debt that must be paid down with part time jobs.


Half the population is either directly or indirectly subsidized by some kind of federal program.


Listen to what you are hearing.   Eighty four billion a month is being conjured out of thin air just to keep the government’s doors open.


Home Land Security has grown to a standing army of almost four hundred thousand if you list the private contractors in the overall count.  HLS has ordered enough ammunition to fight a twenty year war and has taken delivery of 2700 armored vehicles designed to fight urban wars on our city streets.


The Constitution has been suspended on the federal level.


The majority of Americans distrust their government.   Congress is more despised than cockroaches and lawyers.  A third of the population expects a revolution.


American citizens now buy enough guns and ammunition to outfit a World War II size army every nine days. 


We have exceeded critical mass.  The collapse is taking place all around us.


Abraxas's picture

London's burning, but I live by the river.

Hangfire's picture

As I like to tell my Lib friends "sitting here in my safe European home"!    

Freddie's picture

The ***cking Clash were fairly old middle class lefties who's parents were in the diplomatic corps. 

The Sex Pistols were young and real working class libertarians.

Abraxas's picture

I like their music, nevertheless.