November 28, 2011

HIGHER EDUCATION BUBBLE UPDATE: The Root Cause of Market Failure In Higher Education. “In a world turned upside down, China’s rulers want to make sure the young cadres they educate at the people’s expense actually find jobs in the private economy. Here in the U.S., where outstanding government guaranteed student loans have recently passed the $1 trillion mark, education policy is geared not toward maximizing the employability of graduates, but toward garnering votes for politicians. . . . Alternative means of career training, like apprenticeship in trades that remain in demand – because, after all, you can’t fly in Chinese plumbers – get no social respect. This despite the fact that skilled plumbers, with a little hustle, can out-earn most liberal arts majors. . . . Too many aspiring young museum curators can’t find jobs? The pragmatic Chinese solution is to cut public subsidies used to train museum curators. The free market solution is that only the rich would be indulgent enough to buy their kids an education that left them economically dependent on Mommy and Daddy after graduation. The progressive American solution is to seek increased public funding to build more museums.”

As I said before, Tom Friedman, call your office!

UPDATE: Reader Derek Kite emails: “I suspect most of these expensively educated folks don’t have what it takes to be a plumber.” Well, some do and some don’t. But hardly any even consider it as an alternative.

Meanwhile, reader Tom Armstrong writes: “In a previous life, I sold engineered products through plumbers and heating contractors. One of my accounts live on top of a hill in Ranch Santa Fe (San Diego’s answer to Bel Air, but nicer). The McMansion at the bottom of his driveway was built for a former Senator (and Cabinet official, and VP candidate- if that narrows it down enough for you). The plumber had the better view. I’ve never forgotten that.” I was talking to one of my colleagues about some Michael Lind piece on the woes of tradesmen, and he replied “I would have found it persuasive, if I hadn’t seen my electrician’s house.” And my plumber was telling me recently that due to some financial reverses, he’d been forced to . . . sell his airplane. It’s possible to do quite well in those fields, though the really big money does come when you have a whole business, not just your own trade.

And another reader writes:

Long-time reader and admirer, but this is the first time I’ve felt like I had to contact you in regards to one of your posts.

Yesterday, you posted about a supposed dearth of skilled laborers. A reader – Dennis Coxe – replied, saying that if companies were serious about finding skilled workers, they would be willing to pay to train them. I could not agree more. I’m in my early 30s, just married, would be considered “underemployed” based on my education level (BA, MS). But I’m definitely one of the folks who fell into the late 90s/00s trap of thinking a liberal arts degree would be plenty, that the gravy train would go on indefinitely. Now, I find myself regretting on a daily basis that I didn’t earn a degree in something useful, or instead skipped college and gone to work in a skilled manual profession. I’m hard-working, honest, ethical, devoted and loyal, and would like nothing more than to go to work and build a long-term career working in a skilled manual profession, working myself up from the bottom. But I simply can’t afford to spend the money or the time to gain the necessary skills. If a company were willing to train me, I would love the opportunity to relocated and move into a “skilled” profession, and would reward that company with whatever term of service they requested as payment for the training. I suspect I’m not alone. But such training opportunities simply doesn’t seem to be out there. If companies really can’t find skilled workers, they should follow Mr. Coxe’s advice and offer training. They’d be tapping into a generation of young men and women that are suddenly realizing that we’re actually going to have to work for a living, and many of us are more than willing to do so if it means a good long-term career that would enable us to support our families.

I’m sensing a market opportunity for someone here.

MORE: Thomas Edsall: Writing the White Working Class Out Of The Obama Coalition. Seems relevant, somehow . . . .

Meanwhile, on training, reader Brett Law writes: “My local community college has regular skilled trade classes in plumbing, electrical, HVAC, nursing, dental assistant, aviation tech, and about a dozen other skilled trades. If readers are laid off or underemployed from white collar jobs, but willing to work hard, they should contact the local community college. I promise that if the community college isn’t running programs in the area, they’ll know who will.”

And reader Eleanor Coy emails: “I agree with Dennis Coxe about training people. Companies don’t do it any more. They will also not hire if your experience is ‘too old’ or ‘not enough’ or several other excuses meant to exclude the newly graduated or us old farts. After I graduated with my B.A. in English Literature I couldn’t find work (sound familiar?). Computers were just coming into vogue in the business world, and, if one had any aptitude at all, companies were willing to train. I was literally picked up off the streets and have had a successful 30 year career as a computer programmer as a result. The catch was – if I left my employer before a certain time (I believe it was two years), I had to pay back the pro-rated cost of the training. One of the best bargains I ever made. Some few companies are still willing to do this for their up-and-comers (pay for a graduate degree in exchange for a certain amount of time), but it’s getting rarer. I really do think it’s our “throw away” culture. Employees can always be replaced so why invest in them? Nobody expects loyalty any more.”

I blame the takeover of hiring by H.R. departments, which Thomas Edsall informs us are key members of the Obama Coalition . . . .

Meanwhile, reader David Graham notes: “Good discussion on this but drugs have to be mentioned. Most tech/blue-collar jobs are drug-tested going in and many are randomly drug-tested throughout. Even the training programs are drug-tested. How many college grads can withstand that regime? Who wants their bus driver, truck driver, longshoreman, locomotive engineer, diesel mechanic, rangemaster, road graders or electrician drug-impaired? Management too, in some of these trades, is drug-tested. Probably the US system of education would be near emptied of teaching and admin staff if those people had to undergo continuous drug screening. Financial and government sectors surely would be. So, Oh Waaahhh. Clean yourself up and stay clean, young unemployed/lazy rotter, and then see if you have cause for complaint.”

And reader Derek Kite follows up:

If you want training, remember that you are a cost center not a profit center. I’m not in plumbing, but refrigeration, and it takes a couple of years before someone can earn his wage. This is the tragedy of the higher education bubble; you start needing a higher wage limiting your opportunities.

Don’t do resumes. Talk to contractors, talk to the wholesalers, find out who might be looking. Be ready to learn that you know nothing useful and have to start at the same place as the pimply high school dropout. This is harder than you think it could be. The key to continued prosperity is when it simply costs your employer too much when you are not around.

You need to convince someone to invest a couple of years of your wages in you on the far chance that it may pay off. That is the challenge and a surprisingly foreign notion for too many. Don’t underestimate it, these guys have gone through dozens if not hundreds of people that on the surface were better than you.

If it is of any comfort, I’m training right now. Got some good people and watching them struggle. We haven’t seen the catastrophic downturn up here in Canada, but money is tight. There is and always will be a living for those willing to work hard at providing a service people are willing to pay for.

Indeed.

STILL MORE: Ronnie Schreiber emails:

My son, my only son, whom I love, Moshe, is a plumber. He got 1550 on the SAT including a perfect 800 on the math side. He started out majoring in engineering but he’s always liked math so he switch to math & physics. When he needed a job he started apprenticing first for my own first cousin who is a master plumber and then went to work full time for my cousin’s son (my son’s 2nd cousin) who is also a master plumber. Mo’s been working on getting his journeyman’s card and is a good enough plumber that he’s assigned his own truck and has a plumber’s helper. When a good friend of mine’s mother was giving me a hard time because I wasn’t pushing him to finish his degree, I told her that the world needs smart plumbers too.

All he can do with a degree in math & physics is go on to graduate school. Though he’s in the 99th percentile in terms of math ability and skills, he wouldn’t even be able to teach without getting additional ed school credentials. Had he finished his engineering degree, well, while right now the employment market for engineers in the US is good (companies cut to the bone during the financial meltdown and now that the economy is growing, albeit slowly, they need more manpower to increase production), the truth is that engineering can be done in Shanghai and Bangalore just as easily as it can be done in Detroit, and probably cheaper too. When you have burst pipes or an overflowing toilet, that work can’t be offshored.

I’m thinking of taking some courses at a community college in CNC programming. There is starting to be shortages of skilled mechanical labor in the US. We’ve concentrated on the college track, and shuffled the kids we didn’t think were smart enough to go to college into vocational ed ghettos. In some cases the vo-ed schools are great, but in many cases it’s clear that they come second to the college prep schools. The OWS crowd and the academic/government nomenklatura look down with disdain on anyone that actually works for a living, that knows how to do things. My father was a veterinarian but he also earned an associate degree in civil engineering while in the Army during WWII. One of my earliest memories are of my dad and a neighbor replacing a hot water heater, the furniture my dad made, and the time he rented a steamer to remove wallpaper. If my dad didn’t have his veterinary degree, he could have made his living with his brains and hands some other way. I suspect that most people with graduate degrees in the liberal arts or social sciences would have a hard time making a living if they didn’t have to rely on their credentials.

Could be. And yes, it’s hard to outsource plumbing to Bangalore. Some earlier thoughts of mine on this subject can be found here and here.

MORE STILL: Reader Chris Daley writes:

Enjoying the discussion and reader comments about skilled trades. Much better than the original WSJ article in fact

When I read stuff saying “I got a BA and MBA but would be happy to be a tradesman if I was trained” my reaction is that companies will not do that for a couple of reasons. First they fear that people with advanced degrees will take the jobs but when they discover that plumbing is actually hard work they will look to leave as soon as the demand for white collar workers picks back up. If the person really was interested in a trade they would have learned it instead of pursuing an advanced degree. This is the same thinking that stops companies from hiring anyone for a lower level job.

Second a business sees years of expensive education and figures if the person could afford that they can afford to learn the trade themselves at a trade school. Also there is probably some resentment in that a smart business owner knows he is likely on the hook for the student loans that fueled those expensive degrees and now that they have turned out to be a poor investment those same people want him to give them free training so they don’t have to pay for their mistake. If you have a training program with one slot and you could take the former office worker with a BA and MBA on his resume or the fresh out of school guy with good job references in say retail or fast food who do you give the opportunity to? Which offers the better chance of picking up an employee who will be there for 10-15 years to pay back your investment in his training?

I have a daughter who will be 3 years old early next year. My wife and I have already decided that if she tells us she wants to learn a trade that we will gladly apply her college savings toward that end. With 15 years to go before hitting college age I suspect that the world of higher education will look drastically different by the time she has to make that choice.

I expect it will be.