Category Archives: Student debt

University, crops and separating the wheat from the chaff

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“The literature clearly demonstrates that postsecondary graduates tend to fare better in terms of labour force participation, unemployment, and earnings than do people with less education.”

The Cumulative Earnings of Postsecondary Graduates Over 20 Years: Results by Field of Study
— Statistics Canada

“Gigs move the risk away from organizations and on to the individual. This is in stark contrast to the secure 9-to-5 corporate arrangement that workers demanded and received in the mid-20th century. The latter is becoming more and more of a spectre as cost-cutting, off-shoring and salary-pruning continue to erode economic security for the average person. It’s easy to argue that ‘developing one’s own brand’ is becoming more important as we move further into this new century.”

How The Gig Economy Is Reshaping Careers For The Next Generation
— Forbes, Feb. 15, 2019

If a family has second thoughts about the house it just bought, it can sell it, usually at a profit. If its new SUV turns out to be a lemon, it can be used as a trade on another one or sold at a modest loss. A university degree, on the other hand, can’t be sold. It can’t be returned for a refund and it does not guarantee an income.

It has to be worked the way farmers work their fields until the crop is harvested and a buyer found, and that assumes a favourable growing season and an equally favourable market. Graduates have no “crop” to sell until four years after they “plant” it at the earliest. If they plant the wrong “crop” and can’t sell it because of poor market conditions, they’ll have to settle for something less than work “in their chosen field”.

Borrowing money to finance an education can saddle a graduate with student debt for years. This is the point where you’ll want to research student debt in the U.S. and elsewhere, starting below.

There are 28,000 universities in the world. By 2025, enrollment in them will reach 262 million. Each of those students will be looking for a permanent, 40-hour-a-week job, benefits, a pension and the relationship that spawned them that was over 100 years in the making. It was supposed to have been carved in stone. But the C-Suite would rather hire technology and software than people.

That thinking will impact on up to 43% of all jobs, professions included. Many employers are hiring for the duration of specific projects only. When projects end, contractors leave. That’s what the gig economy and precarious employment look like. Parents I speak to say they’ve heard of neither and have no idea what they are. Universities do, and they’re resorting to similar tactics.

What will your strategy be for dealing with the state of the world’s economy and those 262 million students? Where will employers be shopping for the graduates they’ll need? How will the two groups relate to one another when your children enter the labour market once they graduate?

In 2012, as many as 300,000 graduates with one or more degrees experienced both. They were working as unpaid interns because they couldn’t find work in their chosen fields. They couldn’t find anyone who would pay for the education they were trying to sell. Unpaid internships have since been banned by law, but they persist. What’s on your child’s list of chosen fields? Why is it there?

I founded Personal Due Diligence (PDD) in 1976 so that my children would have a resource to help them understand what university education as a commodity looks like and how that would determine what the labour market would have in store for them before they made any commitments. See “What Jobs Are Affected By AI?” (Brookings Institution, Nov. 2019) and “The Ultimate Backup Drive” (Bloomberg Businessweek, Nov. 18, 2019).

In “The World-Shaking News That You’re Missing” (Nov. 26, 2019), Thomas L. Friedman wrote: “I still believe that the most open systems win — they get all the signals of change first, they attract the most high-I.Q. risk-takers/innovators and they enrich and are enriched by the most global flows of talent, ideas and capital.“

This is some of what you’ll find when you do due diligence on this subject:

Universities are paid to open the eyes of their graduates. Employers separate the wheat from the chaff based on what graduates look at and what they see that others don’t. If money’s no object, none of this matters. If it is, it does.

Personal Due Diligence sees things that others don’t. Bring us your questions and your concerns about what you just read and we’ll talk.

Sincerely,

F. Neil Morris
President
PERSONAL DUE DILIGENCE

info@personalduediligence.ca

What would my grandfather say?

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That 28,077 universities are operating around the world speaks to how society has benefitted from them for over 4000 years. We continue to put our money into our belief that universities progress and contribute to our children’s future wellbeing. We go so far as to make sacrifices and incur debt so that our children might attend. So do grandparents.

But progress comes at a price. The new displaces the old, how we work and at what is transformed or replaced, there are winners and there are losers. The process never stops: if it did, I wouldn’t have been able to write this and you wouldn’t be reading it.

Technology is progress and we have to equip our children to adapt to it because we can’t stop it. Choosing the right education for the times will be a critical component of the choices we make, if we’re to believe what The New York Times published in ‘The Hidden Automation Agenda of the Davos Elite’ (please see below). Management plans to accelerate the automation that began in earnest on the shop floor and has now spread to offices and white-collar jobs that were once considered untouchable. The process dates from when the world’s first commercial computer was installed in the U.S. in 1951, and we’re living with the results.

Not all jobs being done by humans will be eliminated. Many are being upgraded and call for leading edge education and training and new ones are being created. But it will have to be the right education. The old ways are disappearing and jobs along with them. That could impact on 40% of all jobs within the next 15 years. In 15 years of working in transition counselling, I met face-to-face with 2133 people where they worked who were displaced because they couldn’t or wouldn’t adapt.

My grandfather’s generation lived through the Great Depression, World War II and Korea. It used its survival instincts to make it through. He would have argued that conditioning our children to expect that a good job will be waiting for them once they graduate has dulled those instincts. He would have likened higher education to fishing tackle. It isn’t the rod that catches the fish, it’s the fisherman. Choose the wrong bait, cast or troll in the wrong part of the lake at the wrong time of day and there’ll be no fish to fry come evening.

The worldwide pool of students from which employers will draw graduates will reach 262 million by 2025. Those who dangle the right degree in front of the right employer in the right place at the right time and persevere will land a job.

But are we teaching our children how to fish or how to read the lay of the land? In ‘The Prosperity Initiative’ (1991), the Government of Canada warned that:

“Canadians are asking what the future holds for themselves and their families. In a profoundly changing world, they know that traditional strategies are no longer enough to provide economic security and prosperity, and protect our environment. New approaches are needed to meet the challenges that confront us—challenges that threaten our ability to generate new jobs, our standard of living, and our social programs.”

It went on to say that we’d have to extend basic education from 13 years to 17 years by the year 2000 to cope with the world we’d be living in. In 2012, twenty years after that caveat and notwithstanding their degrees, as many as 300,000 graduates were working as unpaid interns in this country because “they couldn’t find work in their chosen field.” Despite the number of options open to them and the amount of time they had to weigh them, how did they manage to misread the labour market as badly as they did? What should they have known? Where should they have learned it? What had become of their survival instincts?

What follows is a snapshot of the lay of the land:

So is this from ‘Private education, A class apart’ (The Economist, Apr. 13th-19th):

“IF SPENDING IS a measure of what matters, then the people of the developing world place a high value on brains. While private spending on education has not budged in real terms in the rich world in the past ten years, in China and India it has more than doubled. The Chinese now spend 5% of household income on education and the Indians 4%, compared with 2.5% for the Americans and 1% for the Europeans. As a result, private schooling, tuition, vocational and tertiary education are booming in developing countries.”

Forbes reports that in the U.S., students are carrying US$1.5 trillion in outstanding loans. They and others describe the situation as a crisis. Bloomberg News reports that consumer insolvencies in Canada have risen to an 8-year high. This may not be the best time to invest in the wrong education.

This is the hand we’ve been dealt, and we’re not in Kansas anymore. Employers are building 21st century, Fourth Industrial Revolution workforces, not 20th century workforces.

There are life-altering decisions to be made. To help parents work their way through them is why Personal Due Diligence exists. Your first conversation with us will cost you nothing. Not calling could cost a great deal more.

That’s what my grandfather would have said.

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

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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

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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?

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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

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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

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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.