Category Archives: Student debt

It’s not how much you spend on university. It’s how wisely

between friends


Rise of the ‘precariat
,’
the global scourge of precarious jobs

Barely one in four of the global workforce has a stable job, UN reports
– CBC News, World, June 1, 2015

Contract work is here to stay, says Bank of England governor
UK job market has changed permanently due to financial crisis, Mark Carney tells Treasury select committee
– The Guardian, November 25, 2014


In his Nov. 1, 2015, editorial ‘The 21st-Century Club’, Fortune editor Alan Murray said of the 13th Fortune Global Forum:

“We are now in the early stages of the third Industrial Revolution. New corporate behemoths like Google, Facebook and Uber are reaching Fortune 500 size at unprecedented speed. The century will belong to those who master this new model. Economic dynamism will matter more than sheer scale. The invitation-only CEO gathering (Nov. 2-4) will include leaders of many of the largest companies in the world and focus on the challenge of ‘Winning in the Disruptive Century'”. (You can view the agenda of the recently concluded event by clicking here.)

One of the advantages of living in the early 21st century is that all it takes to see how some of the most powerful corporations in the world are going to change the way we live and work is a few keystrokes. What the Forum attendees heard and discussed wasn’t ‘if’: it was when—and when is now.

Those companies will need the help of well-educated young minds and they’re not alone. They’ve declared their intentions publicly which means that the word is out on what kinds of schooling they’ll be looking for. Parents and children who plan to attend university have to read that word, understand it and act on it. We know the names of the people who are shaping the future and the names of the companies they head. The information they’re making available about what they’re thinking is free.

It’s not how much parents are spending on higher education that matters; it’s how wisely they’re spending it. It’s a lot cheaper to avoid making a mistake than it is to correct it. The two articles at the top of this page speak to the consequences. So does this story about the precariat by Joe Fiorito in today’s Toronto Star. How is someone who is just starting out supposed to repay student loans on irregular or inconsistent income? At what point will the rising cost of tuition put post-secondary education out of reach? What will the impact be on the universities themselves?

There’s a glut of degrees on the street. Jobs that used to call for a high school diploma now call for a degree but pay high school wages. Graduates are accepting them even though they aren’t full-time and employers don’t look gift horses in the mouth. Had graduates taken the time to scrutinize the labour market before they put their money down, they might not have run out of options.

We can’t blame all of this on graduates any more than we can blame all of it on universities or governments. But we can blame it on a changing employer-employee social contract that has already cost many parents their job. Why weren’t they and others paying attention?

The environment in which today’s jobs exist is as important as the jobs themselves. Free trade agreements are part of that environment. Compromises were built into every one of them. To get, we gave. And what we gave was often measured in jobs lost. Canada has entered into 44 of those agreements so far and concerns are being expressed about the Trans-Pacific Partnership, which has yet to be ratified. Politicians and businesspeople love to boast about how many new jobs the agreements they ink will create. What kind of jobs are they? Will they be permanent or precarious? What qualifications will they call for? How much will they pay?

In its Oct. 24th – 30th issue, The Economist published ‘Reinventing the company’. In its Nov. 1st issue, FORTUNE published ‘The 21st Century Corporation: Every aspect of your business is about to change’. This is what Geoff Colvin said in his lead-in:

“Imagine an economy without friction—a new world in which labor, information, and money move easily, cheaply, and almost instantly. Psst—it’s here. Is your company ready?”

Please be sure to read FORTUNE editor Alan Murray’s editorial ‘The 21st-Century Club’. It’s what the C-Suite is reading and it’s already here.

By no means does this apply to all lines of work or to all degrees or all post-secondary diplomas and certificates. But where it does, and if precarious employment is the outcome, how do we calculate the value of higher education? Or the cost? Is it the education, the way it’s chosen, or both?

Even if parents are prepared to borrow money to put their kids through college, someone is going to have to pay it back. In the States, 7 million have defaulted on their loans. The US$1.2 trillion owing isn’t the figment of someone’s imagination: it’s real. In Canada, the number is between C$25 billion and C$50 billion, and one family in 8 is shouldering the burden.

To see the numbers for yourself, go to Google Alerts and set it to deliver links to articles with the words “student debt” in them to your e-mail inbox once a day. You’ll average 10 per day, 7 days a week, 52 weeks a year. I have been since October 2012, and the problem isn’t confined to North America. To see what universities are doing to cope, research the Millennium Project at the University of Michigan.

The world isn’t going through a phase: it’s evolving. We’re experiencing an economic tectonic shift, a “third Industrial Revolution” as FORTUNE puts it. If you want to see what the World Economic Forum’s Global Competitiveness Report 2014 – 2015 says about how Canada is faring, click here.

The United Negro College Fund has been reminding us for years that: “A mind is a terrible thing to waste”. So is a university. If we continue to waste either or both, we’ll have no one to blame for the consequences but ourselves.

James T. Kirk and the Kobayashi Maru

 

On his third attempt, Captain James T. Kirk of the starship Enterprise passed the Kobayashi Maru holodeck “no-win” training exercise by reprogramming it. He was subsequently commended for original thinking. Whether or not this was Starfleet’s way of saying that reprogramming was an option because it was not expressly forbidden, only the film’s writers Roberto Orci and Alex Kurtzman know for sure.

Fiction or no, that part of Star Trek lore resonates in 2015, especially the part about original thinking. The 6 crew members onboard the International Space Station may be excused if they haven’t had time to contemplate how sub-US$50 crude oil will impact on them and their families. But the rest of the people on planet Earth won’t have that luxury.

For Canadians, the world started to change on July 1, 2014. On that day, the Loonie closed at 94 cents. It started changing a lot faster when the Bank of Canada lowered its interest rate to 0.75% on January 21, 2015. We’ll soon be paying a lot more for our morning orange juice, and a lot of other things, courtesy of a 78.5-cent dollar as of February 1, 2015. The interest rate could fall to 0.5% as early as March. Barclays Bank has downgraded its stock ratings for the Bank of Montreal, Royal Bank and TD Bank, noting that “consumer borrowing, the main profit driver for Canada’s banks, will likely slow even more than previously expected”.

Much of the reason will be stories like Target Canada’s abrupt closing of its 133 retail outlets and the 17,600 Canadians who were let go as a result. That doesn’t include Target’s suppliers. SONY Canada is closing its retail stores. Alberta now faces the prospect of recession. Oil companies are cutting back on capital expenditures and hiring. CIBC will be laying off 500 employees because of slower than expected profit growth.

The Kobayashi Maru scenario left little room for “if it ain’t broke, don’t fix it”. For the moment, Canada looks like an oil-based, one-trick pony. Canadians will have their say about whom they blame and what should be done about it on October 19th—or sooner.

We keep hearing that a lower dollar will be good for Canadian manufacturers and exporters. But in the meantime, we have to play the cards we’ve been dealt. That will call for out-of-the box thinking by Canadians looking to become re-employed and those hoping to land that first job.

What is broken and needs to be fixed is the notion that we can or should rely on governments at any level to do our thinking and planning for us. Most have shown that they can barely think for themselves. We’re going to have to develop our own versions of Kirk’s Kobayashi Maru, because without them, not all choices having to do with postsecondary education will be the right choices. There is nothing on the horizon to suggest that conventional thinking will mean that there will be more than enough good, secure, full-time work to go around.

As Jean-Luc Picard, captain of a later Enterprise, would have put it: “Make it so.”

 

From industrial to post-industrial: What does it all mean?

Graduating from university has traditionally been synonymous with the good life and financial security. In some cases, it still is. But not for graduates with degrees for which there is no demand. Work was supposed to be plentiful, not precarious. Yet here we are. The world has changed and we have to rethink how our children are going to earn a living and what kind of education they’re going to need. We have to talk to them about higher education, about how the cost is rising, and about how it wasn’t supposed to be this way.

Economies and societies evolve from industrial to post-industrial. That’s what’s been happening to us for the last 35 years. Wikipedia defines a post-industrial economy as: “A period of growth within an industrialized economy or nation in which the relative importance of manufacturing [shrinks] and that of services, information, and research grows. Such economies are often marked by:

“The industry aspect of a post-industrial economy is sent into less developed nations which manufacture what is needed at lower costs (see outsourcing). This occurrence is typical of nations that industrialized in the past such as the United States and most Western European countries.”

Akio Morita, the better known of SONY’s two co-founders, recognized the signs that North America’s economy was in transition in the mid-1980s. When he died in 1999, The New York Times published an account of his life that described when the transition began:

“In the 1980’s, when Japan seemed on top of the world, Mr. Morita was among the most vocal of the Japanese executives in criticizing American business and hailing the success of the Japanese model. He said American managers were financial paper shufflers who ‘can see only 10 minutes ahead’ and were not interested in building for the long term. And he said that because American companies were losing interest in manufacturing, the United States was abandoning its status as an industrial power.’ Those factors, he said, and not trade barriers, were the reason for America’s trade deficit with Japan.

“’There are few things in the United States that Japanese want to buy, but there are a lot of things in Japan that Americans want to buy,’” he wrote in 1989. “’This is at the root of the trade imbalance. The problem arises in that American politicians fail to understand this simple fact.’”

We’ve learned, some of us more painfully than others, that Morita was right. As went manufacturing, so went the economy. But manufacturing has been going elsewhere for the last 35 years and most people who have jobs appear not to have noticed. They’re convinced that a return to the good old days is just around the corner and they’re educating their children accordingly.

Even if they were right—and they’re not—graduates have discovered that the jobs “in their chosen field” that were supposed to pay off their student loans aren’t there any more. That’s something they and their parents should have known before they wrote the cheques or negotiated the loans.

Some of those graduates live in the U.S. and owe US$1.2 trillion. Their Canadian cousins owe between C$25 billion and C$50 billion.

Morita’s pronouncements were behind my founding Personal Due Diligence, or PDD. If the implications were going to impact on my two children, they were going to impact on other people’s children, too. PDD is sharing with parents and their children one-on-one the lessons of the last 35 years and helping them apply those lessons to choosing higher education. The seven planks in our platform are:

  • Researching and monitoring Canada’s economy
  • Researching and monitoring the global economy
  • Researching and monitoring the labour market
  • Acquiring and analyzing deep market intelligence
  • Identifying and analyzing industry trends
  • Quantifying and projecting precarious employment
  • Business case preparation to support a Plan A and Plan B scenario

An article entitled ‘The New Debate Over The Very Rich’ appeared in the June 29, 1992, issue of FORTUNE. It said in part: “Between 1980 and 1990, FORTUNE 500 companies shed 3.4 million jobs, but companies with fewer than 500 employees created more than 13 million.”

The Canada-U.S. free trade agreement (FTA) came into force in 1989. My multinational IT executive search clients were already responding. The consequences figured in our family’s discussions about university.

Canada now has 12 free trade partners. That number will grow to 21 when current negotiations conclude. There will be concessions, compromises, headcount reductions, restructuring, outsourcing and offshoring as employers adjust to their new normal. Please see the Foreign Affairs, Trade and Development Canada website for further information.

2014 in review

The WordPress.com stats helper monkeys prepared a 2014 annual report for this blog.

Here’s an excerpt:

A New York City subway train holds 1,200 people. This blog was viewed about 5,000 times in 2014. If it were a NYC subway train, it would take about 4 trips to carry that many people.

Click here to see the complete report.

Million-dollar promises, like old habits, die hard

A university degree used to be a guarantee of higher incomes over the course of a lifetime.

Not any more, according to Maclean’s in its January 21, 2013 issue. To read the article in its entirety, please click here.