The Value Of Online Education

The current labour market requires a university qualification in order to obtain employment. That’s pretty much a general rule. If you disagree, try obtaining well paid employment without either a university qualification or a trade certification. You will be an outlier if you are successful.

The value of online education, in my opinion, is that it enables self-starters to obtain the sort of education that a university qualification should be giving them but doesn’t. For reasons I haven’t yet wrapped my head around, my learning at university has been less than my learning online.

There is a major problem with learning online though – it’s only possible to realise the value of what you’ve taught yourself once you are employed and utilising those skills. There is a chicken and egg problem here – a lot of young people will not be given the chances they need to figure out where their comparative advantage lies in the labour market.

This increases the likelihood of sub-optimal investment in the university qualification itself. What degree you take matters, but what you major in matters even more. The Ministry of Education recently released a study showing that some majors clearly have an earnings premium over other majors.

In that sense, if you feel like you’re not learning anything valuable at university, online education is the recovery tool. Without forking out $800 a paper to simply jump through the hoops, you can exchange your time in exchange for far more interesting course content and skills.

This links into what Tyler Cowen was talking about in Average Is Over with respect to conscientiousness. If you can work through a textbook outside of class, do the problems and build a solid understanding of how that area you’re interested in works, you can do it for other fields as well. There’s a cumulative effect to applying yourself to online education – you build experience using the tools, you build experience sticking to a schedule and you gain more knowledge with which to identify other knowledge gaps to be closed.

I like learning new things and developing new skills – particularly IT related ones – but if it wasn’t for online education and the enormous amount of free resources available on the internet, my love of learning would have been destroyed by university. That’s something I’ve discussed at length with other people who have similar interests – rigid orthodoxy at university might signal reliability to future employers but it drums out any creative spark necessary for competitiveness in the skills market.

All Graduates Believe They Are Above Average

The release of the Education Counts “young graduate” earnings data is interesting because it makes one major assumption – that 18 year old high school leavers know what they are doing.

The most important consideration for most high school leavers is what university their friends are going to.

The secondary consideration is what sort of lifestyle they’ll enjoy at university.

The arrogance of youth means that hardly anyone sits down and looks carefully at graduate earnings.

For poor people, that is anyone who doesn’t receive enough family support to live on, i.e. at least 90% of the student population, the only thing that matters is the graduate earnings.

All of the tripe about how university makes you a better citizen and the like misses the point – no one would go to university if they could earn the modest premium above the median income without a degree.

Our current national predicament with education – where we pay for an entry ticket to a labour market that trends towards casual contracts and poor opportunities for advancement – is partly the fault of the “equal opportunity” crowd.

They think that everyone deserves a chance at university education, that we can all be astronauts.

Degree completion data clearly shows that to be false. Most people would be better off doing a trade. The reality is my valuable skills in web development and deploying custom software were completely self taught and if full-time would earn more than any graduate opportunity available.

If a high school leaver looks at the data and sees that the median salary for a graduate is $39,700 if they’re lucky enough not to be on a benefit or returning to study, their gut reaction is likely to be: “I’ll earn way more than that”.

Thus, they borrow heavily, in anticipation of the salary that might never come. They engage in consumption smoothing ignorant of the fact that if the median graduate income is $39,700 – 50% of graduates earn less than that!

I think the most disturbing thing about university in New Zealand is how so many people completing arts degrees don’t realise how low their expected earnings are, and then moan about it.

No one will give you a job because you spent 3 years reading about stuff you could download for free from Project Gutenberg or torrent sites.

If you look at the most successful people in “the arts” and examine their backgrounds, you will notice something.

Their parents or grandparents substantially subsidised their education and twenties until they got a decent paying job.

If that’s not going to happen for you, it is financial insanity to go and get an arts degree. Call me “elitist” but “hobby degrees” should be left to the children of wealthy people.

All graduates believe they are above average. I am no exception.

But I realised a few years ago that the only person I could count on to put food on the table was me.

And that’s why I’ve been slowly building up my valuable skills. That’s why I want to be self-employed and not on some graduate scheme where I have to “pay my dues” in order to earn a pathetic income by global standards 5 years after graduation.

$39,700 is not a very high income. But what is so tragic is that it is significantly higher than the national median income which is around $28,000!

So in exchange for:

  • 4 years of course fees and living expenses
  • 4 years of minimal labour market experience
  • 4 years of relative poverty

You are not likely to earn even double the median income. New Zealand, of course, has one of the lowest bachelor’s degree wage premiums in the OECD due to almost everyone going to university after high school if they don’t pursue a trade or technical job.

I used to think that there was some sort of discrimination in play against young graduates. But the low incomes on offer after graduation are simply another symptom of our screwed up economy.

I’d advise graduates to start learning something valuable and figuring out how to productise it or freelance for a decent sum. Don’t fall for the American nonsense of “paying your dues” through an unpaid internship.