 Welcome to the FeeCast, your weekly dose of economic thinking from your friends at the Foundation for Economic Education. I am Richard Lawrence and I am back from my summer vacation. Happy to see our panel, Anna Jane Perle, Dan Sanchez, and Mary Ann March, and it's the end of summer, which means that I just returned from the beach. I try to get in there right when no one else is there. I got very sunburnt, but only on my legs, so you can't tell. I was very cautious given this pale skin that I have, but I did do something brand new on my vacation, and that is I fished, and I actually caught three fish, one of which was edible, and so I am coming back victorious from from this vacation. Thank you to Sean, our executive producer who filled in for me last week. It seemed like you guys had a great conversation, but this week, of course, given the fact that we're winding down with summer, we're thinking about the fact that for some people, it's time to go back to school, and for many people that means the beginning of their college careers, and a lot of these folks are going because they have goals that they only believe can be achieved through a college degree. Some people might be going because they think it's what they have to do, and other people might be going because their parents told them they should go. Or because it's a party. And because it's a party at some places, right? So as we're talking about returning to college, you're starting to get news in the internet of various large companies that are beginning to say formally now that they are relaxing their requirement for a college degree for job applicants, which isn't exactly new, but they're making a big deal out of it. Yeah, that's right. Google, Apple, IBM, and then I saw a news article earlier that other companies like Bank of America and places like Costco, a bunch of places are relaxing their requirements, and it's not all about the piece of paper anymore for a lot of these places. Which I feel like when you hear this, I never really thought it was that big a deal, because I don't really think about a specific, I guess I just don't, I assume that great companies are out there hiring great employees, regardless of very specifically a degree. So it surprises me to hear that this is, I guess, a formal statement that they're making to the public, which is this is no longer important to us. Yeah, we have an article on the site, college degree requirements were never as real as you thought by. I love the scare quote. By Derek McGill, and he makes that point that even though it was, you know, technically a checkbox on the form, that it was very much a negotiable checkbox, and that a lot of people treated it as non-negotiable. And that's just a mistake, because really, what they are going for is not the college degree itself, but the value creation ability that it signals, that it may signal. But if you can signal it in other ways, that's really what they care about. Yeah, I think that that might even be the difference that we're seeing, or kind of the evolution that we're seeing is that nowadays, I mean, college degrees were kind of one of the only ways back before the internet. I mean, your college degree was one of the few ways you could kind of signal your value and how you've achieved this goal. You could prove that you were serious about actually setting your mind toward a goal and seeing it all the way through. Yeah, and that you have, I mean, I guess there are different, we'll get into kind of the different purposes of what that means, the degree, but I think that now, especially with just access to communication, how easy it is to, I guess, just access information now, it's way easier to show, just demonstrate your work, demonstrate your work in a way that I think is freeing for people. It definitely is for us. It's much easier to see people's work experience and actually validate kind of what they're or confirm what they've done from a hiring standpoint now with the internet. And AJ, you actually do hire at fee. Yeah. You were telling us before we started here that you actually don't necessarily look at the college degree as the end all be all for applicants. Yeah, especially in the work that we do in fees in person programs, we just, I know that I know the kind of work we're looking for. And a degree is really, really important. Obviously we care about economics, we care about philosophy, we care about politics. But I think that ultimately we really, we look for people that have proven that they work hard. And I think that it also speaks to, so when I, I guess when we hire people, we also look at, I think it's really cool. And I actually prioritize people who are, who may have done something like a gap year. And by that, I mean, didn't immediately go to college, didn't immediately go into college right after high school. Because I think that to me represents that they are, they thought about their, the intention of their future. And that they actually have experience in the real world. And for a young person, that's so hard to find. Didn't you, you took a gap year? I took three or four gap years. Yeah. And I'm really glad that I did immediately after graduating high school by the skin of my teeth, I might add. I started taking a couple classes at a local community school. And I was just slipping into my habits of not going to class and skipping to maybe go to a party or something. And so I stopped twice that now that you've mentioned parties on this. Well, it's, we're talking about college, aren't we? So I decided to stop enrolling and I was working, I was working in retail and I had a whole, a whole life in those three or four years, a lot of experience and a lot of fun I might add. And then after a couple of years of being out in the world, I figured out what I was interested in, which was politics and economics. And as soon as I figured that out, I did a little bit of research and I found out that public policy as a degree had a low, or relatively low unemployment rate. And so I was like, Oh, done, I'll study that. And I went back to school. And in my experience, I found that people who take a gap year or two or three also get a lot of value out of college, a lot more value than other people do because they know exactly what they they're going for. They're really trying to extract as much value from the college experience. There's more intentionality to me in the gap year, I guess, approach is that you know why you're doing what you're doing. You actually have to think about it. You have to think about what goals you're trying to achieve as an adult in the future. And I wish more young people took gap years. I wish that it was more socially acceptable to to take that time. Yeah, I think it is becoming more socially acceptable, right? Because I mean, just like Marianne was explaining, you know, people are choosing to do this now because they see their friends, they see their relatives, they see other people who are taking the opportunity not to go directly into the next stage of life, right? Well, at the time, it was the height of the recession. And so I had a lot of friends who were graduating from high school, and they weren't finding jobs, they were getting their degrees, and then they were like, Okay, well, I guess I'll go work a customer service job. And I should clarify, you know, when I said going into the next stage of life, it's almost as if there's a path that everyone has that is identical for each person. It's almost like the game of life, you know, that was probably made sometime in the 40s or the 50s. And it was like, you know, graduate from high school, get married or go to college, get a job, retire at 55, and, you know, then being in your grave by the time you're 62. Yeah. And in the game of life, it's just one path. It's one path that everyone goes on. But now we're discovering that exactly it's not a conveyor belt. There are just so many more opportunities now with the internet where you can actually not only learn, but you can demonstrate through web projects or putting your portfolio online or or doing other types of projects that are so much more visible to potential employers. The possibilities are so much different than before, where all you had was either a piece of paper in a frame above your desk, if you had a desk, a diploma, and a resume. It's so much different than it was. And our education, entrepreneurship education director, T.K. Coleman, when we had him on the podcast, he talked a lot about the different ways that you can signal, especially like Anne Jane, you were mentioning that with the internet, it's so much easier to, you know, it's not just artists who have portfolios now. Like all sorts of professionals can have portfolios. When I when I apply to fee, I mean, I'm a program manager and I had a website and that's and that's a really cool way to show. Yeah, what you can do. Yeah. And so, you know, of course, people choose not to go to college for good reasons and bad reasons both. But one of the best reasons, in my opinion, is to begin your career right now. And we've actually had an article about that recently on our website talking about not waiting four years, but actually just jumping into work life right after high school. Right, right. Yeah. Because really, it's a matter of getting your foot in the door. And there's lots of ways to do that. And so and it's not just putting out a signal in into the in general, but it's about signaling to particular candidates, particular business partners that you want to work with. So you can offer a value proposition. You can offer to work for free. You can say, hey, I noticed your Facebook presence is is a little bit minimal. And I could build that out for you. I can help you. I can actually do something. Our friends at Praxis, for whom T. K. Coleman also works and co-founder and Derek McGill, who wrote the piece that Dan mentioned earlier. They talk about actually demonstrating for no charge that you can actually add value to an employer that you want to work for. That's how I got my foot in the door here at fee. I started off by volunteering and then I did a couple of internships and then I never left and you guys never noticed. And all of this is based on what what economist Brian Kaplan calls the signaling model of higher education. So there's just basically a debate. There's there's the signaling model which we've been talking about versus the human capital model where a lot of people think that what higher education really is about is the you know the skills and the expertise. The raw education you get in the classroom. Right, right. But but there's an argument that it really it is about signaling. Let's take a step back real quick because that's kind of a word we use sometimes in the colloquium in our daily lives but we don't necessarily use it in the way maybe that you're describing it Dan. What do you mean exactly by signaling? So he gives an analogy. He says that there's two ways to raise the value of a diamond. One of them is you get an expert Jem Smith to cut the diamond perfectly to make it a wonderful diamond. That adds value by making the stone objectively better like human capital in the education context. The other way you get a guy with an eyepiece to look at it and go oh yeah yeah this is great it's wonderful flawless. Then he puts a little sticker on it saying triple a diamond that signaling the jewel is the same but it's certified. So it's a the certification that you have value. Yes. Well I see I feel like that's a little bit I mean perhaps I'm wrong and misunderstanding with the signaling I guess the signaling model is but it that's a to me that's a little reductionist because I think that signaling it is important when I think signaling especially in education sense I think this is signaling to an employer or to an individual that the person who earned that degree achieved a goal that's what signaling means to me is that they achieved a goal. So it's still signaling something it's signaling that you achieved a goal not necessarily that you improved your human capital. Does that make sense? Yes and I think there's something to that that like dropping out of college versus actually sticking to it and finishing it. You know that that shows how much stick to it if someone has and how much diligence they have and patience and discipline and so there's definitely something to that but is that as valuable as sticking to an actual work an actual marketplace type project where you're actually serving customers and trying to satisfy customers or including the customer of a boss and arguably that's more important. So I often have an example a thought experiment so like you could think of college as an obstacle course. Now imagine that you are a baseball manager of a team in major leagues and for some reason all of the candidates for your team they've never actually played baseball. They've only actually done obstacle courses. Now some people do better at obstacle courses some some people get through them really fast. Some people are are really bad at them are really slow or some people give up and so if that's all you had to go on of course who would you choose? You would choose the people that did the obstacle course the fastest and strongest. Yeah but that doesn't mean that the obstacle course is the best preparation for becoming a baseball and that opens up the mention of another concept called sunk cost fallacy which is maybe you've started college maybe you've started the obstacle course to go along with your analogy and you realize at some later point maybe halfway through three quarters of the way through 90% of the way through it's no longer going to be the best way for you to achieve your goals. Is it good for you to say well I've gotten this far I might as well continue or is it appropriate for then you to say well you know I did get 70 way 70% of the way in but it's not actually productive for me to continue this I should begin my career you know do the other thing that that I need to do valuably and it's okay then to say you know I put this much into it time to go yeah and it also gives you an insight into the think thought process of hirers like Google and Apple and why before that they had those checkboxes because it's just an easy filtering mechanism it's like okay well for whatever reason everybody's just doing the obstacle course at this age and so well it's just easier it just filters out as many people as possible if we just say like okay you have to have actually finished the obstacle course and had a certain kind of time on it in order to for us to even consider you right but if some people buck the trend and didn't listen to the the the gospel that everyone has to go to the obstacle course that everyone has to do college and and actually played baseball during during that time and you show them like look I've actually thing that you want right then then you're gonna give them a chance of course and in reality I think that there is kind of a commitment on the part of the manager baseball manager in this analogy being like an employer for example they put in more time trying to find that person right because the obstacle course is kind of a preset something you can just check off a box and so the I guess the the input that you're making as a manager or a an employer is that you are you're taking more time to find that person but in reality might end up with a with a higher quality employee right or baseball player well and so college isn't all that bad right there are reasons for it to exist and there are reasons for people to go through college and finish it right not only to show they are their tenacious right but also that they did it for a particular valuable reason each one of us went to college I personally believed my time in college was spent well so there are valuable things yeah with college sure there's a lot of reasons to go there's the signaling aspect the getting the degree maybe you want to pursue medicine or something like that in which case I'm fine with you going to college but you don't want a college dropout treating your your burns that seems to speak to me more to the human capital argument I mean maybe that's not it doesn't quite fit but the idea that like medical school for example that is like you do have to go to medical school to learn things are skills yeah to learn how to put a needle in like that that's that is important so even then like how do we know because part of it is government intervention that there's a government backed cartels with with med medical school and law school that are involved and and you have to wonder like okay is it the proper balance of classroom time versus actual experiment experience like would would these people as opposed to reading about setting bones in a classroom like actually apprenticing with with doctors earlier on you know would would those be more trustworthy it's the way it used to be when you look at various historical accounts of individuals for instance people in colonial era of the united states in many cases it said that they read law and when it said that they read law it didn't necessarily mean that they went to a law school because that was probably not only exceptional at the time but maybe unheard of but they actually apprenticed for a lawyer who taught them the ropes right they probably apprenticed for doctors who taught them how to set bones how to do other things so this notion of institutionalized education is fairly new for many careers I think people would argue that I don't want I don't want someone who apprenticed under a specific doctor to be my doctor I want to know he went to Johns Hopkins right and got this specific degree because I better than learning from John Hobbs himself yeah that's the thing is um I think that there it takes a lot more it puts a lot more of the and this could be good or bad it puts a lot more of the onus on the consumer of that medical good or service to pursue that pursue some sort of quality check on what I think there's also a crowding out effect too because like to the extent that we have these government backed credentialing systems that it prevents the rights of private credentialing systems that that would take some of that burden off of the consumer well and the fact that someone's employed for instance by Emory University Hospital is also credential in and of itself right and so how did they go through the hiring process did they necessarily need to have an md in order to get that job yeah well the other reality is we're not all going to school to be doctors people are going to school to study things that they don't necessarily have to spend a lot of money on a four-year education for but we're talking about the other reasons there are there are plenty of reasons I personally was able to remake myself in a way college was a fresh start for me to leave my bad habits from high school behind and like I mentioned I barely I barely graduated from high school but I was a four-point of student in college because I cared and I had that opportunity to start fresh and I was surrounded by study abroad and you guys participate in like the fun for American studies like really cool things yeah my question is that as compared to high school that was better because there was more independence oh yeah but but what if what if you had even more more independence where you are just went into the market like it would have been less gradated of a transition but may but would the greater independence earlier been an even greater benefit for you to spread your wings it's it's entirely possible I hated high school I which is why I was such a bad student is that I skipped a lot and I had if I'd had the opportunity to study what I was interested in earlier then yeah it might have been a shift earlier on and so we're talking about the independence associated with college over high school but what are some of the other benefits well I think independence is also an important thing to talk about when it comes to young people when you're talking about people whose frontal lobes have not closed you got like really I think you've got almost I mean the risks are really high for success and failure and so I think that some people perceive college and this could be again right or wrong but perceive it as almost like a keeping a keeping pen for your young person until they become fully formed sort of the green room before the show of adult yes yeah exactly it's it's very to me it's like the consequences I mean they are they are meaningful but the consequences are lower right to failure but I I wonder if the cause and effect is reversed here because I wonder if why we feel that these holding pens are even beneficial is because we've sort of kept them in a prolonged adolescent period well that's for sure yeah I kind of think of it as sort of like a a coddling sort of vicious spiral it's like that a lot of parents use the very their immaturity as an excuse well they're not ready to have responsibility so they don't give them responsibility but that's exactly what makes them irresponsible in the first place yeah I mean yeah the idea my dad said when I graduated college he was like I'm not paying for anything you go out and he's like you got to earn your like every everything he's like you're it's all you you are out in the world put me out to the wolves and I think that that alone pushed me to yeah just do everything by the age of 22 have you know full-time job all that stuff insurance car blah blah blah and it's I think that it is kind of the idea that you just you give someone their independence I do think that's important when but I don't know I don't know how that works for everyone but I guess that's a greater question your mileage varies right yeah I think another benefit of college for me at least and on the any other educational programs that I've undertaken has been the networking the social capital that I've built and so hopefully in a maybe ideal sense or maybe even a normal sense when you go to a college program you meet people who then you are not thrown out to the wolves you actually do have a network of people who you can talk to who can reference you who can you know help you be introduced to other people that's valuable and there are a few places that you can get that college is a good one is a very good one one limitation of the networking in college is the fact that everyone is so similar in age and that's exactly the least likely person that you can benefit from in terms of networking is someone who's exactly at the same period of life as stage of life as you are because you what have you to offer not as much to exchange because you're sort of at the same level right right whereas with with someone with an older and a younger person meeting each other you know there's the the older person can help the younger person by giving them opportunities and the younger person can help the older person by giving them leadership experience yeah but you're not only talking in the network to the person in your class you're also talking to people they know so there's that benefit as well so obviously in college aside from sort of the missed time that you have from not launching your career which we'll talk about there are a lot of different considerations around cost and this is actually a big problem in our politics today in society is the amount of student loan debt that households have and this is becoming a bigger and bigger proportion of the amount of debt that is held by individuals that's right 43 million americans hold student loan debt to the tune of one let's see where is it 1.5 trillion trillion and a half that's an average of 37 thousand dollars for the average graduate from year 2016 which is the year i graduate and i'll tell you that number is about right it really does prompt the question when you look at the cost versus the benefit is college worth it yeah because we talk a lot about the value of entrepreneurship and we have an article by zack sleighback that talks about how that burden of debt really puts a damper on entrepreneurship because it makes you less likely to want to take chances in in your career it's like you you can't like start start your own business when you have that kind of burden it's like you've got if you especially if you went to law school you just got to become a lawyer right away like you've got to get into the right the traditional profession that you train pay back your student loans and in most cases student loans will not be forgiven if you file for bankruptcy so you might be saddled with that debt some people it's to the tune of a hundred thousand dollars and that's for life it's not going away as you pay it they're saying it's contributing to risk aversion which is actually contributing to like a lack of innovation yes well that's a no I never thought about that so I think the debt has to be we have to go we have to talk by the other side of the coin though in that college graduates compared to high school graduates are more likely to make money according to the social security administration men with bachelor's degrees earn approximately nine hundred thousand dollars more based on median lifetime earnings than their high school counterparts and for women it's a difference of about six hundred and thirty thousand dollars and that's that's not jump change that's a lot of that's over an entire career that's that's over the course of your entire life at the median I've heard yeah I've heard about like a million people throw around at least like when I was in high school getting ready for college they threw around that number it's like you're gonna make a million more dollars yeah but actually I have a bone to pick with those data because that is not our generation and that's certainly not generation z either right I mean these are people for whom the internet did not exist so I think it's I think it's gonna be very yeah I think you are you're highlighting a very I mean a very serious point that we have to consider we can't even see really how yeah how things like the internet affect what this means and there is a self-selection aspect to college and might even say success in general the people who have the most ambition who are the most motivated maybe they're the ones who are more like who are most likely to go to universities absolutely right in in a world in which everybody believes in the obstacle course yeah then the people who are the have the most gumption have the most intelligence have the most industry they are going to be the ones who finish the obstacle course and who get the higher earnings and so as compared to the people who who failed who who believed in the obstacle course but failed at it then of course that there's going to be that discrepancy but when you consider people who don't believe in the obstacle course who could have succeeded if they if they had done it but don't believe in it and went alternate routes then you you don't you can't expect them to just earn really low wages like i think that they'll learn more here's my question this kind of i want to circle back to like how i perceive signaling model as working and as valuable to me um of what a college degree means is that it does say but let's say you do have somebody whether or not you believe in the obstacle course you should be able to complete it right i mean that's the argument and so they're saying that if it's valuable you should you should be able to the college degree signals that however you did it you achieved that goal so that could be you're really good at schmoozing with professors or you're really good at cheating or you're really good at finding other other students who know what they're doing it's about how you solve this problem and so i think that that's why it it is it matters to me like i see it as important that it's a signaling model yeah yeah winning that game yeah choose to play it is a good signal as opposed to losing that game but is this the right game yeah so you're saying that we really shouldn't live in a world you want people to be able to question the game yeah question the obstacle course interesting well and so on our sister podcast words and numbers we actually had a conversation on this recently where Antony and James did summarize or add the various costs associated with a higher education today and then you've got some of those numbers on hand yeah so the average four year currently average per year for a four year institution for public it's ten thousand dollars a year for private it's thirty five thousand dollars and this is tuition and fees so thirty five for private schools on average and ten for public schools on average right um and that's not county books or anything like that right right no that that is count well that no that's just tuition and fees okay yeah so the average college student spending several hundred dollars on books each semester right so you have to add that uh but even more importantly that's not counting opportunity cost and the average starting salary that someone could expect if they went right what's an opportunity cost just yes so the opportunity cost is what you could have got if you if you hadn't taken that path yeah okay so whatever you're doing whatever you could have been doing otherwise that's the value that you're talking about right whatever you're foregoing and what what a lot of people are foregoing is the starting salary of twenty eight thousand dollars a year and so when you add that to it private school attendees are paying a quarter of a million dollars for their education when you factor in opportunity costs and public schools are paying like forty forty thousand dollars and that is just a huge huge investment and so it's really important to make sure that it's actually worth it so it's forty thousand dollars for the public school plus another hundred or so given the starting salary of a college graduate right so you said two hundred fifty thousand dollars opportunity cost that you'd be missing out on if you went to a private school but in a public school context it's the forty for the tuition and fees plus another hundred or so for the starting salaries that you'd be missing no forty includes the opportunity cost oh it does I'm sorry 152 is the inclusive opportunity cost got it got it yeah so there is though a correlation between employment rates and degrees I mean you might argue that this is from people who've already graduated so the impact on Gen Z it's we can't necessarily say but for a high school diploma the unemployment rate in 2017 was four point six and then that goes down to four four percent for people with diplomas so it definitely has an impact you could decide for yourself whether or not that's a reason to go or not a causation or correlation is the question at that point like do we perpetuate the do we perpetuate the valuing of that or do we kind of try and break free or encourage like the next generation to break free from honoring the obstacle course yeah I don't know and so are you happy that you went to college I mean is this something that that we're looking back at and saying you know where we are today this was a good thing I just paid my student loan this month but I think largely I would say yes however before I'd even graduated my first my first unpaid internship was at a non-profit here in here in Atlanta Georgia and the work I was doing I was like I don't need my college experience for this I could have done this right out of high school so in that case maybe not as much I feel like I don't know yeah I mean I love like the social component I mean it did set me up in sort of like to have social skills that I feel like help contribute to my like my professional success it also that's where I discovered economics but I would say that yeah I wasn't built for school and I knew that like I knew that it was really really hard for me to do things like study and go to class and I just I was definitely way more built for the working world like for sure I'm way better at you know working in an office however that would have looked as a 19-year-old but I definitely was not built for school and I remember knowing that so I don't know yeah I I've written a blog post it's called I had to escape school to become a scholar because really that's what happened is that I actually became curious about the world of ideas again like my as a little kid before school had kind of drilled it out of me I was really interested in all sorts of ideas but then it really wasn't until after I graduated that I started reading the newspaper and I realized I don't have any context to understand these stories and so then I started on my first autodidactic journey of teaching myself something I started diving into history books just starting from the ancient Sumerians and working my way forward of just trying to teach myself history so I could just understand the world that I was like entering finally so you knew how to read the newspaper but you didn't know how to tell what it meant exactly and that is that is the big question that's sort of one of the main pieces of value I think that we get from our working lives is that we actually get to practice these various things that we only learned in textbooks or on blackboards in schooling and this is the the story that you tell Dan is why you're such a keen proponent of this unschooling movement which is what you were working on learning about the Sumerians by yourself exactly and so obviously everyone's individual mileage will vary they're going to find value in school if that's what they're looking for they're going to find value in beginning their own business so don't take our stories as as parables why you shouldn't go to school but it's worth considering the costs both from a monetary sense and from an opportunity cost sense to know what you could be potentially missing out on and that's the whole point of this discussion is just sort of thinking critically about what the game of life or the obstacle course that's been set before us actually will do for us in our own lives and so with that unfortunately we're out of time we have to go back down and write more blog posts and stories and hold more seminars educating people about thinking through the economic lens but we'll see you next week on The FeeCast for now enjoy your weekends