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To College Grads: It's A Different Economy
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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One of Charles' better essays, I must say. Very lucid and clear.
IP>Degree
If I were a kid now I would hope my parents are smart enough to realize to invest in properly shaping my brain and skills to be creative enough to produce and copyright IP for my own benefit. That's not a realistic expectation in the slave state school system that preaches a one mindless size fits all approach, rewards psychopathic tendencies to operate effectively in the pyramid, and supports the brainwashing indoctrination of a socialistocommunofascist NWO.
Be aware that it's not just getting the IP / Patent (and the costs associated with that process), but having the resources to defend your patent. Governments don't do this - YOU must. And if you lack the resources to defend your patent(s) then you'll be walked over. Patent Lawyers are one of the more costly areas of law, and for the small entrepreneur, patent defence is extremely costly, and often ultimately futile.
Never forget thet "The Big Boys" employ engineers whose sole purpose is to circumvent the "patent protection" of their competitors products. This has been going on for decades.
one'd better get a degree in
Drone PilotingThey will fill the void of unqualified fry cooks out there.
Maybe now your order will be right and burger and fries cooked just right with a smile.
I work out about every week day at the rec center of a local college in the town where I work. Since I know a lot of the faculty in that building, it lends well to getting to know the younger crowd when they see me chatting the faculty up.
With graduation next Friday I decided to do an informal poll over the course of the last few weeks, of the guys and gals I know well enough to chat up about having a job lined up. I asked 14 total if they had something lined up. 6 have a job directly related to what they had studied as a major, 4 had a job waiting not really related to their major including working on a dairy(not to belittle dairy farmers) and a sow farrowing operation(again not to belittle pork producers), 2 had no prospect and were going "back home" to find something...anything.....and the last two gals were getting married with no job and a fiance with either a job at Sears or a job selling new cars.
None had any debt under 58k.
"I work out about every week day at the rec center"
Young man, why don't get strong by doing some real work.
I am 69 years old. Went to my casa in Vermont last week and split and stacked 3 cords of firewood. Took me 3 days. Ate much asprin and drank much wine every night. But at least I accomplished something. What do you have to show for moving your iron?
I'm not that young at 42, and work 60 plus hours each week managing four research facilities that involves anything from calibration of supporting equipment to scooping shit. Working out is way to burn off steam and chat with others a little bit since I am alone for the most part in my duties. I unload at least two ton of bagged feed each day hauling each bag 200 feet, one of many activites--along with a wife currently in chemo for breast cancer and double mastectomy and three young kids, am on the school board and volunteer as a paramedic on our town squad--not that I need anyone's sympathy. I don't go to the fitness center to "get strong". I repect my elders as I was taught to do so and am certainly happy for you being able to be active at your age, another reason I stay in good shape........that said feel free to give yourself a big pat on the back.BTW aspirin is the worst damn thing to take, especially at your age. Stick to the wine.
Student loan troubles? No wonder suicide is up 31% over the last 10 years.
i went to Autodidactic University.
Degrees are what you need for board certified careers, like CPA, lawyer, Doctor, engineer.
If you pursue writing,art,music or any of the craft based skills like glass blowing, cabinet making etc, college is a total waste.
Education is not synomous with college, nor is it with literacy and the ability to do critical analytical thinking. The academic system is as much about indoctrination as it is about education.
I didn't need to be taught how to think and forced to pay for my indoctrination.
I know 6 millionaires, none of them pursued their college field of study to achieve their success..
College is a club, it was how you networked before the internet. There is no point to expensive exclusive colleges except to provide a marriage pool for the elite and want to be elite.
Computer based learning systems could be far superior and more efficient than our current systems, but acadamia resists, as much as the record companies resisted the mp3. they will be as successful as well.
It's a different enconomy - One in which your masterful underwater basketweaving skills that you spent 4 years and $100,000 learning are no longer needed.
A question for you, Mr. Charles Hugh Smith,
While there are plenty of things very wrong with the financial sector, enumerated in excruciating detail daily here at zh, I don't follow your logic that they are rentiers, defining that as unconstrained input and declining output. Inputs are very constrained by competition among the many financial companies, and output in the equity markets is pretty durn good recently. Education, medicine, government and defense, yes, I get those. Financial sector, please explain?
College is our occupation. Fools.
What do you think happens to young people when it's the official policy of the country in which they live to:
1) load them up with debt
2) keep the elderly alive forever so they have to take care of them
3) inflate housing and assets so they can never afford them
4) steal all of their savings and hand it to welfare blacks and illegal mexicans
If that is the official policy of the country, the young people in said country are fucked, and therefore the country doesn't have a future. It's not rocket science.
The give your stuff to poor white trash, too, not just the mnorities and illegals. The point is to make them consistent realiable voters and supporter.
Do you blame the Jews?
It IS the jooz!!!!!!!! AAAAUUUGGGGHHHHH!!!!!!!
College, like anything else, is a matter of relative cost and benefit. For anyone who went to college before about 1990, the benefit was obvious. Now, not so much. It's a generational shift.
Unfortunately, the young'uns, they're still supporting the empty suit in the White House, that One who is the Boomer fantasies made flesh and dwelling among us.
by what i've gleaned from all the posts i've read tonight, it looks like 99.99% of you guys have your shit together, or @ least know how to get it there. you're either an ant, or a grasshopper, and we all know how that worked out. prepare for the worst, and be joyful if the worst never comes to your door.
Forget the "Black Swan" event(s). There are flock upon flock of chickens heading your way intending to roost (and they are all carrying H7N9 influenza to boot!!) ;-)