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.

Khan Academy Can Teach You Finance

The explosion of online learning means that you have no excuse for ignorance when it comes to economics and finance.

Khan Academy started off with mathematics videos that could help you learn calculus or algebra, but they’ve expanded to include clear explanations of almost all topics you can think of by way of ten minute videos and exercises.

The “core finance” curriculum over at Khan Academy is a must-see if you have no idea about basic finance principles like time value of money or want to get a basic understanding of how derivatives work.

I am a fan of self-directed learning. I believe that my time at high school and university has actually retarded my intellectual progress. I have to regurgitate crap that’s been proven wrong both by real world observation and even by other academics to get out of this academic prison.

If I could go back in time, I’d work part-time to support myself and spend the rest of the time engaging aggressively with online education and my own startup projects.

Sadly, I’m past the point-of-no-return with my worthless degree and even though I’d love nothing more than to spend time learning what matters instead of what an out-of-touch university bureaucrat thinks I should be learning without a university degree I am a leper in the marketplace.

The tragedy is that because I’m young, I’m at even more of a disadvantage because there’s no way to display my skills and learning outside of the curriculum except by putting myself out there and writing.

What’s worse is that I know that counting sunk costs is wrong, but how can you not count sunk costs when taking the rational choice – quitting now – leaves you with no income and no reasonable prospects of work?