The student loan crisis is really an underemployment catastrophe(medium.com)
medium.com
The student loan crisis is really an underemployment catastrophe
https://medium.com/@eric_seufert/the-student-loan-crisis-is-really-an-underemployment-catastrophe-96181e937a10
367 comments
Agree with most of this, but there are good reasons to think education costs are not driver by bloated administration.
https://marginalrevolution.com/marginalrevolution/2019/05/bl...
https://marginalrevolution.com/marginalrevolution/2019/05/bl...
> More importantly, the data reject the bloat theory. Figure 8 shows spending shares in higher education. Contrary to the bloat theory, the administrative share of spending has not increased much in over thirty years. The research share, where you might expect to find higher lab costs, has fluctuated a little but also hasn’t risen much. The plant share which is where you might expect to find lazy rivers has even gone down a little, at least compared to the early 1980s.
...
> If bloat doesn’t work, what is the explanation for higher costs in education? The explanation turns out to be simple: we are paying teachers (and faculty) more in real terms and we have hired more of them. It’s hard to get costs to fall when input prices and quantities are both rising and teachers are doing more or less the same job as in 1950.
...
> If bloat doesn’t work, what is the explanation for higher costs in education? The explanation turns out to be simple: we are paying teachers (and faculty) more in real terms and we have hired more of them. It’s hard to get costs to fall when input prices and quantities are both rising and teachers are doing more or less the same job as in 1950.
Both of these are ludicrous. The salaries for my school are public, they are for all public schools (that I've looked at at least).
I can tell you from the data from my school the administrative costs have gone up substantially. Both from number of administrators increasing significantly. The average administrative staff wage is over 250k (I know that's not a lot in tech salaries, but that is HUGE where I am. Cost of living calculator says $663,545 compared to SF). Our president makes 700k (just under 2m equiv) and gets 60k/yr salary increase.
I'm sorry, I just don't buy it. 60k/yr is more than the average lecturer at my uni makes. A lecturer! Not a professor. Even the CS Professors only make like $120k/yr (highest I see is 220k, which are the heads and are Full professors). So you are telling me that half the admins are worth at least twice as much as the CS professors (ones that are required to bring in money? And a substantial amount I might add). All our STEM professors are paid about that (CS is on the higher side) and all of them are required to bring in money and as far as I'm aware are paying for themselves (with equipment) and their students (all our masters get funded because all the PhDs are filling research positions).
I can understand lab costs going up but I think putting all the blame, or even the majority, on the professors is ludicrous.
And you also need to consider that hiring more professors doens't always equate to less income. You hire more professors to get more students (who pay a significant amount). I'll buy the argument of hiring professors in subjects that don't draw in enough students to justify their cost, but that's a different argument and I would argue is definitely not the lion's share.
I can tell you from the data from my school the administrative costs have gone up substantially. Both from number of administrators increasing significantly. The average administrative staff wage is over 250k (I know that's not a lot in tech salaries, but that is HUGE where I am. Cost of living calculator says $663,545 compared to SF). Our president makes 700k (just under 2m equiv) and gets 60k/yr salary increase.
I'm sorry, I just don't buy it. 60k/yr is more than the average lecturer at my uni makes. A lecturer! Not a professor. Even the CS Professors only make like $120k/yr (highest I see is 220k, which are the heads and are Full professors). So you are telling me that half the admins are worth at least twice as much as the CS professors (ones that are required to bring in money? And a substantial amount I might add). All our STEM professors are paid about that (CS is on the higher side) and all of them are required to bring in money and as far as I'm aware are paying for themselves (with equipment) and their students (all our masters get funded because all the PhDs are filling research positions).
I can understand lab costs going up but I think putting all the blame, or even the majority, on the professors is ludicrous.
And you also need to consider that hiring more professors doens't always equate to less income. You hire more professors to get more students (who pay a significant amount). I'll buy the argument of hiring professors in subjects that don't draw in enough students to justify their cost, but that's a different argument and I would argue is definitely not the lion's share.
What percentage of the total budget of your school is being spent on each of overpaid administrators and underpaid faculty? (I honestly don't have any expectation as to what the answer to this question might be, but it seems much more important an analysis than the average salary of a given position.)
> The average administrative staff wage is over 250k (
This is a big salary even in SF. What average admin staff is that?
This is a big salary even in SF. What average admin staff is that?
My medical school tuition was $38k for my final year of medical school. If my professors were making $250k/yr (1) their hourly rate would be $125. With a wrap rate of 25%, my institution's billable cost would be $156.25/hr. For $38K I should get 243 hours, or a bit over 12% of an FTE. Figure I got 1-2 hours a day direct time and 1-2 hours indirect time. We'll say 3 hours a day for 250 work days. But it was often "group therapy" where one faculty member would have 3-5 students and residents at a time. Still, at 1 hour a day, that comes out about even.
(1) Average US physician income: $294k, dragged down by military and public health physicians.
(1) Average US physician income: $294k, dragged down by military and public health physicians.
Congratulations, you have disproven statistical evidence by providing an anecdote.
This really doesn't fit the definition of anecdote. It is a counter example. You can see other comments for direct reasoning why the data in the article is wrong. There's things like the statement about unemployment not considering that unemployment doesn't count those who left the workforce, which is also at highs. Or to things like that you can't compare elementary and high schools to college.
I know your comment sounds witty, but it is lacking real value and really adds to the problem at hand. Surprisingly things are extremely nuanced and we try to just point to "simple solutions" we generally make the problem worse. Frankly because we are not considering the system and distracting ourselves from solving the problem (calling it done when we've only just started).
I know your comment sounds witty, but it is lacking real value and really adds to the problem at hand. Surprisingly things are extremely nuanced and we try to just point to "simple solutions" we generally make the problem worse. Frankly because we are not considering the system and distracting ourselves from solving the problem (calling it done when we've only just started).
Ummm...you can't compare higher education spending with elementary/secondary school staffing, as those two graphs in the link do.
I don't know the answer, but it is odd that there's no curve for "faculty share" of university costs. If this were a paper in my field I'd really wonder why the key curve is missing. (Imagine a candy store P&L with no line for "cost of candy.")
In this case, though, the "product that [was] being sold" that made these students originally go to school, is employment—or rather, a proxy signal for employability that the consumers of the product hope will get them employment. People consume education when they can't find a job, in the hopes that they'll become more employable, even though this makes the problem of their unemployment more dire rather than less (because it adds debt.)
It's sort of like taking stimulants when you're hungry.
It's sort of like taking stimulants when you're hungry.
> people consume education when they can't find a job
I think many of our youth are "consuming" higher education because that's what they're expected to do.
> it's sort of like taking stimulants when you're hungry
I'd say it's more like teaching someone how to swim by tossing them off a boat, but with life preservers so they kinda squirm around and do alright but they ain't really swimmin
I think many of our youth are "consuming" higher education because that's what they're expected to do.
> it's sort of like taking stimulants when you're hungry
I'd say it's more like teaching someone how to swim by tossing them off a boat, but with life preservers so they kinda squirm around and do alright but they ain't really swimmin
I guess we have to decide whether the it's "We have a problem with too many snake oil salesman!" or "We have a snake oil effectiveness problem".
I think you present a false analogy, but I found your phrasing very funny
Ague and toothaches are developing resistance to snake oil. We must take drastic action.
I agree with that... however, there are a lot of people studying programs that are overloaded. Let's say there's 100 positions for Foo Studies program majors, but 10000 people get Foo Studies degrees each year. How many of those people will find jobs in their field? How many will wind up in jobs not paying enough to cover cost of living + student loan repayment? Who is responsible for not understanding that a Foo Studies degree will not get them where they need to be? And even when they can get into their chosen field, because there's so much excess supply the actual job pays even less.
Or like taking Caffeine for productivity even though you have severe anxiety already
Recessions are cyclical though, so it seems a rational decision to go to school during a recession as an investment towards greater employability, if one is unable to find a job, to take better advantage when the economy turns positive again.
here’s another thing to think about:
- people want to go to name brand/Well known schools
- The maximum number of schools that humans can remember in their brain is largely fixed
- The population is increasing
- Schools largely Don’t increase their enrollment size due to space and notoriety concerns
you combine all the factors above and you should expect the price of top-tier schools go up dramatically with population size
- people want to go to name brand/Well known schools
- The maximum number of schools that humans can remember in their brain is largely fixed
- The population is increasing
- Schools largely Don’t increase their enrollment size due to space and notoriety concerns
you combine all the factors above and you should expect the price of top-tier schools go up dramatically with population size
But it has not been only top-tier universities whose tuition has increased so dramatically, it has been nearly every university. The only ones that haven't skyrocketed in price have been community colleges.
many factors.
As a supporting data point, I looked up the stats. My “elite” undergrad institution increased enrollment by 14% in the last 15 years.
I don't think US population increased 14% in the last 15 years (even the world is barely 16%).
Largely came to say similar... As someone who didn't go the college route, it's hard for me to sympathize with someone who chose to go 6 figures into debt for a degree in a job that's specifically overloaded, and jobs that pay less than 1/4 if that debt. It's just not a wise decision. Not to mention the over-bloated costs to begin with.
Most of the suggested solutions will not really do much to change things. Maybe requiring students to sign that they've seen job market studies for their chosen program and/or forcing non-compounding interest for student loans while still in college. Maybe even capping loan interest to 10% of income when direct withholding 15%. Optioning loans under cost/benefit would probably go a long way as well.
Most of the suggested solutions will not really do much to change things. Maybe requiring students to sign that they've seen job market studies for their chosen program and/or forcing non-compounding interest for student loans while still in college. Maybe even capping loan interest to 10% of income when direct withholding 15%. Optioning loans under cost/benefit would probably go a long way as well.
> It's just not a wise decision.
Children don't make wise decisions, especially not when they've been told for years that if they get a college degree everything else will just fall into place automatically.
Children don't make wise decisions, especially not when they've been told for years that if they get a college degree everything else will just fall into place automatically.
I don't think someone that is 17-18 should be referred to as a Child. I do think the Universities should do more to disclose the likelyhood of working in a given profession based on their degree path... however, realistically, the individual bears a lot of responsibility.
Aside: based on some actions/headlines that consistently pop up in news articles (most recently Oberlin)... maybe we should start treating them like children. Also, maybe it's time to stop telling kids the world should be whatever they deem to be as "fair."
Aside: based on some actions/headlines that consistently pop up in news articles (most recently Oberlin)... maybe we should start treating them like children. Also, maybe it's time to stop telling kids the world should be whatever they deem to be as "fair."
Someone at 17-18 can be mature... but the US school system and the general culture around how teenagers are handled doesn't do much if anything to actually encourage that. It's entirely possible for people going into college today to have had zero opportunity to pick their own classes, manage their own bills, or have any real control of even the tiniest career up to that point, which is exactly the worst context to come from when making up-front choices involving tens or hundreds of thousands of dollars.
Then, perhaps the schools should start treating them like children and putting a foot down when they start running roughshod... And by this I mean High Schools and Universities. Again, the world is not fair, it isn't meant to be. And children should learn this.
Beyond all of that, PARENTS should be raising their children. They seem to be too concerned about protecting their kids, instead of letting them know in deep specifics how bills/finances in the home work. There's no reason a 10yo can't sit with you when you pay bills, or look at a spreadsheet that outlines things.
It doesn't even take THAT much... I have most of my paycheck going into an account that bills get paid out of... most are set to autopay, except the largest ones (house/car payments). Every two weeks, when I get paid, I sit down and pay those bills due. The rest of my paycheck goes into an account that is for day to day expenses, and that's all I get for it.
In the end, it's not JUST the schools that are responsible for raising children, and the (US) government doesn't do a very good job of most things. Raise your children people.
Beyond all of that, PARENTS should be raising their children. They seem to be too concerned about protecting their kids, instead of letting them know in deep specifics how bills/finances in the home work. There's no reason a 10yo can't sit with you when you pay bills, or look at a spreadsheet that outlines things.
It doesn't even take THAT much... I have most of my paycheck going into an account that bills get paid out of... most are set to autopay, except the largest ones (house/car payments). Every two weeks, when I get paid, I sit down and pay those bills due. The rest of my paycheck goes into an account that is for day to day expenses, and that's all I get for it.
In the end, it's not JUST the schools that are responsible for raising children, and the (US) government doesn't do a very good job of most things. Raise your children people.
I'm not sure the author's suggestion that potential students be diverted to trades/coding bootcampts etc., will solve too much, and instead may simply shift the problem into those trade industries as well. Somewhere in the ballpark of 2,000,000 students earn a bachelors degree each year. Let's say 25% of students should be diverted into trade schools instead. That will mean an additional 500,000 student per year entering those fields, which will then have the impact of making those jobs ever more scarce and probably depressing wages as workforce supply outpaces demand.
That's not to say diversion of this sort wouldn't help at all, only that it is not a cure-all. I think we're simply approaching a point in economic history where fewer workers are needed to produce more value/gpd/products/whatever. I'm not sure what the solution to that problem is though.
That's not to say diversion of this sort wouldn't help at all, only that it is not a cure-all. I think we're simply approaching a point in economic history where fewer workers are needed to produce more value/gpd/products/whatever. I'm not sure what the solution to that problem is though.
There are two books that cover this subject well: The Case Against Education: https://jakeseliger.com/2018/03/12/the-case-against-educatio..., which argues that most "education" is really signaling, not human capital acquisition, and Paying for the Party: https://jakeseliger.com/2014/04/27/paying-for-the-party-eliz..., which argues that many schools have evolved some substantive majors and some non-substantive majors. If we can move people from non-substantive majors into trades and the like, that will likely be a win for just about everyone.
I also don't think we're going to see a cure-all, but it's hard for almost any intellectually honest person in the non-elite parts of the higher-education industry to look at what's going on and think it's great.
I think we're simply approaching a point in economic history where fewer workers are needed to produce more value/gpd/products/whatever
Then we'd see soaring productivity, which we don't see: https://twitter.com/paulkrugman/status/1140259227908411392
I also don't think we're going to see a cure-all, but it's hard for almost any intellectually honest person in the non-elite parts of the higher-education industry to look at what's going on and think it's great.
I think we're simply approaching a point in economic history where fewer workers are needed to produce more value/gpd/products/whatever
Then we'd see soaring productivity, which we don't see: https://twitter.com/paulkrugman/status/1140259227908411392
Using a graph that shows soaring productivity to argue that soaring productivity isn't happening seems a little counterintuitive to me. But I'm not a prize-winning economist, so perhaps I'm missing something.
The US economy can't be fixed by educating more plumbers. The core problem is that the US has turned itself into a peacetime rationing economy. Essential services - healthcare, education, housing, financial support - are strictly rationed for reasons that are strictly unnecessary and economically destructive for the majority of the population.
The extracted value paid by individuals to the companies that provide and finance these services is effectively a privatised form of tax. It's vastly more onerous than the official tax rate, while providing no true public benefit - and no democratic representation.
More plumbers and electricians won't change this, because they'll still be working in a system where they'll have to charge unaffordably high prices to make a decent personal profit after the "corporate taxes" on health care and education (and personal housing) are paid.
Ultimately it's a political choice to run a starvation economy for most workers, and that won't change unless there's a political shift.
Which badly needs to happen. This is not about automation, and it's not about AI. There's a huge amount of productive work that isn't being done - new infrastructure, maintenance of old infrastructure, childcare, health care, education at all levels, housing, trade and building work, academic research and open-ended no-immediate-return blue sky R&D - because the political economy is biased against that kind of activity rather than for it.
The US economy can't be fixed by educating more plumbers. The core problem is that the US has turned itself into a peacetime rationing economy. Essential services - healthcare, education, housing, financial support - are strictly rationed for reasons that are strictly unnecessary and economically destructive for the majority of the population.
The extracted value paid by individuals to the companies that provide and finance these services is effectively a privatised form of tax. It's vastly more onerous than the official tax rate, while providing no true public benefit - and no democratic representation.
More plumbers and electricians won't change this, because they'll still be working in a system where they'll have to charge unaffordably high prices to make a decent personal profit after the "corporate taxes" on health care and education (and personal housing) are paid.
Ultimately it's a political choice to run a starvation economy for most workers, and that won't change unless there's a political shift.
Which badly needs to happen. This is not about automation, and it's not about AI. There's a huge amount of productive work that isn't being done - new infrastructure, maintenance of old infrastructure, childcare, health care, education at all levels, housing, trade and building work, academic research and open-ended no-immediate-return blue sky R&D - because the political economy is biased against that kind of activity rather than for it.
Productivity growth collapsed in 1973 and it has not recovered yet. There were a few good years in the 1990s, but nothing like the reliable productivity growth that the USA saw for the century before the 1970s.
My gut reaction to this claim is always that it seems wrong; that the metric we're using to measure productivity must be missing a big part of the story. Why is that reaction wrong?
Lots of people make that argument, but when asked "What are we under counting?" no one's been able to come up with a story that remains consistent when applied to multiple industries. Computers got much, much faster, but everything else stagnated.
It's fairly easy to measure how much money is produced per employee. That number grew 3% to 4% a year for most of the 20th Century, till 1973, when it collapsed. Since then it's average 1.5% a year (again, with a few good years in the 1990s, and with some up and down wobbles during the Great Recession).
The central fact is the big push towards automation in the 1930s and 1940s and 1950s simply had a bigger impact than the kind of breakthroughs we've had in the last 40 years.
The automation of the telephone systems, and the removal of all the women who worked as operators, was huge in the 1940s and 1950s (and a fantastic boost to the computer industry). The later boom in multiplexing made capital investments more profitable, but did not increase the amount of money made per employee.
The introduction of the modern combine tractors on USA farms lead to a fantastic increase in agricultural productivity in the 1930s and 1940s and 1950s and 1960s, and nothing since then has had a similar effect on agricultural productivity.
The introduction of digging robots transformed the coal industry in the 1930s and 1940s and 1950s. Mountain top clearance was another huge change in how the work was done. Nothing since the 1960s has had anything like a similar impact. In fact, the opposite is true, increased environmental protections have, if anything, decreased productivity in that sector, or at least slowed the increase.
And on and on.
The transformations in the early to mid 20th Century were huge. The more recent transformations have been small. The Great Boom gave way to the Great Stagnation.
Check out:
The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
https://www.amazon.com/Rise-Fall-American-Growth-Princeton/d...
It's fairly easy to measure how much money is produced per employee. That number grew 3% to 4% a year for most of the 20th Century, till 1973, when it collapsed. Since then it's average 1.5% a year (again, with a few good years in the 1990s, and with some up and down wobbles during the Great Recession).
The central fact is the big push towards automation in the 1930s and 1940s and 1950s simply had a bigger impact than the kind of breakthroughs we've had in the last 40 years.
The automation of the telephone systems, and the removal of all the women who worked as operators, was huge in the 1940s and 1950s (and a fantastic boost to the computer industry). The later boom in multiplexing made capital investments more profitable, but did not increase the amount of money made per employee.
The introduction of the modern combine tractors on USA farms lead to a fantastic increase in agricultural productivity in the 1930s and 1940s and 1950s and 1960s, and nothing since then has had a similar effect on agricultural productivity.
The introduction of digging robots transformed the coal industry in the 1930s and 1940s and 1950s. Mountain top clearance was another huge change in how the work was done. Nothing since the 1960s has had anything like a similar impact. In fact, the opposite is true, increased environmental protections have, if anything, decreased productivity in that sector, or at least slowed the increase.
And on and on.
The transformations in the early to mid 20th Century were huge. The more recent transformations have been small. The Great Boom gave way to the Great Stagnation.
Check out:
The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
https://www.amazon.com/Rise-Fall-American-Growth-Princeton/d...
What's the starting time for that series? Early 1900s (say WW1), or back in the 1800s?
I've got an alternate explanation for the grandparent: the economy is undergoing a phase change from an industrial economy to an information economy, which will bring with it different assumptions about what an economy is. A future historian looking back on us from a century later will see steady growth in whatever metric they measure the economy in (likely volume of data produced) since about the 1970s. The fact that large sectors of the economy have shown negative productivity growth will drop out of the history books, because neither these non-software industries nor productivity as a concept will seem important to this historian.
I'm basing this on a thought experiment: what does the last major phase change in the economy (from largely subsistence-based agriculture to industrialization) look like now, and how do the metrics by which we judge it differ. The concept of productivity is basically nonsensical in a pre-industrial agricultural society - crop yields, of course, depend upon the wind, rain, and weather, and why would we expect them to increase in any non-random fashion? But real agricultural wages (likely a good proxy for productivity) skyrocketed between 1790 and 1810, and then declined by 20% [1, p 20] between then and 1850. To a farmer (that's most of society back then), their plight wouldn't look all that different from today's factory workers: the generation that came of age in 1850 did significantly worse than that of 1810. There was a bit of a bump when mechanized agriculture and meatpacking came out in the early 1900s, but this trend largely continued into the 1930s, at which point we basically stopped talking about small family farmers and got agribusiness instead.
But do we consider the 1800s a time of low productivity? No. We associate them now with the first and second industrial revolutions, which dramatically changed society and hugely increased productivity. "Industry" initially meant "the textile industry", because that was the first area that mass-production techniques were applied to. Over time these techniques spread until they took over the whole economy, at which point we could start measuring the economy by metrics like "productivity" that assume that innovation and capital can allow an individual worker to produce more than they could before. Former metrics like crop yields become an afterthought: as long as they're "enough", who cares?
If you start the clock at 1910 or even at 1870, you're looking only at the portion of history where the industrial economy is the economy. To get a better analogy to current conditions, you have to go back, before the Civil War, when the nascent industrial revolution is causing the collapse of plantations, slavery, seamstresses, tailors, whalers, and small farmers.
[1] http://old.econ.ucdavis.edu/faculty/gclark/papers/farm_wages...
I've got an alternate explanation for the grandparent: the economy is undergoing a phase change from an industrial economy to an information economy, which will bring with it different assumptions about what an economy is. A future historian looking back on us from a century later will see steady growth in whatever metric they measure the economy in (likely volume of data produced) since about the 1970s. The fact that large sectors of the economy have shown negative productivity growth will drop out of the history books, because neither these non-software industries nor productivity as a concept will seem important to this historian.
I'm basing this on a thought experiment: what does the last major phase change in the economy (from largely subsistence-based agriculture to industrialization) look like now, and how do the metrics by which we judge it differ. The concept of productivity is basically nonsensical in a pre-industrial agricultural society - crop yields, of course, depend upon the wind, rain, and weather, and why would we expect them to increase in any non-random fashion? But real agricultural wages (likely a good proxy for productivity) skyrocketed between 1790 and 1810, and then declined by 20% [1, p 20] between then and 1850. To a farmer (that's most of society back then), their plight wouldn't look all that different from today's factory workers: the generation that came of age in 1850 did significantly worse than that of 1810. There was a bit of a bump when mechanized agriculture and meatpacking came out in the early 1900s, but this trend largely continued into the 1930s, at which point we basically stopped talking about small family farmers and got agribusiness instead.
But do we consider the 1800s a time of low productivity? No. We associate them now with the first and second industrial revolutions, which dramatically changed society and hugely increased productivity. "Industry" initially meant "the textile industry", because that was the first area that mass-production techniques were applied to. Over time these techniques spread until they took over the whole economy, at which point we could start measuring the economy by metrics like "productivity" that assume that innovation and capital can allow an individual worker to produce more than they could before. Former metrics like crop yields become an afterthought: as long as they're "enough", who cares?
If you start the clock at 1910 or even at 1870, you're looking only at the portion of history where the industrial economy is the economy. To get a better analogy to current conditions, you have to go back, before the Civil War, when the nascent industrial revolution is causing the collapse of plantations, slavery, seamstresses, tailors, whalers, and small farmers.
[1] http://old.econ.ucdavis.edu/faculty/gclark/papers/farm_wages...
> healthcare, education, housing, financial support -
> are strictly rationed for reasons that are strictly
> unnecessary and economically destructive for the
> majority of the population
Does that mean you want to force more people to become doctors and for healthcare institutions to overspend?
Housing is mostly limited by usable land and the rate at which construction can happen. For cities, building something often means tearing down something else. Near cities, for the most part are expanding as fast as housing can be built. What makes you think it's artificially limited?
Does that mean you want to force more people to become doctors and for healthcare institutions to overspend?
Housing is mostly limited by usable land and the rate at which construction can happen. For cities, building something often means tearing down something else. Near cities, for the most part are expanding as fast as housing can be built. What makes you think it's artificially limited?
It behooves one to read the comment thread replying to Dr. Krugman's post.
Many arguments emphasizing the disparity between real output vs. employment in manufacturing. Paul Krugman is wrong surprisingly often about these sorts of things. He cherry-picks one graph and says that this graph, combined with the opinions of cherry-picked esteemed colleagues, supports his conclusion, when ample evidence exists and is provided in near-real-time to refute it.
Many arguments emphasizing the disparity between real output vs. employment in manufacturing. Paul Krugman is wrong surprisingly often about these sorts of things. He cherry-picks one graph and says that this graph, combined with the opinions of cherry-picked esteemed colleagues, supports his conclusion, when ample evidence exists and is provided in near-real-time to refute it.
>> Paul Krugman is wrong surprisingly often
Not that surprising if you examine his incentive structure. It is best for him to misrepresent issues like this, QE methods during the Bush/Obama administrations, etc.
Not that surprising if you examine his incentive structure. It is best for him to misrepresent issues like this, QE methods during the Bush/Obama administrations, etc.
Mind pointing to some of the evidence that it's a weird supply side issue that is automating jobs without making people more productive?
Krugman's point is not uncontested:
http://www.scottsantens.com/our-paradoxical-economy-courtesy...
Additionally, even if we're not peering around the metrics for dynamics hiding behind them, there's the question of how much of the by-Krugman's-metric still rising (if not "soaring") productivity it would take to soften the labor market. I'd like to think he knows the answer to that question, but it isn't clear.
http://www.scottsantens.com/our-paradoxical-economy-courtesy...
Additionally, even if we're not peering around the metrics for dynamics hiding behind them, there's the question of how much of the by-Krugman's-metric still rising (if not "soaring") productivity it would take to soften the labor market. I'd like to think he knows the answer to that question, but it isn't clear.
His central argument is that IT is only increasing productivity in open source software and does not cause any productivity improvements in businesses, which is a strange argument. But low demand also explains everything he talks about.
When you hear hoof beats think horses not zebras.
When you hear hoof beats think horses not zebras.
> When you hear hoof beats think horses not zebras.
It depends where you are of course...
It depends where you are of course...
>> Then we'd see soaring productivity, which we don't see: https://twitter.com/paulkrugman/status/1140259227908411392
This is like using a total number for "inflation" to assume that costs have not gone up. And yet...
https://ritholtz.com/wp-content/uploads/2018/02/pricechanges...
Childcare, hospital services, college textbooks, college tuition, childcare, and medical services way overindex the average inflation.
TVs, Software, Toys, Cellphone Service, New Cars, and Clothing all underindex the average inflation.
What do those sectors underindexing sound like regarding productivity and purchasing power?
EDIT: Also consider two other effects: We are automating productive jobs, and people are replacing those jobs with very low productivity jobs (service sector).
This is like using a total number for "inflation" to assume that costs have not gone up. And yet...
https://ritholtz.com/wp-content/uploads/2018/02/pricechanges...
Childcare, hospital services, college textbooks, college tuition, childcare, and medical services way overindex the average inflation.
TVs, Software, Toys, Cellphone Service, New Cars, and Clothing all underindex the average inflation.
What do those sectors underindexing sound like regarding productivity and purchasing power?
EDIT: Also consider two other effects: We are automating productive jobs, and people are replacing those jobs with very low productivity jobs (service sector).
That is exactly the argument of the paper the OP is promoting [1]: that the cost of education is due to the "Baumol Effect:" it is an industry dominated by the cost of human contact (the teacher's time) and human contact is not subject to productivity gains in the same way other goods are.
In other words, it isn't that education isn't unusually expensive, it's that everything else is unusually cheap. From the paper's conclusion:
"The Baumol effect is the best explanation for rising prices in education, healthcare, and other service sectors. In that sense, and only in that sense, is there something “wrong” with the service sector—namely, that it’s hard to increase productivity in services. Or we could equally well say that what’s right with the goods-producing sector is that it’s easier to increase productivity in goods. Whatever the explanation for this difference in productivity growth, however, it’s a difference, like the difficulty of domesticating huckleberries, that cannot be traced back to policy. We should neither ignore this difference nor make too much of it."
That's the paper's perspective. I'm not promoting it myself, but I did find it to be a sensible argument.
[1] https://www.mercatus.org/system/files/helland-tabarrok_why-a...
In other words, it isn't that education isn't unusually expensive, it's that everything else is unusually cheap. From the paper's conclusion:
"The Baumol effect is the best explanation for rising prices in education, healthcare, and other service sectors. In that sense, and only in that sense, is there something “wrong” with the service sector—namely, that it’s hard to increase productivity in services. Or we could equally well say that what’s right with the goods-producing sector is that it’s easier to increase productivity in goods. Whatever the explanation for this difference in productivity growth, however, it’s a difference, like the difficulty of domesticating huckleberries, that cannot be traced back to policy. We should neither ignore this difference nor make too much of it."
That's the paper's perspective. I'm not promoting it myself, but I did find it to be a sensible argument.
[1] https://www.mercatus.org/system/files/helland-tabarrok_why-a...
I've had the same thought. That the price of goods have decreased. But more due to cheap imports. Of course productivity improvements are also important but less so. Then as those prices go down, the central bank prints money to counteract decreasing prices.
And it's because of this currency debasement that the price of everything else increases.
And it's because of this currency debasement that the price of everything else increases.
"Then we'd see soaring productivity, which we don't see"
If you average everyone, sure. But that's kind of circular reasoning. If you look at the elite employees of, say, the FAANGs, the tail of the distribution, their productivity is soaring.
If you average everyone, sure. But that's kind of circular reasoning. If you look at the elite employees of, say, the FAANGs, the tail of the distribution, their productivity is soaring.
We just need to reduce or eliminate government backed student loans and the problem will take care of itself. This "crisis" is almost a replay of the housing crisis we just had, government backed loans encourage lenders to lend out money to people who are not qualified for the loan. It doesn't make sense to keep loaning out tens of thousands of dollars to 18 year old kids that have no income [yet] and no real plan to make any money for the next 4 years.
Can you imagine if someone submitted a business proposal asking for a $100,000 investment or loan and the proposal was "think I'll take some classes and then figure out what I want to do with the rest of my life"? We need to end the insanity and turn the spigot off. Then the institutions will be forced to lower their prices and manage their budgets again. Maybe one day we'll get back to the point where a young person can pay for in-state tuition with a part-time job, like it was about 25 years ago.
Can you imagine if someone submitted a business proposal asking for a $100,000 investment or loan and the proposal was "think I'll take some classes and then figure out what I want to do with the rest of my life"? We need to end the insanity and turn the spigot off. Then the institutions will be forced to lower their prices and manage their budgets again. Maybe one day we'll get back to the point where a young person can pay for in-state tuition with a part-time job, like it was about 25 years ago.
But without the student loans, the under privileged will not be able to afford said education - I don't want to see a society where only those who can afford it go to university.
This simply isn't true. Schools offer crazy financial aid and there are junior colleges / state universities that offer 100% of aid to impoverished individuals.
The people taking malinvestment (student loans for unproductive means / negative ROI) are firmly in the middle class bracket, both lower/upper sides of it.
The people taking malinvestment (student loans for unproductive means / negative ROI) are firmly in the middle class bracket, both lower/upper sides of it.
financial aid is such a tiny portion that it effectively doesn't exist for the vast majority of university goers.
People taking on too much loans for higher education is a multi-pronged problem. Loans have a place, and if people choose to mis-use a loan to study an "unproductive" subject, i expect that the fault lies with them.
however, when the loans to study law/medicine is in the 200k range, i find it hard to believe that the fault isn't with the university and vested interests in making money with the loans.
People taking on too much loans for higher education is a multi-pronged problem. Loans have a place, and if people choose to mis-use a loan to study an "unproductive" subject, i expect that the fault lies with them.
however, when the loans to study law/medicine is in the 200k range, i find it hard to believe that the fault isn't with the university and vested interests in making money with the loans.
And who decides what constitutes malinvestment? I'm guessing there will be plenty of funds made available for tech work, what with Twitter, Ubereats and Facebook being so critical. How about the arts? How about history and culture, you know the stuff that makes living worthwhile beyond your usefulness to line the pockets of capitalists?
Or how about we just confront the problem dead on, remove the money and profit aspect entirely, and offer free college like dozens of other nations do, and have for many years, somehow without their economies imploding? Why must we sacrifice yet more of our society on the altar of profits? Fuck good investments. Fuck investors. Fuck this entire screwed up system that decides that anything that cannot be monetized is worthless.
Or how about we just confront the problem dead on, remove the money and profit aspect entirely, and offer free college like dozens of other nations do, and have for many years, somehow without their economies imploding? Why must we sacrifice yet more of our society on the altar of profits? Fuck good investments. Fuck investors. Fuck this entire screwed up system that decides that anything that cannot be monetized is worthless.
> who decides what constitutes malinvestment?
the unemployment rate by major, assuming it wasn't already a bad investment due of the student lacking the skill or willingness to finish the studies.
the unemployment rate by major, assuming it wasn't already a bad investment due of the student lacking the skill or willingness to finish the studies.
> How about the arts? How about history and culture, you know the stuff that makes living worthwhile beyond your usefulness to line the pockets of capitalists?
Do you ever think about the possibility of people making art or studying history without going into tens of thousands of dollars of debt?
Do you ever think about the possibility of people making art or studying history without going into tens of thousands of dollars of debt?
Considering I just said make college free, yeah I think I've considered the possibility.
Even going past that, though, if studying History can't get you a job that makes enough to pay off your debt, then why does it cost so much in the first place?
Even going past that, though, if studying History can't get you a job that makes enough to pay off your debt, then why does it cost so much in the first place?
If I am a bank, I’m absolutely giving a loan to an underprivileged kid with good grades who wants to go to college for a useful degree.
If you are a bank, you issue loans only on things that are likely to have a positive ROI. With a mortgage, you know what the property is worth and can foreclose on it if the borrower isn't able to make the payments.
No such equivalent with a college student. 18-year olds for the most part aren't going to know for sure what they want to major in, so "a useful degree" at the time the loan is signed, might change 2 years in, when they actually have to declare a major.
No such equivalent with a college student. 18-year olds for the most part aren't going to know for sure what they want to major in, so "a useful degree" at the time the loan is signed, might change 2 years in, when they actually have to declare a major.
We can easily conceive of loans that are contingent on the major not changing to something useless. I don’t believe flaws in the current system have to stick forever.
You get exactly the same benefit if government only backs 70% of each student loan. Then it's not profitable loan if the student cannot pay back.
But if you keep significant government backing, then the student loans would get lot lover interest rates. Which is probably good for absolutely everybody.
But if you keep significant government backing, then the student loans would get lot lover interest rates. Which is probably good for absolutely everybody.
this but you also have to have affordable education because it's the most reliable, predictable and virtuous of all class mobility mechanisms, and trade school don't provide that for the most part because those are optimized to make corporate drones, not self thinking individuals
I'm pretty sure any competent welder and machinist running a small business custom-fabricating high performance automotive parts (or a similar field, like oil pipelines) would take umbrage with your description of their profession as "corporate drones who aren't self-thinking".
exceptions exists everywhere, do I have to introduce a disclaimer for the 1% of everything or can we have a discussion of the general case without people having to nitpick every word?
heck, I even didn't use an absolute
> for the most part
heck, I even didn't use an absolute
> for the most part
Yes. Do you think 99% of people who go to college are self-thinking and not corporate drones? Why do so many of them move on to work at corporations?
> trade school [] are optimized to make corporate drones
I mean, I'm not a native English speaker but it seems pretty clear to me I was NOT talking about college output, quite the opposite actually.
I mean, I'm not a native English speaker but it seems pretty clear to me I was NOT talking about college output, quite the opposite actually.
You must understand that we’re talking about trade school as an alternative to college, so if you point out some stunning detractor toward trade school, you’re implying the detractor does not exist for the alternative.
Maybe I took that implication to an extreme end, but calling out trade schools for producing “corporate drones” absolutely bears the implication that you believe the alternatives are different / not as bad.
Maybe I took that implication to an extreme end, but calling out trade schools for producing “corporate drones” absolutely bears the implication that you believe the alternatives are different / not as bad.
> you’re implying the detractor does not exist for the alternative.
no? what kind of crazy dichotomic logic is that? you're way overthinking it.
> Do you think 99% of people who go to college
moreover college output has a lot more variation than trade school output, so assuming that the proportions of outcome are the same is as well something that was never claimed.
> You must understand
you just dropping things I never said and argue as if I said them, how does one go and debate or understand that? it was never my point to begin with!
jesus, 6 post ago I made one point: trade school aren't providing the titles one would go get to optimize for class mobility, heck, the rest isn't even a point of discussion really, the whole idea on which trade school are based on is to bake blue collar workers.
no? what kind of crazy dichotomic logic is that? you're way overthinking it.
> Do you think 99% of people who go to college
moreover college output has a lot more variation than trade school output, so assuming that the proportions of outcome are the same is as well something that was never claimed.
> You must understand
you just dropping things I never said and argue as if I said them, how does one go and debate or understand that? it was never my point to begin with!
jesus, 6 post ago I made one point: trade school aren't providing the titles one would go get to optimize for class mobility, heck, the rest isn't even a point of discussion really, the whole idea on which trade school are based on is to bake blue collar workers.
Haha, whatever you say.
1) if it does turn out to be true that we need "fewer workers", that's great, we just move to a 30-hour work week (or 20, or whatever). We once had 6-day work weeks, or sometimes even 7, and it was productivity gains that allowed us to move to 5. We can move again.
2) But, I'm not sure it's even true. We mostly got to where we are by having all the manufacturing done in 3rd world countries for pennies. It's not that it doesn't take a lot of hours, it's just that we pay little for it. Which is great, if you're one of those who has a job, but bad in lots of other ways.
3) Regarding automation, it should be noted that the manufacturing did not, by and large, go to the countries with the best robots, or even the most reliable electricity for automation. It went to where the environmental, health, and safety laws were laxest, and the cost of labor was lowest. This suggests that there is still plenty of labor that needs doing, we just are run by an elite that doesn't want to pay for it.
2) But, I'm not sure it's even true. We mostly got to where we are by having all the manufacturing done in 3rd world countries for pennies. It's not that it doesn't take a lot of hours, it's just that we pay little for it. Which is great, if you're one of those who has a job, but bad in lots of other ways.
3) Regarding automation, it should be noted that the manufacturing did not, by and large, go to the countries with the best robots, or even the most reliable electricity for automation. It went to where the environmental, health, and safety laws were laxest, and the cost of labor was lowest. This suggests that there is still plenty of labor that needs doing, we just are run by an elite that doesn't want to pay for it.
I like the idea or shortening the work day, unfortunately the commonman jobs are the ones being automated out of existence. There will only be a smaller percentage of people who can actually do the majority of the jobs. Education may help some with this but only to a certain degree. The days of assembly line work are nearing an end.
I don't know what will happen to the population who are unable to work, perhaps more specialization is the answer
See point #3, above. The "commonman jobs" did not, in fact, get automated out of existence, they mostly got moved to countries with LESS automation than the advanced economies, which is the opposite of what one would predict if automation were the issue.
> 1) if it does turn out to be true that we need "fewer workers", that's great, we just move to a 30-hour work week (or 20, or whatever). We once had 6-day work weeks, or sometimes even 7, and it was productivity gains that allowed us to move to 5. We can move again.
Shorten the work week and it is hourly workers getting screwed. Unless we think, for some reason, corporations will take it upon themselves to pay more for less, especially since the labor pool would be more competitive with increases in automation.
Shorten the work week and it is hourly workers getting screwed. Unless we think, for some reason, corporations will take it upon themselves to pay more for less, especially since the labor pool would be more competitive with increases in automation.
> Shorten the work week and it is hourly workers getting screwed.
Funny this is exactly one argument that was used against the 40 hour working week!
Funny this is exactly one argument that was used against the 40 hour working week!
I see no reason to think that full time salaries wouldn’t also fall. If the goal is to employ more people, the first solution that will be tried is “at roughly the same total labor expense”. Exempt employees will not be exempt from this pressure on wages.
This is potentially the lump of labour fallacy. There isn't a set amount of work to be done.
If we have a mass of students learning no useful skills and divert them into useful fields, then the overall productivity of the economy will go up.
Obviously if everyone floods into a single field there's some limit: you can't productively employ 10x the plumbers without a matching increase in buildings.
But in general, better skills should lead to a better economy.
If we have a mass of students learning no useful skills and divert them into useful fields, then the overall productivity of the economy will go up.
Obviously if everyone floods into a single field there's some limit: you can't productively employ 10x the plumbers without a matching increase in buildings.
But in general, better skills should lead to a better economy.
Germany has been better managing its human capital for generations with its apprenticeships, trade schools, and cheap universities. There are problems of course with switching lanes and with second tier universities, but on the whole it seems to work better.
"If we have a mass of students learning no useful skills and divert them into useful fields..."
What do we do if a significant portion of the students who already aren't learning useful skills lack the neural plasticity to become productive in other endeavors? Or in other words, how do we incorporate humans into the economy when those individuals are objectively inferior at EVERY task compared to an automated (robot, AI, etc...) alternative? Especially as we consider things like climate change and austerity, and how humans are supposedly the greatest threat to overall environmental longevity?
What do we do if a significant portion of the students who already aren't learning useful skills lack the neural plasticity to become productive in other endeavors? Or in other words, how do we incorporate humans into the economy when those individuals are objectively inferior at EVERY task compared to an automated (robot, AI, etc...) alternative? Especially as we consider things like climate change and austerity, and how humans are supposedly the greatest threat to overall environmental longevity?
That's a good question in the medium term. But, the US education system presents a clear misallocation of skills that can be fixed.
It won't solve the underlying issue you address, but it will improve things, and waste less societal resources in the educational process too.
It won't solve the underlying issue you address, but it will improve things, and waste less societal resources in the educational process too.
The problem is the government subsidizes loans.
That may be a problem, but it's a bit beside the point I was making. Whether or not college costs & therefore debt is increasing as a result of easy loans says nothing about the job prospects of graduates from bachelor programs. Even if we posit a world where the loans didn't exist, college costs were lower, and therefore just as accessible as it is today then we still have the same underemployment problem. If such a change instead resulted in more students learning a trade, we still have to same downward pressure on trade wages because the labor supply increases relative to demand.
With or without government subsidized loans, there is a jobs market issue.
With or without government subsidized loans, there is a jobs market issue.
Unless most majors generate signal instead of human capital.
It's a problem for sure but education costs have been high-inflation for a long time. See here: https://news.ycombinator.com/item?id=7866194
It is that in addition to the fact that they cannot be discharged in bankruptcy under the majority of cases (nearly all).
You can’t mandate that banks must give loans to all student applicants regardless of collateral, and at the same time permit bankruptcy of those loans. Those two things are in direct conflict. Literally every graduate would simply declare bankruptcy (Since anyone who is both a graduate and borrow would by definition be broke). You’d be a fool not to. There’s literally no downside to bankruptcy if you’re a broke 22 year old with a brand new $250k debt and a degree in anything.
Your choice are:
1. everyone can get a loan regardless of wealth, but they can’t file bankruptcy
2. Let banks only give student loans to qualified applicants (i.e. rich kids with co-signing rich parents) but permit bankruptcy.
Your choice are:
1. everyone can get a loan regardless of wealth, but they can’t file bankruptcy
2. Let banks only give student loans to qualified applicants (i.e. rich kids with co-signing rich parents) but permit bankruptcy.
That's why you should learn things you enjoy and find intrinsically valuable because there is never a guarantee of employability
That's a harmful attitude. Of course there's more reliable merit in studying things your community will value you and reward you for. If you do your own thing, hoping that it leads to something fabulous, you'd better take responsibility for the risk of failure.
That is not so bad to depress some of those wages, my plumber is making $2k/Day. I don't know too many people making that kind of money even in tech, let alone other disciplines!
I think your plumber has additional material and labor costs you're not seeing.
Primary cost of labor is your health. Those kind of jobs aren't done by people over 45. The human body degrades during that sort of work.
Lol tell that to my dad who is still painting houses at 63. Or his competition who is still painting at 70. that is preposterous. In fact most laborors I know are well above 45. Yeah it takes a toll on your health but most of the health issues I see in labor intensive jobs is because of alcoholism. Its good for your body by and large to get up every day and do physical work. Yes your back will hurt, and your feet and your joints. But you'll be in good health.
Think construction... welders... carpenters... plumbers... guys who smash appendages and crawl around in mud.
I know quite a few old ones and I know many many more who struggle with pain every day as they are my age and talk to me about it. ( IT being my 3rd career after welding and meatcutting ) I have many friends who are dropping out of the workforce and finding alternative jobs because they cant do the work.
Painting is hard work but its one of the less body impacting you can do. There are a few roles like that and yes, being active is a good thing.
I know quite a few old ones and I know many many more who struggle with pain every day as they are my age and talk to me about it. ( IT being my 3rd career after welding and meatcutting ) I have many friends who are dropping out of the workforce and finding alternative jobs because they cant do the work.
Painting is hard work but its one of the less body impacting you can do. There are a few roles like that and yes, being active is a good thing.
have you heard about age discrimination in tech?
I have 50 decades of life and work in tech. You tell me ?
Look, Methusela. I doubt you were working in software in the 1500s.
LOL um... typo :)
Please don't post shallow attacks on other people because of obviously trivial misstatements. That adds noise, not signal.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
Materials sure, but what do you mean labor? He is the labor, he gets the money.
There's more to running a plumbing company that just the person who shows up at the job site. Plus, plumbing isn't a one-person job. Every plumber has helper/apprentices, etc.
How is that different from when I take on contract tech work and farm out some of the work. everyone has these types of problems when they are sole proprietors.
I believe you're confusing top-line revenues and profits available for the tradesman. As it stands, you're asserting that your plumber makes approximately 14x the average plumber in America, and 10x the average plumber in San Francisco. This is unlikely to be correct.
In a similar vein, Apple takes in over $2,000,000 of revenue per employee, but Genius Bar employees are not taking that amount home. I mention this solely because it uses the same reasoning evident in your initial claims.
In a similar vein, Apple takes in over $2,000,000 of revenue per employee, but Genius Bar employees are not taking that amount home. I mention this solely because it uses the same reasoning evident in your initial claims.
I kind of agree with your point, but you really think an average licensed plumber in SF makes $200/day???
Well, I did a cursory search for data, and it seems to indicate that this is the case.
So yes... I think the average plumber in SF is making about $70k/yr. (so ~$300 per day worked, or $200 per day).
So yes... I think the average plumber in SF is making about $70k/yr. (so ~$300 per day worked, or $200 per day).
[deleted]
One thing that I noticed in this article and charts was the unprecedented growth of auto loans. They too have skyrocketed. That seems like another "bubble" waiting to happen.
Car companies seem to have figured out a lucrative business model: pump up the price of desirable cars (suvs, trucks), then offer low-interest loans, making it seem like you’re getting a good deal. That’s how you end up with an average new car price of 34k.
And now I’m wondering if the same dynamic is happening in education: schools increase tuition because govt-subsidized loans are easily accessible.
And now I’m wondering if the same dynamic is happening in education: schools increase tuition because govt-subsidized loans are easily accessible.
The problem is getting worse. It used to be hard to get 5 year loans for new cars. 8 year loans are pretty common. With the vehicle failing to reach the loan's end of life these new loans roll in the old loan's deficiency until someone defaults.
A still relevant earlier discussion: https://news.ycombinator.com/item?id=14476381
A still relevant earlier discussion: https://news.ycombinator.com/item?id=14476381
Is it common for modern used cars to not last 8 years? I know lots of people driving cars that are 10-15 years old at this point.
The average car on the road is 12 years old at this point. It has increased dramatically, even during "cash for clunkers", which you would think would have dropped it.
https://www.energy.gov/eere/vehicles/articles/fact-997-octob...
Well if you do no maintenance whatsoever you can destroy any car in 8 years. With maintenance even a BMW will last 20 years though you may be better off getting something more rugged, like a Toyota.
I'm not sure how common it is. Thing is that the market for used cars is fundamentally messed up [0]. That 8 year loan on most new buggies will be underwater for all but the last year or so of its 96 month life.
[0] https://en.wikipedia.org/wiki/The_Market_for_Lemons
[0] https://en.wikipedia.org/wiki/The_Market_for_Lemons
Is it common for houses not to last centuries? I know lots of people living in very old houses.
Perhaps mortgages should have longer terms too?
Perhaps mortgages should have longer terms too?
Short answer: yes it is common for a building not to last long periods of time (unless properly maintained). I recall a civil engineer telling me once that most “tract” homes only are designed for a 35 year useful life. While I can’t find a reference for that, I did find this Quora article from a structural engineer:
Answer to What is the design life span of a building? by Vishnu Vijayakumar https://www.quora.com/What-is-the-design-life-span-of-a-buil...
Note: while he quotes 60-80 years, the concrete is still in that 30-40 year timespan.
Note: while he quotes 60-80 years, the concrete is still in that 30-40 year timespan.
That's why foundation repair companies are so popular.
I think you would be very lucky to get a few decades without the need for any major repairs or upgrades. It too know people who live in houses that have some features that are centuries old, but none of them are living in the exact house that was constructed centuries ago.
The distinction is meaningful as the comments earlier in the thread are talking about how long a new car will last before it needs work (beyond your basic oil changes, etc.). If you are willing to put money into major repairs and upgrades, there is no real reason why a vehicle cannot last centuries as well, as classic car enthusiasts can attest.
The distinction is meaningful as the comments earlier in the thread are talking about how long a new car will last before it needs work (beyond your basic oil changes, etc.). If you are willing to put money into major repairs and upgrades, there is no real reason why a vehicle cannot last centuries as well, as classic car enthusiasts can attest.
Pickups especially. From what I remember, Ford is all but dropping making cars in favor of the F series because it has a higher profit margin. But I'm less concerned about car prices in contrast to college and healthcare costs.
With GPS/always on mobile data connections, the lender has a much easier time reclaiming the collateral and recouping their losses by selling or leasing it again.
I can absolutely confirm this. I have done work (not on this particular type of system, however) for many small-to-medium car dealerships, and they will spend roughly $400 to equip many of the vehicles in their inventory with ignition interlocks that can be disabled remotely.
Here is their business cycle:
1. Purchase a used car from a customer for 80% of "fair market value."
2. Sell the car on a $0-down, 7-year note for 110% of "fair market value."
3. Undoubtedly the loan goes into arrears, and the dealer will disable the ignition system after a certain amount of time. The "owner" will be billed for the tow as well as multiple "recovery fees."
4. Sell the car again for 110% of "fair market value."
5. Repeat.
Multiple times I have been told "we don't want them to pay off the car; we make less money that way."
I remember one particular dealer bragging to me about the fact that he had sold a 2009 Honda Civic 11 times in 4 years. That is, 11 sales and 10 repossessions over the course of 4 years. The saddest part was hearing that over 70% of their car notes would go into arrears within 4 months.
Here is their business cycle:
1. Purchase a used car from a customer for 80% of "fair market value."
2. Sell the car on a $0-down, 7-year note for 110% of "fair market value."
3. Undoubtedly the loan goes into arrears, and the dealer will disable the ignition system after a certain amount of time. The "owner" will be billed for the tow as well as multiple "recovery fees."
4. Sell the car again for 110% of "fair market value."
5. Repeat.
Multiple times I have been told "we don't want them to pay off the car; we make less money that way."
I remember one particular dealer bragging to me about the fact that he had sold a 2009 Honda Civic 11 times in 4 years. That is, 11 sales and 10 repossessions over the course of 4 years. The saddest part was hearing that over 70% of their car notes would go into arrears within 4 months.
If you are interested in great (and humorous) investigative journalism on this, see this piece: https://www.youtube.com/watch?v=4U2eDJnwz_s
Is it possible to disable these systems, or is something baked into the car where if you disable it the car won't run? This seems very suspicious unless the auto dealer/contractor is expecting most people to not even bother with the gps system.
I know that for my most recent vehicle purchase (paid cash, no loan) the dealer left their own anti-theft device installed. From what I could gather online, they use them for anti-theft on the lot and then can try to upsell you on a service that uses the same hardware during the sale.
It's wired directly into the ignition system. Despite having a computer engineering degree and enough experience to be reasonably confident in my ability to analyze unknown electronic systems, I spent a lot of time very carefully going through all of the connections to convince myself I wasn't going to brick my vehicle by removing the device. In the end it was pretty easy to yank the device. The hardest part was patching the ignition wire, which had been cut to install the device.
Conclusion from the previous paragraph? It's not that hard if you know what you're doing, but I'd bet that something like 99% of people wouldn't have a clue how to remove it even if they noticed it was there at all.
It's wired directly into the ignition system. Despite having a computer engineering degree and enough experience to be reasonably confident in my ability to analyze unknown electronic systems, I spent a lot of time very carefully going through all of the connections to convince myself I wasn't going to brick my vehicle by removing the device. In the end it was pretty easy to yank the device. The hardest part was patching the ignition wire, which had been cut to install the device.
Conclusion from the previous paragraph? It's not that hard if you know what you're doing, but I'd bet that something like 99% of people wouldn't have a clue how to remove it even if they noticed it was there at all.
If you're smart and capable enough to reverse engineer the device, there's a 95% chance you're smart and capable enough to have a job that pays enough to not need ultra high-interest car loans.
I don't think that's true. There are a lot of smart people in not very good jobs who can't break through, or people who have self learned skills in some fields but not enough to get a job that's paying to do that. I could do this easily, but I'm stuck in a $52k/year IT job in Seattle trying to move up.
It doesn’t take many people to know this to serve an entire community. The problem is likely that the terms of the loan are such that the car still gets repo’d, just at a lower frequency and higher cost.
This is exactly what was on my wife’s Honda. Tried to up sell us on some theft deterrent system. Upon declining, we’re told it’s in there.
I recall buying a Honda back in the late 90s. Dealer tried to up sell me on having the VIN etched into all the windows. I declined. Drive the car home and realize it has the VIN etched in all the glass.
I recall buying a Honda back in the late 90s. Dealer tried to up sell me on having the VIN etched into all the windows. I declined. Drive the car home and realize it has the VIN etched in all the glass.
That doesn't prevent the car from being repossessed though, just makes it a bit harder. Automated license plate scanners are increasingly becoming a thing too (and they're feeding into collaborative sightings databases), so it's easier and easier to locate and thus repossess a vehicle.
I don’t understand your use of the term “fair market value” in quotes, implying that it’s not the actual market value. If the seller and buyer are not under duress while selling and buying, why is the dealer not buying and selling at the market value?
Typically because there is an education and need asymmetry between the buyer and seller in a lot of these cases. If the car is maybe worth $3K cash, but a dealer can lease it to someone for $4K by requiring no money down but high interest rates on the loan/monthly payments, where does one say the "market value" is?
The dealer is getting $4K (or more in the cases where they repossess the car and re-lease it) because the buyer often has few options on how to get transportation so they're implicitly forced to take worse terms (say, they need a car immediately to get to their low-wage job otherwise they are fired and forced into worse poverty). Of course, you can still say the car doesn’t have a value until a transaction takes place.
These socio-economics dynamics mean cars have much more of a spectrum of "value" than just one-off car purchases. Framed another way with the parent comment, buyers are often under implicit economic duress, it's just not duress forced by the seller.
I'm not strictly opposed to markets like subprime auto/personal loans, as often these markets would look worse without these options. But a lot of times people see supply-and-demand situations in very limited scope and miss external factors that influence choices.
The dealer is getting $4K (or more in the cases where they repossess the car and re-lease it) because the buyer often has few options on how to get transportation so they're implicitly forced to take worse terms (say, they need a car immediately to get to their low-wage job otherwise they are fired and forced into worse poverty). Of course, you can still say the car doesn’t have a value until a transaction takes place.
These socio-economics dynamics mean cars have much more of a spectrum of "value" than just one-off car purchases. Framed another way with the parent comment, buyers are often under implicit economic duress, it's just not duress forced by the seller.
I'm not strictly opposed to markets like subprime auto/personal loans, as often these markets would look worse without these options. But a lot of times people see supply-and-demand situations in very limited scope and miss external factors that influence choices.
Yes, but that's covered by the 110%-80% sale spread and the onerous interest, fees, and repossession costs, not the car's market value.
In that case the market value is 3k and the dealer is selling the finance for 1k
Tell that to the state when they collect their sales tax.
Because the vast majority of the customers that walk through these buy-here pay-here places' doors already have loans on their vehicle and are looking to upgrade. "Kelly Blue Book" is not a phrase used very often by their salespeople; the customer base seems to be much more interested in the appearance of the cars than the financial utility of them.
You weren't touting KBB and that's good. Kelly Blue Book is a great trademark and marketing tool but the preferred industry reference is The Black Book https://www.blackbook.com/
KBB is still in use. NADA Guides is often referred to before BB, in my experience, but is pretty close to KBB values.
If the dealer is buying at 80% and selling at 110% of some number then surely that means that number is not actually fair market value?
Even the stock-market has a bid-ask spread.
A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies.
As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks.
Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread.
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"Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters.
By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.
A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies.
As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks.
Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread.
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"Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters.
By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.
So, by definition, 110% of “fair market value” is fair if someone buys at that price? Doesn’t that mean the scare-quoted “fair market value” isn’t?
In my eyes, "fair market value" is roughly (bid_price + ask_price) / 2. In effect, "fair market value" is a survey-result, based on how much buyers are bidding and how much sellers are asking.
80% to 110% isn't a perfect split between the buyer and seller, but its "within expectations".
80% to 110% isn't a perfect split between the buyer and seller, but its "within expectations".
80% isn't enough margin to pay for the dealership and the repoing and all the other stuff
You're doing fairly well if you can get a car dealer to buy your car for 80% of what they sell it for
You're doing fairly well if you can get a car dealer to buy your car for 80% of what they sell it for
That’s the spread and it exists in all dealer transactions. Also called “markup”.
I am disputing the existence of that number. If two parties enter into an agreement to exchange X for Y, and no one has a gun to their head, then the market value of X is Y at that time for that party, and the market value of Y is X at that time for that party.
Many guns are not physical or tangible.
"I could literally survive the next 10 minutes without buying this" is not the same thing as "if I don't buy this soon, my life will not be significantly worse off."
Poverty's not known for opening up options for people.
"I could literally survive the next 10 minutes without buying this" is not the same thing as "if I don't buy this soon, my life will not be significantly worse off."
Poverty's not known for opening up options for people.
If there isn’t really such a number then surely the scare quotes are completely appropriate?
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This is true (John Oliver covered in depth at https://www.youtube.com/watch?v=4U2eDJnwz_s), but has nothing to do with the $35K 6+-year loans on new cars.
Those devices are mostly only installed for subprime loans on used cars, especially by "buy here pay here" lots that handle their own financing.
Surely not easier than locating, reclaiming and resealling a house... yet we had a housing-bubble-inducde crisis 10 years ago!
In the last twenty years, new vehicle prices have doubled. My eyes just about roll out of my head when I see what the sticker price is for a new truck or minivan. I assume people must be leasing more than they used to, because I can't see any other way to get the payment down into a palatable $500/month range.
Some quick numbers here. Inflation over the last 20 years was about 54%, so I would expect an apples-to-apples vehicle to cost that much more today than it did in 1999. If you look at the CPI-based numbers for cars from 2000 to 2019, in real dollars it's barely gone up [1].
I think what you're seeing is that the cars getting advertised, and more specifically the cars that you want are more expensive than they used to be because auto makers are trying to boost margins in a shrinking market by pushing fancy features and higher-end models. But if you look at base-model sedans, they've stayed pretty close in price over the last two decades.
[1] http://www.in2013dollars.com/New-cars/price-inflation
I think what you're seeing is that the cars getting advertised, and more specifically the cars that you want are more expensive than they used to be because auto makers are trying to boost margins in a shrinking market by pushing fancy features and higher-end models. But if you look at base-model sedans, they've stayed pretty close in price over the last two decades.
[1] http://www.in2013dollars.com/New-cars/price-inflation
Except it's hard to find base model cars anywhere.
Is it? I’m still driving the same car I bought 10 years ago so I’m genuinely not sure. At the time, I ordered it from the Honda fleet manager at a dealership and getting a base model was no problem. If you’re walking into a dealership or want a car ASAP then you’re probably right, but I feel like if you can wait a couple weeks getting a base model is still relatively easy.
Depends on the make, iiuc
The Costco Auto Program[1] can be good for that.
[1] https://www.costcoauto.com
[1] https://www.costcoauto.com
When I bought my Kia it definitely was a problem to get the low end model. There was just one base model on the lot vs. many cars fully decked out. I guess not many people buy base model these days.
Buying new is basically a fools game now. Take note of vehicles with proven longevity and snatch them up when the depreciation makes them affordable.
The market is rather efficient in these vehicles, so depreciation isn't a way to save money. Dealers beg 3-yr-old car owners to sell their cars back so they can flip them. Like real estate, cars are cheap to buy. The expense comes when you sell them, losingthe residual becase you won't get a good price. The most important factor in auto afforidability is how long you own the car, not how good a deal you get at purchase time. And buying a "reliable" used car is a risk, because you don't know what damage this particular used car has suffered. Unless you have good intel on why the previous owner gave it up, and how they treated it, you're taking a gamble.
You can pretty blindly buy a no-accident 3-year off/lease Honda or Toyota and be overwhelmingly likely to have a great ownership experience.
With the rate at which electronic safety features are advancing, I think the advantages of buying used have fallen a bit. A new base-model Corolla currently has more electronic safety features than a high-trim 3-4 year old Avalon or Lexus. That's a recent phenomenon, though, and it might be a temporary condition if the rate of improvement of those systems slows down.
How did everybody manage to convince themselves that they need these expensive add-ons? You need seatbelts, airbags, and impact absorption. That was perfected 20 years ago. Everything else is a luxury not needed for driving.
The new radar systems in the front of the car that slam the brakes if you might hit something are lifesaving for both occupant and pedestrian.
The little indicators if someone in your blind spot is also a HUGE safety increase for drivers and bikers/scooters/etc.
Those should be as standard as seatbelts an airbags in 2020.
The little indicators if someone in your blind spot is also a HUGE safety increase for drivers and bikers/scooters/etc.
Those should be as standard as seatbelts an airbags in 2020.
I’ll take the other side and say some of the newer (literal) bells and whistles are more a distraction than a life saver. Properly adjusted mirrors should have no blind spots - I don’t need lights on the mirrors constantly flashing on the highway. My last rental would beep whenever it thought I was drifting out of my lane but suffered from so many false positives it was infuriating.
I’d add ABS (also readily avail though not standard 20 years ago) and side airbags (very uncommon 20 years ago) to the list.
Most people are pretty poorly trained and now, often distracted, drivers.
Most people are pretty poorly trained and now, often distracted, drivers.
Have you tried to buy a used care recently?
A 2-year-old used car is usually within $1000~$2000 of the original selling price.
A 2-year-old used car is usually within $1000~$2000 of the original selling price.
Body on frame trucks don't rust out like cars and are more than serviceable after 6 years of depreciation.
At least, when it comes to cars, they have gotten better in quality over the past 20 years. Not sure the same can be said about higher education.
If this were 10yr ago I'd agree. The 80s gave us computers. The 90s gave us good simulation software and the engineers used that to build us reliable cars. The early 2000s gave us plastic interior and exterior trim that didn't rattle and fall apart in short order.
Since then we've tacked more gears onto automatic transmissions, hybrids have become more mainstream, sedans and wagons have been replaced with small SUVs as electronic doodads have proliferated. If you don't mind creaky plastic quality is about the same back deep into the 90s for cars that were on reasonably modern platforms in the 90s.
Since then we've tacked more gears onto automatic transmissions, hybrids have become more mainstream, sedans and wagons have been replaced with small SUVs as electronic doodads have proliferated. If you don't mind creaky plastic quality is about the same back deep into the 90s for cars that were on reasonably modern platforms in the 90s.
Gas mileage is better, backup cams are standard (and required), the average age of a vehicle on the road is 11 years (up from 8 years in the 90s), so they are more reliable and last longer, better airbags (side curtains are standard nowadays), better anti-corrosion technology, adaptive cruise control, lane assist, auto parallel parking, partial autopilot, bluetooth standard, etc.
Gas mileage is a very marginal improvement in any of the vehicles I'm interested in, on the order of 16 mpg then to maybe 20, now. Bodywork is plastic or aluminum, so it is less repairable, but there's the anti-corrosion factor.
Everything else listed I would want to actively avoid in my next vehicle.
Everything else listed I would want to actively avoid in my next vehicle.
> Gas mileage is a very marginal improvement in any of the vehicles I'm interested in, on the order of 16 mpg then to maybe 20, now.
this says more about the vehicles you're interested in than the overall trend in vehicle efficiency. I get ~34mpg out of my hot hatch with a heavy right foot.
this says more about the vehicles you're interested in than the overall trend in vehicle efficiency. I get ~34mpg out of my hot hatch with a heavy right foot.
Not really. I used to drive an Saab turbo from the 80s that got close to 30mpg. Old civics pushed 40. 34 mpg isn’t really an improvement over that.
sure, but that was probably a much lighter car. I realize I'm moving the goalposts a bit here, but when you consider the improvements in crash safety, engine performance, and efficiency together, cars really are a lot better today than they were 20+ years ago. the one thing that has suffered is the weight and size of the vehicles, but imo it's worth being a lot less likely to die in a car.
Would you say that the average age of a vehicle is longer due to cars being pricy and people fixing them up or because they are far more reliable? I could see it going both ways.
I disagree on a few of those.
The backup cams affect my night vision. When I back out of a parking space at night, I'm hit with the glare. I need my vision to drive!
Humans adapt to adaptive cruise control, lane assist, auto parallel parking, partial autopilot, and any other safety feature. So we get more texting while driving and other dangerous behavior. https://en.wikipedia.org/wiki/Risk_compensation
The backup cams affect my night vision. When I back out of a parking space at night, I'm hit with the glare. I need my vision to drive!
Humans adapt to adaptive cruise control, lane assist, auto parallel parking, partial autopilot, and any other safety feature. So we get more texting while driving and other dangerous behavior. https://en.wikipedia.org/wiki/Risk_compensation
So marginal incremental improvement in drive-train technology and electronic doodads? That's how I read that list you gave me.
Cars these days don't age any better than cars from 20yr ago or the more modern cars of the 90s.
I guess anti-corrosion has improved but it hasn't improved by that much. You still have plenty of vehicles that repeatedly rust out in some spot because the salt gets flung there and the surface coatings aren't adequate to stop it.
Cars these days don't age any better than cars from 20yr ago or the more modern cars of the 90s.
I guess anti-corrosion has improved but it hasn't improved by that much. You still have plenty of vehicles that repeatedly rust out in some spot because the salt gets flung there and the surface coatings aren't adequate to stop it.
Average age of cars on the road is 11 years vs 8 years in the 90s...which means cars are on average lasting 37.5% longer than 20 years ago. And that might be a lagging indicator.
It also might be an indicator of how deep the 2008 recession was, and of how big the 90s stock boom was.
No, the measure is average age, which is more indicative of used cars than any largess caused by various boom times. Cars don't get salvaged for spare parts and metal until they're no longer useful as vehicles. They otherwise get resold and traded in and put back out on the road.
Are you sure about how this metric is defined? The average age of cars in today's fleet is not the same thing as the expected lifespan of today's new car.
In a growing fleet, new purchases expand the fleet and necessarily lower the average age. On the other hand, if production falls below replacement rates, the average age of the fleet will increase. Couldn't such a change reflect changes in demographics (number of new drivers added to population) or habits (amount of car-based travel) as much as car durability?
Also, wouldn't such fleet metrics be influenced by the lumpy history of natural disasters like hurricanes flooding densely populated coastal regions?
In a growing fleet, new purchases expand the fleet and necessarily lower the average age. On the other hand, if production falls below replacement rates, the average age of the fleet will increase. Couldn't such a change reflect changes in demographics (number of new drivers added to population) or habits (amount of car-based travel) as much as car durability?
Also, wouldn't such fleet metrics be influenced by the lumpy history of natural disasters like hurricanes flooding densely populated coastal regions?
There's a lot of very real safety improvements that have been added (or mandated) over the past decade. They are saving lives. It doesn't matter if you don't value these improvements for whatever reason; the rest of us will still benefit from your vehicle having them, so they are now required.
Coincidentally, my newest vehicle is almost 20 years old.
Mine is 21, which makes this whole discussion rather humorous to me.
same here.
bought a used 2016 last year for ... ~$12k? Small Focus, nothing fancy. Even that felt like a bit of a stretch, although... I'm getting more conservative with $ as I get older. It's also just 2 of us in the house - no kids, and I get that some people want/need larger cars to haul around kids and stuff. But seeing that an 'average' new car loan is $30k, my mind just... boggles.
bought a used 2016 last year for ... ~$12k? Small Focus, nothing fancy. Even that felt like a bit of a stretch, although... I'm getting more conservative with $ as I get older. It's also just 2 of us in the house - no kids, and I get that some people want/need larger cars to haul around kids and stuff. But seeing that an 'average' new car loan is $30k, my mind just... boggles.
Simple, put down a larger down payment. I put down almost 50% of my last car purchase to get it down to ~$500.
Trucks have doubled and it's insane. Jeeps as well. A base Ruby is now what...42k-ish?
Friggin' stupid. I can almost buy two rental houses for that price. At least one that can be in move in condition with a splash of paint and carpet.
Friggin' stupid. I can almost buy two rental houses for that price. At least one that can be in move in condition with a splash of paint and carpet.
Where are you buying rental houses for $42k?
Inner city. There are always cheap rentals if you look around. I'm landlocked with no beaches. This helps costs tremendously.
What's the ROI on such rentals (cost of property vs. amount of rent generated per month)?
Maybe Detroit? Though I hear houses are closer to $10k there.
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I think of lot of this is very low interest rates which makes new cars more affordable.
It's such a shame that the state can't support the education system financially, so that 20-year old people wouldn't have to take loans to study. It works in other countries, so why not in the US?
The simple and honest answer to your question is greed. The fact is that the USA has more than enough money to support a healthy and well-educated population through government-funded healthcare and education (including what you asked about - higher education), but the capture of significant portions of our government by corporate interests has successfully stopped that kind of progress from occurring so that an ever-shrinking number of people can become unfathomably wealthy. This has been accomplished primarily through the use of emotion-based propaganda over a series of decades and has been incredibly effective at poisoning the national discourse.
It might be more nefarious -- to essentially maintain a permanent underclass of society with just broad strokes.
Thank you for summing this in one paragraph.
Federally guaranteed student loans exceed $120 billion every year. That is a massive subsidy, and it may be increasing costs for more people than it helps. The glut of admissions being able to pay artificially high tuitions is emboldening administrators to add more dormitories every year, expand the administrative class, and build rec centers -- raising tuition even further.
> Last year, FSA provided more than $120 billion in federal grants, loans, and work-study funds to approximately 13 million students at nearly 6,000 participating schools.
https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
The damage from existing poorly designed government subsidies should be fixed before we issue any more blank checks - otherwise we'll all be stuck paying for artificially inflated university budgets.
> Last year, FSA provided more than $120 billion in federal grants, loans, and work-study funds to approximately 13 million students at nearly 6,000 participating schools.
https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
The damage from existing poorly designed government subsidies should be fixed before we issue any more blank checks - otherwise we'll all be stuck paying for artificially inflated university budgets.
And a result, schools are building things like lazy rivers and rock climbing walls to attract students....and the federal money.
Best solution would be to not back student loans.
Best solution would be to not back student loans.
Two nits:
1) $122.5B is the total financial aid, not just loans. Per the table on page 8, loans amounted to $93.8B of that. The rest were outright grants.
2) The FSA no longer guarantees loans; it issues them outright. It's incorrect to refer to "federally-guaranteed loans" except in the past tense.
1) $122.5B is the total financial aid, not just loans. Per the table on page 8, loans amounted to $93.8B of that. The rest were outright grants.
2) The FSA no longer guarantees loans; it issues them outright. It's incorrect to refer to "federally-guaranteed loans" except in the past tense.
The amount of labor required for an individual to attend even a community college has increased more than 5-fold. This is for basic tuition at a no-name university, obviously the numbers are far worse for ivy league. You can slice that in terms of markets demanding more, costs going up, administration bloat or whatever else how you like but the fact of the matter is, when a college education is more critical than ever for many fields, it costs five times what it used to, optimistically.
If we want college grads able to leave school and not be saddled with debt for the remainder of their lives, make college free. I'm not interested in hearing about how someone might dare learn something that isn't inherently profitable; I reject the assertion that just because something cannot be successfully monetized does not automatically make it worthless. Art, culture, history, all of these are more valuable to society at large than the highest valued startup. End of. Argue it.
If we want college grads able to leave school and not be saddled with debt for the remainder of their lives, make college free. I'm not interested in hearing about how someone might dare learn something that isn't inherently profitable; I reject the assertion that just because something cannot be successfully monetized does not automatically make it worthless. Art, culture, history, all of these are more valuable to society at large than the highest valued startup. End of. Argue it.
> This is for basic tuition at a no-name university, obviously the numbers are far worse for ivy league.
It's worse, but opposite of the way you're thinking. Harvard/Yale/Princeton are basically free if your parents make less than about $65,000 per year. So, a smart ambitious kid with non-rich parents can graduate from a top school with an extremely strong network and have no debt. But an "average" kid with non-rich parents will have to work a side job or two, and graduate with substantial debt, all for a not particularly useful degree.
It's worse, but opposite of the way you're thinking. Harvard/Yale/Princeton are basically free if your parents make less than about $65,000 per year. So, a smart ambitious kid with non-rich parents can graduate from a top school with an extremely strong network and have no debt. But an "average" kid with non-rich parents will have to work a side job or two, and graduate with substantial debt, all for a not particularly useful degree.
> So, a smart ambitious kid with non-rich parents can graduate from a top school with an extremely strong network and have no debt.
Or the kid could win the lottery, with effectively the same odds of success. That does not make this a good system.
Or the kid could win the lottery, with effectively the same odds of success. That does not make this a good system.
I'm not saying it's a good system, but we've effectively ended up in a situation where some of the kids least in need of a leg up end up getting a huge boost, and the ones who need more help get nothing.
Except this argument is an offshoot of a problem caused by a greater fault. To take this in a programming metaphor, you're attempting to make an unmaintained, old library work with new code, when there are perfectly good alternatives available with better functionality and support, and good use cases.
Instead of band-aiding the bad solution, throw it out. Get a better one.
Instead of band-aiding the bad solution, throw it out. Get a better one.
The money has slowly been taken out of everything.
It's a deliberate program.
When a new market opens up, like say the internet in the 90s, then the investors and the people in charge will allow some of us to be overpaid for a while.
It's really not out of the goodness of their heart's. At that point they are focusing on market capture, and they need bodies to help them do that.
Eventually they find a way to make that market 'efficient' (read bad for everyone employed in it) and unless a new market opens up, it can be really bad for workers.
I can't think of a significant new market that's been opened up since the app bubble of 2010 or so.
It's a deliberate program.
When a new market opens up, like say the internet in the 90s, then the investors and the people in charge will allow some of us to be overpaid for a while.
It's really not out of the goodness of their heart's. At that point they are focusing on market capture, and they need bodies to help them do that.
Eventually they find a way to make that market 'efficient' (read bad for everyone employed in it) and unless a new market opens up, it can be really bad for workers.
I can't think of a significant new market that's been opened up since the app bubble of 2010 or so.
Efficiency is a “bad deal” in a place with a very low floor of benefits / lifestyle. In economies with very high minimums, efficiency is not too bad! Would you prefer a dynamic market with winners and losers or a stable market that’s kinda ok for a lot of people? This trade off seems pretty easy but over long periods of time the stable market starts to look like a stagnant market that may not allow new entrants to new industries, creating a permanent lagging behind the dynamic/higher-outcome-variance market. So you want some turmoil / “creative destruction”. This is why imho barriers to firing people is bad. I’d rather have the gov’t be the social safety net than the employer.
These are all theoretical benefits, if you can't afford a decent place to live and feel like you have to delay having kids till 38.
Space and re-usable rockets, although that's not really your average consumer market. Electric cars are mainstream too and that's new. Solar/renewables were old but efficiencies and markets of scale (?) made it more mainstream.
We have a pretty long way to go before the computing market is efficient though (bonus: it'll probably be tied to the actual computational efficiency of computers at some point because the markets will all be traded by computers).
We have a pretty long way to go before the computing market is efficient though (bonus: it'll probably be tied to the actual computational efficiency of computers at some point because the markets will all be traded by computers).
Irrational exuberance. Corporate management labeling a department or activity a "cost center" if it doesn't result in revenue or directly supports revenue generating functions.
Talking about underemployment as a problem for college graduates in general doesn’t seem very insightful to me. It seems obvious that not all degrees have problems with underemployment. So which ones do? Why are people doing those degrees? Are they under the mistaken impression that those degrees will lead to employment opportunities that don’t actually exist?
I believe (partially anecdotally and partially from reading articles over the years) that a big part of this problem is more like "mis-education", rather than "under-education". In primary and high school education in the UK, computing is a dire situation.
It's clear that being good at using a computer is a huge asset in modern society, so why don't we gear education towards it? Programming ought to be seen as vitally important as English and Maths.
It's clear that being good at using a computer is a huge asset in modern society, so why don't we gear education towards it? Programming ought to be seen as vitally important as English and Maths.
I wouldn't put programming as valuable than English and Math. It's clearly good to know, but honestly since we're talking about exploding debt, how about fiscal education in schools??
You'd need to put that as a 4th year class - if you do it first semester, people would run the numbers and start asking questions.
Practical fiscal education in schools is almost a political nonstarter. If you were to educate high school freshmen on how savings, loans, investments, taxes and retirement planning works for a semester it would greatly alter the voting habits and priorities of that generation.
Just giving out a brochure "What are taxes and how do you pay them" would already be an enormous leap forward.
I would assume going into some of the topics you suggest would lead to school getting swamped by insurance sales people.
I would assume going into some of the topics you suggest would lead to school getting swamped by insurance sales people.
Which do you think is more valuable knowledge, solving for x or summing the columns in an excel spreadsheet?
Solving for x, because it actually rewires your brain to think logically vs typing a pre-built function with zero understanding. Besides, a huge part of programming is thinking about variables.
OK, maybe bad examples. My point is that it's underemphasised in school.
I think that you make a good point, but on the other hand it seems like the number of degrees which are "safe bets" are decreasing. For example, my understanding is that a business degree is much less likely to get you into the middle class than it used to. Similarly, I think there was a time when BS degrees in the sciences were enough to get decently paid technician jobs. Now it seems like engineering and medicine are the only degrees with a guaranteed return.
If people are trying to pay loans back with degrees that don't lead to good jobs, surely that's a problem, right? If you think that large amounts of people being unable to pay loans back is a problem, that is.
Sure, but that could be a problem for any number of different reasons, and the article doesn’t provide any insight into what they might be.
Are people being deceived in some way into thinking that particular degrees are more marketable than they actually are?
Are degrees that are thought to be very marketable (and perhaps once were) no longer very marketable?
Are people knowingly choosing to do degrees that are known to be unmarketable?
All of those things are completely different problems. The article doesn’t give me any insight into what the problem might be, and doesn’t actually provide much more insight than I could have gotten from looking at two graphs.
Are people being deceived in some way into thinking that particular degrees are more marketable than they actually are?
Are degrees that are thought to be very marketable (and perhaps once were) no longer very marketable?
Are people knowingly choosing to do degrees that are known to be unmarketable?
All of those things are completely different problems. The article doesn’t give me any insight into what the problem might be, and doesn’t actually provide much more insight than I could have gotten from looking at two graphs.
This isn't an article about the morality of student loans. It's about the economy. If the economy is struggling because of people unable to pay student loans, that's a problem. Doesn't matter whether it was 'right' that it ended up this way. The problem is that people have student loans that they are unable to pay. How to solve it is another issue.
The article doesn’t make any case for the economy struggling. ‘Struggling’ in this context would mean that there’s less skilled employment opportunities available than there used to be. The article doesn’t put forward any argument to say that’s the case. With increasing enrolments, the economy could be doing great and still produce underemployment.
The question is why are people completing unmarketable (or not sufficiently marketable) degrees? The article provides no insight into what the answer to the question might be. ‘Many degrees are less marketable than the used to be’ is one (partial) explanation. But it’s not the only potential explanation, it’s not obviously the correct explanation, and it’s not an explanation that the article provides any content to support.
The question is why are people completing unmarketable (or not sufficiently marketable) degrees? The article provides no insight into what the answer to the question might be. ‘Many degrees are less marketable than the used to be’ is one (partial) explanation. But it’s not the only potential explanation, it’s not obviously the correct explanation, and it’s not an explanation that the article provides any content to support.
> The question is why are people completing unmarketable (or not sufficiently marketable) degrees?
There's no reason to single this out as 'the question'. There are many interesting questions around student loans. The article singles out the question 'What caused the student loan debt load to get to the level of “crisis” in the United States?' There is no reason that an answer to this question needs to involve the actions of individual students. You could answer the question by talking about how states are reducing the % of tuition they they contribute to state universities, or the explosion of university administration, or how student loans are easier to get now than in the past.
There's no reason to single this out as 'the question'. There are many interesting questions around student loans. The article singles out the question 'What caused the student loan debt load to get to the level of “crisis” in the United States?' There is no reason that an answer to this question needs to involve the actions of individual students. You could answer the question by talking about how states are reducing the % of tuition they they contribute to state universities, or the explosion of university administration, or how student loans are easier to get now than in the past.
The problem statement in the article is ‘student loan crisis an underemployment catastrophe’. If you accept the idea that some degrees are more marketable than others, then ‘the question’ absolutely is ‘why are people completing unmarketable degrees?’.
That’s not to say there aren’t also other problems. But the problem this article is discussing is that people are completing college degrees that do not improve their employment opportunities.
That’s not to say there aren’t also other problems. But the problem this article is discussing is that people are completing college degrees that do not improve their employment opportunities.
If you're talking about a single individual, doing a degree in something employable might be a good strategy for getting a job, but it doesn't follow that getting more people into professional degree programs will significantly change the underemployment situation. Our economy only needs so many teachers, engineers, doctors, etc. Underemployment of an entire generation isn't caused by the degrees they choose.
The article doesn’t put forward a case for underemployment of an entire generation. It puts forward a case for a certain level of increased underemployment for a generation of student loan holders.
It’s self-evident that if those college graduates who are underemployed had chosen different courses, then the problem would look quite different. The fact that developed nations have to import large amounts of skilled labour proves this (although you could make a solid argument that they import more than they strictly ‘have to’).
There’s likely a number of factors that contribute to this problem. Generally increasing enrolments seems like it would be having some level of impact. But this article does not even attempt to shed light onto what those factors might be, and how they might be weighted. I don’t know what I’m supposed to have learned from reading this that I couldn’t have picked up from just looking at the graphs it includes.
It’s self-evident that if those college graduates who are underemployed had chosen different courses, then the problem would look quite different. The fact that developed nations have to import large amounts of skilled labour proves this (although you could make a solid argument that they import more than they strictly ‘have to’).
There’s likely a number of factors that contribute to this problem. Generally increasing enrolments seems like it would be having some level of impact. But this article does not even attempt to shed light onto what those factors might be, and how they might be weighted. I don’t know what I’m supposed to have learned from reading this that I couldn’t have picked up from just looking at the graphs it includes.
> It’s self-evident that if those college graduates who are underemployed had chosen different courses, then the problem would look quite different.
Not only is this not self-evident, it defies common sense and economics. If more people take professional degrees then the supply of those degrees increases and salaries decrease (and we're back where we started). That is, if there are enough professional jobs to go around which there aren't. You seem to think there are lots of professional jobs to go around, but I went to school with many engineers who struggled to find jobs after graduation. It seems like we're above the point of saturation in many professions.
Not only is this not self-evident, it defies common sense and economics. If more people take professional degrees then the supply of those degrees increases and salaries decrease (and we're back where we started). That is, if there are enough professional jobs to go around which there aren't. You seem to think there are lots of professional jobs to go around, but I went to school with many engineers who struggled to find jobs after graduation. It seems like we're above the point of saturation in many professions.
Your anecdata doesn’t add much to the conversation, and you seem to be relying on a particularly extreme interpretation of what I said. It’s a fact that there are many skilled professions where we have labor shortages. If more people (I never said all people) had chosen to study in those fields, then they likely would not be facing underemployment. Unless you want to disputed the existence of skilled labor shortages, then this is a perfectly self evident conclusion. If you’d like to claim that there simply aren’t enough skilled employment opportunities in the entire economy to provide all of the skilled professionals with employment (which it seems you’re hinting at), then I’d suggest you produce some evidence to support that position.
There is no doubt some salary gains to be made by a small percentage of people choosing to go into professional programs (as I said above), but it's really besides the point. The main issue is that there will still be a large number of students who can't benefit from this strategy.
>The question is why are people completing unmarketable (or not sufficiently marketable) degrees?
For the pursuit of knowledge. Universities are not job training. You getting a good job with your degree is a bonus not the intend outcome for a university.
For the pursuit of knowledge. Universities are not job training. You getting a good job with your degree is a bonus not the intend outcome for a university.
That used to be called a "liberal education", which meant an education that was appropriate for free men, as opposed to slaves, who would be trained in a trade.
Today, that corresponds to pursuing knowledge if you don't need the money. If you do, pursue something that pays. (Pursue as much knowledge as you can work in around the edges, but the main focus has to be on something that pays.)
Today, that corresponds to pursuing knowledge if you don't need the money. If you do, pursue something that pays. (Pursue as much knowledge as you can work in around the edges, but the main focus has to be on something that pays.)
Ok, so are you saying that there should be no student loans on humanities degrees? Because that's the logical conclusion of what you're saying here.
Would it make sense for the government to make a list of fields where they do back up student loans (which would probably be mostly STEM fields)?
Would it make sense for the government to make a list of fields where they do back up student loans (which would probably be mostly STEM fields)?
I'm talking about students, not institutions or rules. I'm saying that if you're a student, and you need to work for a living, pick your major with some wisdom, no matter how much you want to "seek knowledge".
My position is "Student, protect yourself." I take no position on whether the rules ought to change to protect students. (Perhaps they should, because 18-year-olds probably will get carried away with the romance of "pursuing knowledge" and ignore the way the real world works...)
My position is "Student, protect yourself." I take no position on whether the rules ought to change to protect students. (Perhaps they should, because 18-year-olds probably will get carried away with the romance of "pursuing knowledge" and ignore the way the real world works...)
Perhaps the loan requirements should be more stringent on fields that are unlikely to support repayment for people that aren’t in a financial position to repay them? Not very different to lending in other areas of life.
Or remove the non-dischargeability and the govt backing at the same time, and let interest rates and lending requirements fall where they may.
Or remove the non-dischargeability and the govt backing at the same time, and let interest rates and lending requirements fall where they may.
There can always be a private loan market for student loans. Government guaranteed student loans basically happen out of goodwill. The assumption is that it will be a net benefit and therefore everyone should be given the opportunity. However this didn't turn out to be true. If the government keeps funding loans that will never be paid back then it won't be able to fund the loans that can be paid back. I don't really see why limiting certain degrees is seen as pure evil. In Germany some university degrees only accept a limited amount of participants. People with higher grades will be prioritized. This restriction however doesn't apply to the STEM degrees (not an exhaustive list) because they never get enough students. Therefore even if someone is poor and suffers from low intelligence, they are not barred from a degree that leads to a prosperous career.
The description of the STEM/MINT situation in German universities is far too generalized. You have quite a few STEM/MINT universities and programs which require a numerus clausus, its just up to the university to set the NC. Many classical STEM/MINT programs dont have a problem with having a few hundred students each year instead of a few dozen since alot of those will fail in the first years where students just have to learn the basics of the field. Those courses are generally easy to teach and require little interaction with individual students. In the most prestigious technical universities having 70 to 90% of the students fail specific exams is nothing special. And studends are barred from the program after failing the 3rd try. You are also not completely barred with to low of an average entry grade from school, you will just have to wait longer to start your degree. That part is the case for every university and every program, STEM/MINT isnt a special case here.
edited for more information
edited for more information
Man, this canard gets really tiring. Don't get me wrong: I was crazy about university as a place of learning and added a "useless" major & minor from a career perspective to take advantage of the opportunity to learn
But 1) this doesn't reflect the priorities of the vast majority of people, 2) this wasn't to the exclusion of paying attention to what's marketable (ie my other major), and 3) it beggars belief to claim that any significant number of people are intentionally taking on high debt loads in order to play-pretend being an unemployable philosopher-aristocrat.
Leaving aside whether society _should_ be providing the no-strings-attached opportunity for a broad-based education[1] as disconnected from economic productivity, it's beyond laughable to claim that students are actually making this choice en masse in the knowledge that their education is unmarketable.
A misguided and anachronistic belief in the marketability of arbitrary degrees is a far more plausible explanation.
[1] I certainly think it would be nice in the abstract, pending feasibility obviously
But 1) this doesn't reflect the priorities of the vast majority of people, 2) this wasn't to the exclusion of paying attention to what's marketable (ie my other major), and 3) it beggars belief to claim that any significant number of people are intentionally taking on high debt loads in order to play-pretend being an unemployable philosopher-aristocrat.
Leaving aside whether society _should_ be providing the no-strings-attached opportunity for a broad-based education[1] as disconnected from economic productivity, it's beyond laughable to claim that students are actually making this choice en masse in the knowledge that their education is unmarketable.
A misguided and anachronistic belief in the marketability of arbitrary degrees is a far more plausible explanation.
[1] I certainly think it would be nice in the abstract, pending feasibility obviously
People are taking one of those courses because universities in the USA are basically companies. As a result you get marketing to sucker people into buying stuff they dont need and cant afford.
That doesnt change the fact that we have those programs in the first place for the pursuit of knowledge in the hope that it will benefit society. That benefit doesnt have to be an economic one. A degree in your native language has arguably little financial value, but you only have to look to countries like France to see how much a society still collectively values their language.
Investing in universities is historically something nations afford themselves in the hopes it will be of benefit to society. The idea of individuals investing into themselves is a rather American one. I would argue the only reason a large amount of US universities exist is because they have a special tax status and people get to take special loans to pay for their services. Alternatively you would just have companies providing job training. From the outside it looks like much of the problems with the US system stems from purposefully not communicating that difference to new students
edit: To word it differently, the sole purpose of the teaching arm of a classical university is to enable the next generation to introduce novel ideas into their fields. Thats what a doctoral dissertation is. You advancing your field and adding to the collective knowledge.
That doesnt change the fact that we have those programs in the first place for the pursuit of knowledge in the hope that it will benefit society. That benefit doesnt have to be an economic one. A degree in your native language has arguably little financial value, but you only have to look to countries like France to see how much a society still collectively values their language.
Investing in universities is historically something nations afford themselves in the hopes it will be of benefit to society. The idea of individuals investing into themselves is a rather American one. I would argue the only reason a large amount of US universities exist is because they have a special tax status and people get to take special loans to pay for their services. Alternatively you would just have companies providing job training. From the outside it looks like much of the problems with the US system stems from purposefully not communicating that difference to new students
edit: To word it differently, the sole purpose of the teaching arm of a classical university is to enable the next generation to introduce novel ideas into their fields. Thats what a doctoral dissertation is. You advancing your field and adding to the collective knowledge.
That explanation likely accounts for some of the underemployment. How much, I’m not sure, perhaps a lot of it. Now, this still leaves people with a debt they may be unable to service. Which is still a problem, and raises its own set of questions. But it’s a completely different problem to any of the other potential explanations.
I’m looking at the Underemployment vs Unemployment of Recent College Grads graph, and then the following graph of Unemployment of Young Workers vs Recent Grads and they seem like they should share one of the curves in common, but the graphs are different?
Underemployment rates for non-farm jobs in the US, 2005–2018 — Unemployment of Recent Grads
Vs
Unemployment rates for non-farm jobs in the US, 2005–2018 — Recent Graduates
The drop in the Unemployment rate for “All Young Workers” since 2011 however is staggering.
IMO a non-dischargable loan should have a correspondingly extremely low interest rate, but I think there has to be a bright line drawn at forgiving principal except in the case of fraud on the part of the educator or the loan servicer.
Underemployment rates for non-farm jobs in the US, 2005–2018 — Unemployment of Recent Grads
Vs
Unemployment rates for non-farm jobs in the US, 2005–2018 — Recent Graduates
The drop in the Unemployment rate for “All Young Workers” since 2011 however is staggering.
IMO a non-dischargable loan should have a correspondingly extremely low interest rate, but I think there has to be a bright line drawn at forgiving principal except in the case of fraud on the part of the educator or the loan servicer.
Why should the principle not be discharged? Why is lending a virtually risk free position (which induces a massive moral hazard)
It’s non-dischargeable so that it can be offered to people with no collateral and who are otherwise entirely un-creditworthy.
Not surprisingly, this results in high delinquency rates!
The alternative is most people wouldn’t qualify for this level of debt, you would more highly subsidize cheaper public education, and private universities would have to rely entirely on endowments to provide financial aid to people who otherwise wouldn’t be able to afford to go.
At some point a $50k private undergraduate education (forget about $100k+!) is not for everyone, even if there are banks willing to write the check and put you into that kind of debt.
But think of the outcry if you were to limit the amount of educational debt someone could take on — for example by only making the first $20k non-dischargeable. It would fix the delinquency problem, drastically lower the total annual student loan rate, and cause private tuition prices overall to decline, but it would be called institutional racism.
I think we already went through this cycle with housing, when ~15 years ago politicians started saying that owning a home was a right and everyone should own one, regardless of ability to pay. Zero down, no income verification, guaranteed issue mortgages caused the housing bubble, and we see something nearly the same in education today saddling kids with debt way over their heads, except this time you can’t even walk away from it in exchange for a 7 year credit score hit.
Not surprisingly, this results in high delinquency rates!
The alternative is most people wouldn’t qualify for this level of debt, you would more highly subsidize cheaper public education, and private universities would have to rely entirely on endowments to provide financial aid to people who otherwise wouldn’t be able to afford to go.
At some point a $50k private undergraduate education (forget about $100k+!) is not for everyone, even if there are banks willing to write the check and put you into that kind of debt.
But think of the outcry if you were to limit the amount of educational debt someone could take on — for example by only making the first $20k non-dischargeable. It would fix the delinquency problem, drastically lower the total annual student loan rate, and cause private tuition prices overall to decline, but it would be called institutional racism.
I think we already went through this cycle with housing, when ~15 years ago politicians started saying that owning a home was a right and everyone should own one, regardless of ability to pay. Zero down, no income verification, guaranteed issue mortgages caused the housing bubble, and we see something nearly the same in education today saddling kids with debt way over their heads, except this time you can’t even walk away from it in exchange for a 7 year credit score hit.
> if you were to limit the amount of educational debt someone could take on — for example by only making the first $20k non-dischargeable. It would fix the delinquency problem, drastically lower the total annual student loan rate, and cause private tuition prices overall to decline, but it would be called institutional racism.
The solution to structural racism is more scholarship money, not more debt. Pell and Social Security supplement grants have gotten really meager since when I went to school.
> I think we already went through this cycle with housing, when ~15 years ago politicians started saying that owning a home was a right and everyone should own one, regardless of ability to pay.
Ahh yes, this old card. Blame the poors for financial crisis. Buddy most of the defaults weren't from poor people buying homes. People with good credit scores leveraged that score to speculate, over 85% of the defaults were for investment properties. Most of the mortgage defaults were done by your doctors, lawyers, realtors, general contractors, and business owners who watched one too many episodes of home flipping shows and thought they could get in on a good deal.
The solution to structural racism is more scholarship money, not more debt. Pell and Social Security supplement grants have gotten really meager since when I went to school.
> I think we already went through this cycle with housing, when ~15 years ago politicians started saying that owning a home was a right and everyone should own one, regardless of ability to pay.
Ahh yes, this old card. Blame the poors for financial crisis. Buddy most of the defaults weren't from poor people buying homes. People with good credit scores leveraged that score to speculate, over 85% of the defaults were for investment properties. Most of the mortgage defaults were done by your doctors, lawyers, realtors, general contractors, and business owners who watched one too many episodes of home flipping shows and thought they could get in on a good deal.
>> The solution to structural racism is more scholarship money, not more debt
I completely agree, scholarships and grants should be greater than the loan debt that a student takes on, and the maximum financial aid for a student should be capped annually in some way. There are simply too many student loans being made available to students that don't need them. I have a colleague that got a full ride through undergrad but managed to graduate with over two hundred thousand dollars in student loan debt. It is predatory lending to loan students more money than they need to cover their cost of education and cost of living (for a student).
I completely agree, scholarships and grants should be greater than the loan debt that a student takes on, and the maximum financial aid for a student should be capped annually in some way. There are simply too many student loans being made available to students that don't need them. I have a colleague that got a full ride through undergrad but managed to graduate with over two hundred thousand dollars in student loan debt. It is predatory lending to loan students more money than they need to cover their cost of education and cost of living (for a student).
Interesting point;
“When the economy slowed, defaults went up across income spectrums. But while the chance of a low-income borrower defaulting increased from 6 percent pre-crisis to 12 percent post-crisis, the chance of a high-income borrower defaulting went from almost zero to around 5 or 6 percent. And the latter group was defaulting on bigger loans.” [1]
I think the homeownership rate over time also tells a story, but perhaps this is dwarfed by the rate of sales and the collapse of prices causing ~25% of houses to actually be underwater.
However if you look at Mortgage Origination by Risk Score over time [2] and Debt-to-Income ratio over time [3] there is truth to the claim that the overall portfolio of homeowners also changed in the lead up to the crisis.
[1] - https://mitsloan.mit.edu/ideas-made-to-matter/rethinking-how...
[2] - https://infogram.com/1pwez02vj1mld0fvlzvmn3r1k9s9y7x5zgp
[3] - https://infogram.com/1pk6ve560vyl93c97kvpwy5dymt3kz1rd5g
“When the economy slowed, defaults went up across income spectrums. But while the chance of a low-income borrower defaulting increased from 6 percent pre-crisis to 12 percent post-crisis, the chance of a high-income borrower defaulting went from almost zero to around 5 or 6 percent. And the latter group was defaulting on bigger loans.” [1]
I think the homeownership rate over time also tells a story, but perhaps this is dwarfed by the rate of sales and the collapse of prices causing ~25% of houses to actually be underwater.
However if you look at Mortgage Origination by Risk Score over time [2] and Debt-to-Income ratio over time [3] there is truth to the claim that the overall portfolio of homeowners also changed in the lead up to the crisis.
[1] - https://mitsloan.mit.edu/ideas-made-to-matter/rethinking-how...
[2] - https://infogram.com/1pwez02vj1mld0fvlzvmn3r1k9s9y7x5zgp
[3] - https://infogram.com/1pk6ve560vyl93c97kvpwy5dymt3kz1rd5g
That's not to mention the lenders who signed people, knowing that they were taking on low-grade debt, to have someone package those mortgages with the good ones to obscure their risk and sell them to speculators.
[deleted]
I would like to see these graphs next to graphs of for-profit university attendance. Looking at wikipedia, for-profit grew rapidly until enrollment started dropping around 2009.
For-profit schools are "13 percent of the nation's college enrollment, but account for about 47 percent of the defaults on loans. About 96 percent of students at for-profit schools take out loans, compared with about 13 percent at community colleges and 48 percent at four-year public universities."- 2012 report [1]
[1] https://www.nytimes.com/2012/07/30/education/harkin-report-c...
For-profit schools are "13 percent of the nation's college enrollment, but account for about 47 percent of the defaults on loans. About 96 percent of students at for-profit schools take out loans, compared with about 13 percent at community colleges and 48 percent at four-year public universities."- 2012 report [1]
[1] https://www.nytimes.com/2012/07/30/education/harkin-report-c...
I've also heard that the pricing of for-profit schools is to maximize backed loans out before a student drops out (since most drop around the end of their second year). I know a lot of people who couldn't get funding for their final year of study.
If companies didn't require "higher education" degrees for entry, then schools would be forced to start appealing more to the masses. In an information age such as we live in, we can access virtually all the info we could get from universities for a mere fraction of the cost (just the books + supplemental material if we need it).
There's no need for government subsidized education or broadening the job market. There's need of ditching bureaucrats and "Because we've-always-done-it-this-way" morons. Reward people for studying on their own, building their own businesses, networking, etc. rather than following the stupid system just to get two letters next to their name.
There's no need for government subsidized education or broadening the job market. There's need of ditching bureaucrats and "Because we've-always-done-it-this-way" morons. Reward people for studying on their own, building their own businesses, networking, etc. rather than following the stupid system just to get two letters next to their name.
A little bit unrelated question: why are HE revolving loans so cheap, having negative CAGR? Some piece of economics i totally fail to understand.
They are guaranteed by taxpayers.
>Lots of student loans are also owned by pseudo government agencies or private companies with beneficial relationships with the Department of Education, such as NelNet Inc. (NYSE: NNI) and Sallie Mae (NYSE: SLM). Sallie Mae holds a lot of the loans made under the Federal Family Education Loan Program (FFELP), which was replaced by the federal government.
https://www.investopedia.com/articles/personal-finance/08121...
>Lots of student loans are also owned by pseudo government agencies or private companies with beneficial relationships with the Department of Education, such as NelNet Inc. (NYSE: NNI) and Sallie Mae (NYSE: SLM). Sallie Mae holds a lot of the loans made under the Federal Family Education Loan Program (FFELP), which was replaced by the federal government.
https://www.investopedia.com/articles/personal-finance/08121...
Exactly. To the tune of $120 Billion per year. That's a lot of people being artificially willing and able to pay higher and higher tuitions. The federal taxpayer guarantee on these loans is one of the strongest forces behind the dramatic rise in tuitions - if people can pay and pick the pricier institution, then universities will happily charge and spend more.
https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
Growth rate of the category is a different thing than internal rate of return. Negative CAGR just means that consumers are paying off or otherwise discharging the loan type at a faster rate than they're taking it out. Revolving home equity got a large amount of that wiped out in the 2008 crisis, which happened in the timeframe in question (2005-2018).
Oh God i just missed the point of that particular chart - it was the chart of average interest of each type of load, by growth rate of the total amount outstanding! LOL! Then it's clear.
Re the escalating price of universities, why do we treat the issue like it’s totally a mystery? Aren’t the budgets and costs of large public universities (E.g. the UC system here in CA) public? Weren't these choices based on specific choices by specific individuals who are public employees? Can’t we pinpoint precisely who raised prices and why? What should cost substantially more today than 25 years ago (after inflation)? And why don’t we just demand that a system like UC just go back to the precise budgets of, say, 1995 (again inflation adjusted)? It seemed to be working ok then.
Didn't they have a medical loss ratio requirement with obamacare that required 85% of premiums to go toward actual health care?
Could a similar requirement be imposed which specifically required some substantial percentage of the money to go toward teaching payroll, specifically excluding administrator payroll, leisure activities, athletics, and building construction?
Or rather than that, just require schools to publish the percentage of tuition spent on actual teacher/T.A. payroll by department?
Could a similar requirement be imposed which specifically required some substantial percentage of the money to go toward teaching payroll, specifically excluding administrator payroll, leisure activities, athletics, and building construction?
Or rather than that, just require schools to publish the percentage of tuition spent on actual teacher/T.A. payroll by department?
What would happen if subsidized loans were simply capped at a much lower maximum? You'd expect enrollment to drop at first, but would universities adapt by lowering tuition? Or would the enrollment rates just stay low? Or would students take more expensive loans?
No.
While more and better employment would help with the student debt, the fact is starting out in life saddled with what is essentially a home mortgage takes a huge bite out of the potential value of education.
And it carries a very high opportunity cost in that increasing numbers are avoiding school and or seeking options that do not put them in profound debt so early in life.
While more and better employment would help with the student debt, the fact is starting out in life saddled with what is essentially a home mortgage takes a huge bite out of the potential value of education.
And it carries a very high opportunity cost in that increasing numbers are avoiding school and or seeking options that do not put them in profound debt so early in life.
Schools charging the same amount to each student is an issue. Why should someone getting taught in an expensive engineering program pay the same as a British lit kid?
People want to do away with all the "useless" majors, which seems like a mistake to me. Colleges weren't about finding jobs until recently when companies decided to outsource training workers to these places. For our entire history colleges were places where people can learn about the world and different things. Suddenly shaming them for teaching literature when they have been doing it for hundreds of years is dumb. The answer is to just charge tuition relative to the cost of the particular education.
People want to do away with all the "useless" majors, which seems like a mistake to me. Colleges weren't about finding jobs until recently when companies decided to outsource training workers to these places. For our entire history colleges were places where people can learn about the world and different things. Suddenly shaming them for teaching literature when they have been doing it for hundreds of years is dumb. The answer is to just charge tuition relative to the cost of the particular education.
It's a crisis of handing too much money to people that have no chance of repaying it. We have people that took at $100k in loans for a music education degree. A very noble cause, but you're unlikely to pay that back within 15 years given the salary prospects.
The root of the problem like many other macro problems [housing crisis, income disparity, etc] is well-intentioned but misplaced government subsidies.
The root of the problem like many other macro problems [housing crisis, income disparity, etc] is well-intentioned but misplaced government subsidies.
It’s fairly obvious about what is going on with tuition costs. The burden has shifted from the tax payers to students, due to budget cuts. If you simply put the funding levels back to 90s a lot of this would go away.
https://www.cbpp.org/research/state-budget-and-tax/a-lost-de...
https://www.cbpp.org/research/state-budget-and-tax/a-lost-de...
I’m still trying to figure out why every major costs the same. Most non-STEM majors are using the same methods, and devices that were used 50, a hundred years ago.
$50K per year for an English degree vs $50k per year for a Mechanical Engineering degree, the English majors are getting jobbed. Think about all the majors that don’t require the underpinnings of constant technology upgrades, or need the latest and greatest technology.
$50K per year for an English degree vs $50k per year for a Mechanical Engineering degree, the English majors are getting jobbed. Think about all the majors that don’t require the underpinnings of constant technology upgrades, or need the latest and greatest technology.
Why should banks be allowed to inflate credit bubbles that people cannot pay back? Why do we keep saving the banks?
Because they have inordinate political leverage
That's how the economy keeps moving....
Too pessimistic?
Too pessimistic?
That's how you collapse economies.
To keep them moving, allow defaulting on loans, make the banks take the loss. They will stop issuing glaringly risky loans to the unqualified, preventing a 2008 style subprime loan crisis.
To keep them moving, allow defaulting on loans, make the banks take the loss. They will stop issuing glaringly risky loans to the unqualified, preventing a 2008 style subprime loan crisis.
The problem with college is that going to college won't make you an expert in your field. Even if you're an A+ student, the amount of knowledge required to be an expert vastly outpaces the knowledge gained by going to college.
That's part of it but mostly it's due to rent seeking on the part of degree granting institutions.
H1B compete with the newly graduated college students. Before people say that there’s no problem with STEM graduates finding a job, I’ll counter that many of my coworkers 20 years ago didn’t have STEM degrees, and were previously English majors, business majors, etc. They were people with technical aptitude who realized they had picked a field of study that didn’t quite suit their financial aspirations. They were able to get an entry level IT job and move up. Now those jobs are filled by H1B.
It's probably worthwhile to think about scale in this context: There are only 85000 H-1B visas issued each year by the US; 20k of those are reserved for people with advanced degrees [1]. Given that there are an estimated 3.87 million software developers working in the USA [2], this seems unlikely to be the root cause of the inability of some graduates to find entry level software jobs.
1. https://www.uscis.gov/working-united-states/temporary-worker... 2. https://en.wikipedia.org/wiki/Software_engineering_demograph...
1. https://www.uscis.gov/working-united-states/temporary-worker... 2. https://en.wikipedia.org/wiki/Software_engineering_demograph...
But how long are those visas good for? If it's multiple years, then we really need to count how many active H1Bs there are, not the number issued yearly.
I just Googled and found this article: https://qz.com/949589/the-h-1b-visa-cap-tells-you-very-littl...
... which indicates that about 500,000 H1B visas are currently valid. If those were to all go to tech workers, that would be about 1/7 of all software developers, which is definitely enough to move the needle on compensation, access to entry level jobs, and so on.
I just Googled and found this article: https://qz.com/949589/the-h-1b-visa-cap-tells-you-very-littl...
... which indicates that about 500,000 H1B visas are currently valid. If those were to all go to tech workers, that would be about 1/7 of all software developers, which is definitely enough to move the needle on compensation, access to entry level jobs, and so on.
You assume everyone is maxing it out.
My H1B extension still has ~2 years left on it, but I moved back last year..
But, sure -- it's not nothing. But go look at the stats.
My H1B extension still has ~2 years left on it, but I moved back last year..
But, sure -- it's not nothing. But go look at the stats.
There are a lot more technical jobs that require a degree than 3m software developers. There are dozens of different types of engineering and scientific domains apart from software development.
The vast majority of applicants were in IT, mainly developers, according to a quick search:
https://www.investopedia.com/news/h1b-visa-issue-explained-m...
https://www.investopedia.com/news/h1b-visa-issue-explained-m...
Even if we assume only half of H1Bs are in software developer roles, 1/14 of all software developers is still enough by my estimation to move the needle. Especially because, even just by random chance, there are likely to be concentrations of H1B visa holders in certain geographic areas.
Honestly I think even the quoted 85,000 number would be enough to move the needle, but 250,000 certainly would be.
Just a couple of "thought experiments"... if there are 3M software developers with on average a 20 year career, about 150,000 would be entering the workforce at any given time. If it's true that H1Bs compete with entry level workers for jobs, 85,000 visas would certainly have a felt impact.
Also, about why I think even 85,000 would affect the entire market... even a relatively small amount of additional workforce can shift the balance of market forces significantly. Again, as a thought experiment, let's say there are 100,000 jobs for software engineers and those software engineers are worth $200,000 to the companies that employ them. For simplicity, let's say additional software engineers beyond 100,000 are absolutely worthless to the company. Assuming we have 95,000 software engineers looking for jobs, they find themselves highly in demand and able to negotiate from a strong position for high salary, benefits, and so on. If we add another 10,000 engineers somehow, from any source (including increases in the local training of engineers), suddenly there are more engineers than the market demands, and a race to the bottom could begin (assuming all engineers were equal). Obviously there is also a skill distribution so the most highly skilled engineers would be less affected than those less skilled, but as you get closer to the bottom of the distribution, you'd be more affected by the changes to negotiating power even if you're more skilled than some of the new entrants.
Obviously the above is not a rigorous analysis, which could and should be done, but is just a thought experiment to show that it's POSSIBLE that a small number of new entrants could affect the market.
See also https://www.khanacademy.org/economics-finance-domain/ap-macr...
If anyone knows of good resources for estimating the supply/demand curves for software engineers, I'd be interested in reading them.
Honestly I think even the quoted 85,000 number would be enough to move the needle, but 250,000 certainly would be.
Just a couple of "thought experiments"... if there are 3M software developers with on average a 20 year career, about 150,000 would be entering the workforce at any given time. If it's true that H1Bs compete with entry level workers for jobs, 85,000 visas would certainly have a felt impact.
Also, about why I think even 85,000 would affect the entire market... even a relatively small amount of additional workforce can shift the balance of market forces significantly. Again, as a thought experiment, let's say there are 100,000 jobs for software engineers and those software engineers are worth $200,000 to the companies that employ them. For simplicity, let's say additional software engineers beyond 100,000 are absolutely worthless to the company. Assuming we have 95,000 software engineers looking for jobs, they find themselves highly in demand and able to negotiate from a strong position for high salary, benefits, and so on. If we add another 10,000 engineers somehow, from any source (including increases in the local training of engineers), suddenly there are more engineers than the market demands, and a race to the bottom could begin (assuming all engineers were equal). Obviously there is also a skill distribution so the most highly skilled engineers would be less affected than those less skilled, but as you get closer to the bottom of the distribution, you'd be more affected by the changes to negotiating power even if you're more skilled than some of the new entrants.
Obviously the above is not a rigorous analysis, which could and should be done, but is just a thought experiment to show that it's POSSIBLE that a small number of new entrants could affect the market.
See also https://www.khanacademy.org/economics-finance-domain/ap-macr...
If anyone knows of good resources for estimating the supply/demand curves for software engineers, I'd be interested in reading them.
Why would you compare a yearly number to a total number? A better comparison would be the yearly net change in H-1B holders vs. growth in the number US software developers.
That number may even be better for your argument, because 65K/yr entry level programmers entering a 4000K programming market seems huge.
That number may even be better for your argument, because 65K/yr entry level programmers entering a 4000K programming market seems huge.
How is it possible that 2.5% of the workforce is a programmer? One out of every 40 people?
It's a good question: you can see a fairly granular breakdown of the workforce by industry [here](https://www.bls.gov/cps/cpsaat11b.htm). There are about 5.1 million people working in "Computer and mathematical occupations", the majority of whom are developers.
I created a tree map out of it: https://void4.github.io/allgermans/americans.html
Previously, one with all Germans: https://void4.github.io/allgermans/Germany.html
Previously, one with all Germans: https://void4.github.io/allgermans/Germany.html
man a first look at that tree map made it seem strangely mis-represented... like there is no way there are that many dental assistants. Pro tip for viewers: zoom all the way out
20 years ago was a special time. Anyone who could spell HTML could get a job. Things are different now and the bar is a bit higher. Today’s equivalent of the English and business majors are boot camp grads.
The bar is higher because there's free (or near free) specialized education overseas and not domestically. Why pay to train entry level employers when the tax payers of X country will do it for you for free? Take away the subsidized labor pool and watch that bar fall back to the floor.
> The bar is higher because there's free (or near free) specialized education overseas and not domestically.
Uh not really.
I've been a front-end developer for almost ten years. When I first started out, yeah, you could teach a monkey to build a static site. Most of the jQuery I knew was copy and paste, easy stuff.
Now? You need to be an expert in Javascript, Object Oriented programming, CSS preprocessors, NPM and various build tools, template languages, responsive frameworks and at least another dozen or so technologies people are using to create dynamic websites. This doesn't even scratch the surface of what you need to know if you're interested in developing mobile apps.
Web designers don't have it much easier. You need to be completely fluent with every Adobe tool and Apple Sketch or any collection of wireframing software. Toss in deep knowledge of font pairings, color theory and you need to have expert level knowledge of CSS. You're not a "web designer" anymore either. You're now a UI/UX developer.
And did I mention that every single one of these technologies come and go faster than mumble rappers on Soundcloud? So once you've taken a year or so to learn BackboneJS, poof then Angular and ReactJS comes out, and now you have to pivot to those languages. Oh, you're company loved Angular but the new guys like ReactJS? Oh too bad, now we're going to use React instead. Oh you just interviewed for a new role, but they're in love with VueJS, do you know that too?
The bar is higher because development in general has become exponentially more complex and continues to get more complex every month. Specialized Education overseas really has nothing to do with it. At the rate technology is changing on the front-end side, there's just no way education can keep up.
Uh not really.
I've been a front-end developer for almost ten years. When I first started out, yeah, you could teach a monkey to build a static site. Most of the jQuery I knew was copy and paste, easy stuff.
Now? You need to be an expert in Javascript, Object Oriented programming, CSS preprocessors, NPM and various build tools, template languages, responsive frameworks and at least another dozen or so technologies people are using to create dynamic websites. This doesn't even scratch the surface of what you need to know if you're interested in developing mobile apps.
Web designers don't have it much easier. You need to be completely fluent with every Adobe tool and Apple Sketch or any collection of wireframing software. Toss in deep knowledge of font pairings, color theory and you need to have expert level knowledge of CSS. You're not a "web designer" anymore either. You're now a UI/UX developer.
And did I mention that every single one of these technologies come and go faster than mumble rappers on Soundcloud? So once you've taken a year or so to learn BackboneJS, poof then Angular and ReactJS comes out, and now you have to pivot to those languages. Oh, you're company loved Angular but the new guys like ReactJS? Oh too bad, now we're going to use React instead. Oh you just interviewed for a new role, but they're in love with VueJS, do you know that too?
The bar is higher because development in general has become exponentially more complex and continues to get more complex every month. Specialized Education overseas really has nothing to do with it. At the rate technology is changing on the front-end side, there's just no way education can keep up.
There was free and low cost education available overseas 20 years ago. I don’t buy your argument.
20 years ago, I'm willing to bet the number of IT degrees overseas was a small fraction compared to today. Over the last 20 years the market has reacted to the conditions available and lead to the situation we have now.
You may be "willing to bet," but this is just you asserting that your premise is true. Do you have any data? My claim that free and low cost university-level education was available outside the US is easily verifiable with a 10 second Google search.
> there's free (or near free) specialized education overseas and not domestically.
There's free specialized education available on the internet for anyone who is an autodidact.
There's free specialized education available on the internet for anyone who is an autodidact.
Plenty of H1B holders create jobs as well. The economy isn't a pie of fixed size with everyone fighting over a limited number of slices.
Overall, immigration has been a net boon to the US's economy, including the creation of many jobs.
Overall, immigration has been a net boon to the US's economy, including the creation of many jobs.
Net boon to the economy in terms of GDP, but it does have some negative effects on wages and employment.
Not necessarily. A lot of immigrants are job creators. Think of how many startup founders are foreign, and have created a lot of money and jobs for a lot of people. Hell, look at how well represented foreigners are in the upper echelons of the FAANGs. Even Sergey Brin was born in Moscow.
Why can't a 28 American with an English major do a coding bootcamp and find an entry level job? I'm sure if he's reasonable intelligent and ambitious he can. There aren't that many h1b's around competing with him, most American jobs aren't h1b jobs.
For starters, H1Bs are cheaper to hire. Also, they're more desperate to stay in the US, so they won't demand too much and won't walk away from poor conditions.
That also fixes with the population issue since middle class Americans can't really afford to have kids.
That also fixes with the population issue since middle class Americans can't really afford to have kids.
> For starters, H1Bs are cheaper to hire
Citation needed, because this is a sweepingly broad statement. To hire an H1B you need to pay the prevailing wage, usually at least $60k, which is more than an entry-level non-STEM college grad is going to be paid outside the Bay Area (it should still be increased to something like $90-95k IMO but that's a different issue).
In addition to that, there are thousands of dollars in legal fees. And of course the application has to win the lottery (which happens in April) and then be approved for the visa (which starts in October). Which means you have to wait at least 7 months after extending an offer for the employee to start.
Citation needed, because this is a sweepingly broad statement. To hire an H1B you need to pay the prevailing wage, usually at least $60k, which is more than an entry-level non-STEM college grad is going to be paid outside the Bay Area (it should still be increased to something like $90-95k IMO but that's a different issue).
In addition to that, there are thousands of dollars in legal fees. And of course the application has to win the lottery (which happens in April) and then be approved for the visa (which starts in October). Which means you have to wait at least 7 months after extending an offer for the employee to start.
Yeah, in theory. In practice H1B abuse is rife. You can look at HN's previous discussion on this.
It is hard to afford to raise kids in the bay area.
It is not so hard to afford to raise kids somewhere else, say Salt Lake City or Syracuse, NY.
This is the "comparative advantage" that Adam Smith told you about. India can export kids to the bay area, but so can other parts of the U.S.
It is not so hard to afford to raise kids somewhere else, say Salt Lake City or Syracuse, NY.
This is the "comparative advantage" that Adam Smith told you about. India can export kids to the bay area, but so can other parts of the U.S.
In my anecdotal experience, the business axes a position and downgrades responsibilities to a lower title. So what a Sr. DBA did before would go to a regular DBA or even a Jr. DBA. It doesn't matter what the prevailing wage for a title is when responsibilities are loosely coupled.
I think the best way to counter the abuse is to increase the premium ($100k+) and allow H1Bs to move between companies.
I think the best way to counter the abuse is to increase the premium ($100k+) and allow H1Bs to move between companies.
> So what a Sr. DBA did before would go to a regular DBA or even a Jr. DBA.
GP was asserting that it is cheaper to hire H1Bs than entry-level grads, which isn't the same thing as what you're describing.
> I think the best way to counter the abuse is to increase the premium ($100k+) and allow H1Bs to move between companies.
I agree re: increasing the minimum to ~$90-100k. Maybe apply a CoL based multiplier so it's $85k in, for instance, Tulsa but $135-145k in the Bay Area.
H1Bs are already allowed to move between companies. But the new company has to apply for a fresh visa, without going through the lottery, and it takes a few weeks, which is a hassle. Plus there's a risk of being denied or going into RFE. I think that rule could be tweaked to allow movement without approval if the offered salary in the new role is higher by a certain minimum percentage (like say 10% increase).
GP was asserting that it is cheaper to hire H1Bs than entry-level grads, which isn't the same thing as what you're describing.
> I think the best way to counter the abuse is to increase the premium ($100k+) and allow H1Bs to move between companies.
I agree re: increasing the minimum to ~$90-100k. Maybe apply a CoL based multiplier so it's $85k in, for instance, Tulsa but $135-145k in the Bay Area.
H1Bs are already allowed to move between companies. But the new company has to apply for a fresh visa, without going through the lottery, and it takes a few weeks, which is a hassle. Plus there's a risk of being denied or going into RFE. I think that rule could be tweaked to allow movement without approval if the offered salary in the new role is higher by a certain minimum percentage (like say 10% increase).
> For starters, H1Bs are cheaper to hire.
As an H1B, I am paid squarely in the middle of the pay band of my co-workers that share my performance rating and ladder level. If you combine that with all the immigration-related legal expenses my employer is racking up, I cost more then the average employee, here.
I ask - just because there's some shitty headshops that illegally employ H1Bs at below-market rate, don't generalize that to the entire population of visa-holders.
As an H1B, I am paid squarely in the middle of the pay band of my co-workers that share my performance rating and ladder level. If you combine that with all the immigration-related legal expenses my employer is racking up, I cost more then the average employee, here.
I ask - just because there's some shitty headshops that illegally employ H1Bs at below-market rate, don't generalize that to the entire population of visa-holders.
Middle class Americans can absolutely afford to have kids. People in certain metros maybe can't afford it, but living there is often a choice they explicitly make, or at the very least talk themselves into. Sure you make half as much working somewhere else, but the cost of living is also a quarter as much.
Yep. That.
Every time I read something about the cost of having kids I'm looking for some idea of where these people live.
The single largest expense for kids is day care and that's only necessary if you have 2 working parents...and if one of those parents income doesn't more than justify the cost of daycare it's usually a better idea to have a stay at home.
People seriously take for granted the financial value that a stay at home parent brings to a home in overall cost savings. Expenses go up based on lack of time, more so than anything else. It affects your shopping, cooking, home maintenance, yard maintenance, eating out, fuel costs and long term child care costs (after school activities, day care, summer day camps, etc) that you have to worry about when you keep needing to free up time so that you can get to work.
And all of those expenses are higher in densely populate areas where there's more demand for all of the "good" activities.
But it often comes down to a matter of pride to have a stay at home parent.
Every time I read something about the cost of having kids I'm looking for some idea of where these people live.
The single largest expense for kids is day care and that's only necessary if you have 2 working parents...and if one of those parents income doesn't more than justify the cost of daycare it's usually a better idea to have a stay at home.
People seriously take for granted the financial value that a stay at home parent brings to a home in overall cost savings. Expenses go up based on lack of time, more so than anything else. It affects your shopping, cooking, home maintenance, yard maintenance, eating out, fuel costs and long term child care costs (after school activities, day care, summer day camps, etc) that you have to worry about when you keep needing to free up time so that you can get to work.
And all of those expenses are higher in densely populate areas where there's more demand for all of the "good" activities.
But it often comes down to a matter of pride to have a stay at home parent.
Current income justifying day care is a short term and fallacious comparison. You need to look at long term potential. Leaving the labor force does more than just set you back the years you were gone.
You do of course...but you also have to determine long term cost potential of all of the other expenses and savings besides day care.
It compounds in both directions and gets amplified by the continued lack of time due to balancing home and work commitments. Usually it takes a couple of years of exhaustion before people come face to face with the realization that things would be much easier of one person was a stay at home.
The formula is trickiest in the middle. At the higher end, a lot of couples will hire a nanny that can provide many of the same benefits as a stay at home. At the lower end, the decision is fairly easy.
It's in the middle where it's toughest to come to grips with it.
It compounds in both directions and gets amplified by the continued lack of time due to balancing home and work commitments. Usually it takes a couple of years of exhaustion before people come face to face with the realization that things would be much easier of one person was a stay at home.
The formula is trickiest in the middle. At the higher end, a lot of couples will hire a nanny that can provide many of the same benefits as a stay at home. At the lower end, the decision is fairly easy.
It's in the middle where it's toughest to come to grips with it.
Also really depends what you are chasing, both as an individual and a family unit. It's an optimization problem where there are more variables than income.
Edit:
Personally, I think the whole financial independence movement is pretty interesting, and sometimes I get myself through the day by viewing it as my wife being financially independent. Which is halfway there as far as things go.
Edit:
Personally, I think the whole financial independence movement is pretty interesting, and sometimes I get myself through the day by viewing it as my wife being financially independent. Which is halfway there as far as things go.
I should have clarified. Middle class Americans cannot afford to have kids if they want the type of lifestyle they grew up with. Someone who grew up in Boston will need to move further out; someone who grew up with a single mom in Austin can no longer afford to raise a kid there without a spouse.
A lot of American's grew up middle class but aren't anymore, they still think of themselves as such but truly aren't. This is how most Millenials live, they are too broke to have kids, think of themselves as middle class because they grew up that way, even if in reality they aren't.
What do you consider middle class? That term is notoriously ill-defined.
Being able to support yourself and a family with a (single) full time job. That includes owning a home, a car, being able to afford to see a doctor when you have to, going to the occasional movie and taking a vacation once in a while. It includes being able to do all these things without being one illness or one unexpected expense away from being homeless or destitute. It includes the prospect of being able to be able to retire no later than your mid 60s with enough money to maintain a similar (if not the same) standard of living.
~40 years ago this "middle class" standard of living was readily attainable for anyone who diligent, reasonable intelligent, and willing to work hard. Not only that, it was standard for such a lifestyle to be achievable with only one household member working. Now the much more common circumstance is that both adults work, many of the above living conditions are barely achievable, if at all, and many families are one financial hiccup away from disaster.
We can debate over the various reasons for this change in the economic landscape for working people, but there is no debate to be had over the reality of it. The change has been substantive. Its much, much harder for the average working person today to live comfortably and raise a family than it was just a few decades ago.
~40 years ago this "middle class" standard of living was readily attainable for anyone who diligent, reasonable intelligent, and willing to work hard. Not only that, it was standard for such a lifestyle to be achievable with only one household member working. Now the much more common circumstance is that both adults work, many of the above living conditions are barely achievable, if at all, and many families are one financial hiccup away from disaster.
We can debate over the various reasons for this change in the economic landscape for working people, but there is no debate to be had over the reality of it. The change has been substantive. Its much, much harder for the average working person today to live comfortably and raise a family than it was just a few decades ago.
That all seems pretty true. People have spent that past decade telling me that I'm going to be less well off than my parents, though. So I guess my opinion is that it's best to just accept it and adjust your lifestyle accordingly. We still live like kings compared to most of human history.
Also, the social safety net in the US isn't great, but it definitely exists. You can be a pretty big screw up and still have a roof over your head. You just won't have much else.
Also, the social safety net in the US isn't great, but it definitely exists. You can be a pretty big screw up and still have a roof over your head. You just won't have much else.
>People have spent that past decade telling me that I'm going to be less well off than my parents, though. So I guess my opinion is that it's best to just accept it and adjust your lifestyle accordingly.
If I told you I was going to beat you up and steal your money every night, it doesn't mean you should just smile and accept it as inevitable, even if that's really my plan.
>We still live like kings compared to most of human history.
We have more collective wealth than any time in human history, and more collective wealth than we did ~40 years ago when working people had the living conditions I described above. As far as I'm concerned, there's no "good" or "acceptable" reason that the artificial system ("the economy") that we designed and continue to maintain, that has resulted in far worse living conditions for the average American, should not be changed so that our collective wealth is more evenly distributed among those who participate in our system. Especially dishonest and (more frequently) ignorant people will blame the, "free market" for the massive (and growing) disparity in wealth, but there is nothing about our economic system that is "free". From our central bank to our byzantine "regulatory" structure to our legal system to our tax code to currency control and beyond, we have a financial system that is tightly controlled, regulated, and guided by powerful, entrenched interests at the upper echelon of the financial world. It isn't even useful to draw a distinction between governmental and non-governmental entities at this level, because they are the same. Our economy has been guided and controlled by a rotating door of corporatists (or whatever other adjective you choose to describe our economic oligarchs) to ensure wealth consolidation.
We can either recognize the problem - that our whole system has been off the rails for some time and is horribly broken - or we can continue down the same path of the rich getting richer and the poor getting poorer until we reach a breaking point. Hopefully we choose the former path but unfortunately the latter seems more likely.
If I told you I was going to beat you up and steal your money every night, it doesn't mean you should just smile and accept it as inevitable, even if that's really my plan.
>We still live like kings compared to most of human history.
We have more collective wealth than any time in human history, and more collective wealth than we did ~40 years ago when working people had the living conditions I described above. As far as I'm concerned, there's no "good" or "acceptable" reason that the artificial system ("the economy") that we designed and continue to maintain, that has resulted in far worse living conditions for the average American, should not be changed so that our collective wealth is more evenly distributed among those who participate in our system. Especially dishonest and (more frequently) ignorant people will blame the, "free market" for the massive (and growing) disparity in wealth, but there is nothing about our economic system that is "free". From our central bank to our byzantine "regulatory" structure to our legal system to our tax code to currency control and beyond, we have a financial system that is tightly controlled, regulated, and guided by powerful, entrenched interests at the upper echelon of the financial world. It isn't even useful to draw a distinction between governmental and non-governmental entities at this level, because they are the same. Our economy has been guided and controlled by a rotating door of corporatists (or whatever other adjective you choose to describe our economic oligarchs) to ensure wealth consolidation.
We can either recognize the problem - that our whole system has been off the rails for some time and is horribly broken - or we can continue down the same path of the rich getting richer and the poor getting poorer until we reach a breaking point. Hopefully we choose the former path but unfortunately the latter seems more likely.
> If I told you I was going to beat you up and steal your money every night, it doesn't mean you should just smile and accept it as inevitable, even if that's really my plan
I didn't say smile and accept it. I said "adjust your lifestyle". The rules changed, so how you play needs to change with it.
If you tell me you're going to beat me up and take my money every time you see me, I'm going to make sure we don't cross paths.
My point is that there is no reason to be surprised at what is happening because people have been telling us that is what will happen.
The fact is, there are a bunch of people who are in effect living a life of "He told me he'd beat me up and take my money every day, and sure enough every time I see him, he beats me up and takes my money, but maybe tomorrow he won't!"
When someone shows you their cards, take advantage of it, is all I'm saying.
I didn't say smile and accept it. I said "adjust your lifestyle". The rules changed, so how you play needs to change with it.
If you tell me you're going to beat me up and take my money every time you see me, I'm going to make sure we don't cross paths.
My point is that there is no reason to be surprised at what is happening because people have been telling us that is what will happen.
The fact is, there are a bunch of people who are in effect living a life of "He told me he'd beat me up and take my money every day, and sure enough every time I see him, he beats me up and takes my money, but maybe tomorrow he won't!"
When someone shows you their cards, take advantage of it, is all I'm saying.
- $50-$99 is lower middle
- $100-$199 is middle
- $200-$499 is upper middle
- $500-$999 is lower upper
Etc.
That’s the scale I’ve always used (household income).
Most millennials fall in the lower middle or middle bucket.
- $100-$199 is middle
- $200-$499 is upper middle
- $500-$999 is lower upper
Etc.
That’s the scale I’ve always used (household income).
Most millennials fall in the lower middle or middle bucket.
This is probably accurate given how our society really is structured. But following your thresholds:
- 61% of incomes are below lower middle
- 26% of incomes are lower middle (median being $61,822)
- 10% of incomes are middle
- 3% (nearly) of incomes are upper-middle
- <1% is remaining…
Data from https://dqydj.com/income-percentile-calculator/
Caveat, this is individual income, and you're talking about household income, so not quite the same for couples where both work.
- 61% of incomes are below lower middle
- 26% of incomes are lower middle (median being $61,822)
- 10% of incomes are middle
- 3% (nearly) of incomes are upper-middle
- <1% is remaining…
Data from https://dqydj.com/income-percentile-calculator/
Caveat, this is individual income, and you're talking about household income, so not quite the same for couples where both work.
The real median household income was $61,372 in 2017. I think your scale may be incorrect.
https://fred.stlouisfed.org/series/MEHOINUSA672N
Your lower-upper class is a subset of the top 1% of incomes.
https://dqydj.com/united-states-household-income-brackets-pe...
https://fred.stlouisfed.org/series/MEHOINUSA672N
Your lower-upper class is a subset of the top 1% of incomes.
https://dqydj.com/united-states-household-income-brackets-pe...
On that scale, pretty much everyone I know / grew up around is lower middle class. Not a bad life.
A quarter? Dream on. We're living in the Midwest with an East coast salary (remote).
I have no idea how other ppl here afford kids and manage to save. We spend $30k on day care and another $12k on health premiums alone.
I have no idea how other ppl here afford kids and manage to save. We spend $30k on day care and another $12k on health premiums alone.
Living in the Midwest on a Midwest salary ($85k/yr), currently 30 years old, have 3 kids, a stay at home wife, and a net worth that just peeked over $250k.
Also, our work health insurance is shit, so $200 gets taken out of my paycheck each week for that, which puts it right around the $12k you mentioned.
Daycare is stupid expensive. Healthcare is stupid expensive. We handle the former by having my wife stay home. The latter is just an unfortunate fact of life.
I really don't know how much it costs to live on the coasts, but on a developer salary you can live very comfortably in the Midwest (Ames, Iowa here).
Also, our work health insurance is shit, so $200 gets taken out of my paycheck each week for that, which puts it right around the $12k you mentioned.
Daycare is stupid expensive. Healthcare is stupid expensive. We handle the former by having my wife stay home. The latter is just an unfortunate fact of life.
I really don't know how much it costs to live on the coasts, but on a developer salary you can live very comfortably in the Midwest (Ames, Iowa here).
A single-income family with children and a stay-at-home parent isn't an unfortunate fact of life, it's a stable economic and social arrangement that promotes health and welfare of children, giving them a strong prospect for future success.
war1025 said that the healthcare being stupid expensive is an unfortunate fact of life, not the single-income family.
So you are saying if you have a non-fatal health incident then you are in serious financial trouble?
My wife and I are in the same position. We pay $209 a month for “healthcare” coverage that has a $700 yearly deductible. If either of us got sick or injuries we would be totally screwed. The US system is broken. We have massive wealth inequality, an educational system in crisis, and a toxic political system.
My wife and I are in the same position. We pay $209 a month for “healthcare” coverage that has a $700 yearly deductible. If either of us got sick or injuries we would be totally screwed. The US system is broken. We have massive wealth inequality, an educational system in crisis, and a toxic political system.
I assume by $700 you mean $7000? Also wondering if your $209 / month figure was accurate. What your comment currently describes is 1/4 the premium and 1/10th the deductible that my family has.
I agree that healthcare in the US is completely broken. It is in fact one of my favorite things to gripe about to anyone who will listen or who happens to be in my vicinity at the wrong moment.
I think our current "out of pocket max" is somewhere around $6k/year. The bill for having twins blew through that pretty well. When we had our first child, our deductible was roughly twice as much and I think we maybe just scratched the out of pocket max. Those insurance premiums were only a third of what we pay now though, which was a better trade off in my opinion.
Would we be financially ruined by running into something like that again? No. Would we be majorly inconvenienced? Yes.
I agree that healthcare in the US is completely broken. It is in fact one of my favorite things to gripe about to anyone who will listen or who happens to be in my vicinity at the wrong moment.
I think our current "out of pocket max" is somewhere around $6k/year. The bill for having twins blew through that pretty well. When we had our first child, our deductible was roughly twice as much and I think we maybe just scratched the out of pocket max. Those insurance premiums were only a third of what we pay now though, which was a better trade off in my opinion.
Would we be financially ruined by running into something like that again? No. Would we be majorly inconvenienced? Yes.
Cheaper to hire by the design of people that agree with you: if you want them to be just as pricey as an american you have to eliminate all restrictions of negotiation.
You also have to eliminate all tax-benefits that americans receive that foreigners don't. And then you have to make public all wages of american citizens, to equal the information asymetry
You also have to eliminate all tax-benefits that americans receive that foreigners don't. And then you have to make public all wages of american citizens, to equal the information asymetry
Why is "do a coding bootcamp" the common refrain from tech workers trying to help non-tech people?
Because the truth is that the technical work is not the barrier, but rather the grit to grind through the hundreds of little problems that you'll encounter on the way to getting a working piece of code. So "do a coding bootcamp" functions as a rapid weeding process where someone can find out quickly if they're up to the career or not. Then if they're not, they didn't waste a ton of time finding out that it doesn't work out for them, and if they are, then the bootcamp will provide further vectors to progress.
Because tech work is magical and plentiful regardless of where you are and everyone can become a programmer /s
I do believe that if you can learn to read and write, you can learn to program.
The drive into getting more people to code is to increase the supply and lower pay.
Besides "get a CS degree", what are the other alternatives? Telling people to learn how to program themselves isn't very successful; if they were the kind of person who'd do that, they'd have already done it; it's not like they were just waiting for someone to tell them to do it.
Because it's a way into tech for non-tech people? This wasn't, as far as I understood, a general suggestion for all English majors, but for those that allegedly used to be able to simply start in tech jobs 20 years ago. Now they may need a bit of prior knowledge, which boot camps can help with.
Because the barrier to entry is still quite low. While maybe not "Anyone who could spell HTML could get a job" low, as said in another comment here, it's still so low that I'd wager a decently clever person with a good 3 month bootcamp can get a _entry-level_ job.
I would say the entry level market for devs is very saturated.
If they're making more than any other job you can get with 3-6 mos. of training, the market is not saturated.
That's a fallacious argument though, because at the lower end tech jobs pay more than other careers but result in you being exploited by corporations looking to drive wages down.
When I graduated, there were companies offering me 30-40k a year in cities like Seattle. I have friends that could tell you the same story, some who took the opportunity because of the entry level market being saturated.
Bootcamp graduates are often placed in incredibly exploitative contracting environments (often in companies that also underpay, abuse and threaten H1Bs) which are farmed out to larger companies looking to get work done cheap. Though this has just been my personal experience and that of my friends. They leverage desperation.
When I graduated, there were companies offering me 30-40k a year in cities like Seattle. I have friends that could tell you the same story, some who took the opportunity because of the entry level market being saturated.
Bootcamp graduates are often placed in incredibly exploitative contracting environments (often in companies that also underpay, abuse and threaten H1Bs) which are farmed out to larger companies looking to get work done cheap. Though this has just been my personal experience and that of my friends. They leverage desperation.
It's really become rather saturated at the entry level.
It's a market for lemons situations, where there may be a lot of opening, but there's tons of unqualified candidates.
There are no entry-level jobs.
It's the commodification of the profession.
I never understood this either, it's not practical advice for most people. You might as well say "become a plumber", "do electrician school", or even "go be a doctor".
There are a variety of high demand and well paying jobs, but not everyone is interested in them, or even cut out for them.
There are a variety of high demand and well paying jobs, but not everyone is interested in them, or even cut out for them.
Because tech workers like devaluing their skills.
Because the number of openings for entry tech workers is essentially infinite. (Wait, what?)
Because non-technical work is regarded as completely worthless and there is more merit in being a minimally-competent HTML-slinger.
Because the number of openings for entry tech workers is essentially infinite. (Wait, what?)
Because non-technical work is regarded as completely worthless and there is more merit in being a minimally-competent HTML-slinger.
No idea. I think it is somewhat suicidal to want to commodify your own profession.
Not many entry level jobs. Everyone is hiring experienced candidates because that's what H1B's are, experienced.
Would you rather hire an entry-level domestic worker for the same salary as an experienced foreign worker?
Would you rather hire an entry-level domestic worker for the same salary as an experienced foreign worker?
Not necessarily - they just need to have a degree.
Pretty sure saying "learn to code" will get you in trouble on Twitter. Not sure about here. Watch out, though.
Twitter is such a weird echo chamber of madness. People there will get themselves so twisted up about nonsense and just end up feeding the trolls. Unfortunately, it starts leaking out into regular society.
Not just 20, but all the way back from the beginning of programming until perhaps the mid 80s.
English majors, telephone company employees who were getting a bit old to climb poles, bright high schoolers who got trained in the military, science grad school dropouts, etc etc, and somehow code got written.
English majors, telephone company employees who were getting a bit old to climb poles, bright high schoolers who got trained in the military, science grad school dropouts, etc etc, and somehow code got written.
I'd look at our own problems rather than trying to blame immigrants, who have always been part and parcel of the US economy.
Indeed, many of those companies wouldn't be around were it not for immigrants, since they not only work for companies, but also found them and of course purchase their products and services.
Indeed, many of those companies wouldn't be around were it not for immigrants, since they not only work for companies, but also found them and of course purchase their products and services.
H1Bs are not meant for immigration. Their purpose is to fulfill a void in the highly educated work force by employing a temporary, foreign worker.
I think his point has some validity since H1Bs can replace local workers with lower paying H1B substitutes. Yes, this isn't allowed but it happens all the time.
I think his point has some validity since H1Bs can replace local workers with lower paying H1B substitutes. Yes, this isn't allowed but it happens all the time.
It's crucial to keep in mind that this is not a zero sum game.
There is not a fixed lump of labor to be divided up.
There is not a fixed lump of labor to be divided up.
I don't agree that it's a major problem to underemployment- especially not the massive underemployment referenced in the article. But I still think it's a problem that should be corrected.
You have another option for people of your ideological inclination: ban any software product that is made outside of the us. Inevitable, consumers will have to turn to the domestic market which will inflate the salaries you are so interested in protecting.
Once that works, you can advance further and ban free open-source, including platforms like Github. Free labor is the enemy of high wages. You can increase salaries even more by regulating licenses and limiting how many people can be software engineers or write code at all.
And then you can keep going, and ban high use of computing power: you will need more labor to compensate the inefficiencies of wasteful, environment harming, computer processing.
Success is guaranteed!
Once that works, you can advance further and ban free open-source, including platforms like Github. Free labor is the enemy of high wages. You can increase salaries even more by regulating licenses and limiting how many people can be software engineers or write code at all.
And then you can keep going, and ban high use of computing power: you will need more labor to compensate the inefficiencies of wasteful, environment harming, computer processing.
Success is guaranteed!
>Now those jobs are filled by H1B
How do you know that? I doubt this claim. Plenty of people still teach themselves programming and get jobs.
How do you know that? I doubt this claim. Plenty of people still teach themselves programming and get jobs.
Basically cross-train on private sector money and time. There should be a "don't follow your dreams" social campaign.
That's difficult when there is a motivation and purpose glut. Lot's of people/kids struggling to find connection and purpose. They hope they can achieve this through higher learning.
An alienation epidemic. Everyone wants a job that's at least one of: personally meaningful, or clearly helpful to others. Also it should pay the bills well enough to gain you housing somewhere with decent schools. Good friggin' luck.
> Everyone wants a job that's [..] clearly helpful to others.
I can imagine no better symptom to show how utterly sick the current economic system is, than that it takes luck to find a job where one is helpful to others and paid well. Helping others in exchange for money is supposed to be the basis of the free market!
I can imagine no better symptom to show how utterly sick the current economic system is, than that it takes luck to find a job where one is helpful to others and paid well. Helping others in exchange for money is supposed to be the basis of the free market!
If a company is okay with employees "cross training" is that a problem? They're not forced to train employees, but the good ones will.
It seems more fruitful to focus on what product is being sold through state-subsidized loans and if they provide the necessary value. Bloated administrations is largely to blame for the increased cost, and a middle class student getting a student loan they can't default on for a degree without earning potential is not a good choice.