The Golden Circle of Higher Education

This week in Economics 40S, we looked at the direct and opportunity costs of attending a college. 

Working with Economics defines direct costs as "...out-of-pocket expenses that are required to do something." In the example used, it was the expense of tuition, books, and supplies necessary whilst attending college. Opportunity costs are defined as "...the value of the best possible alternative that is given up in the decision to use a resource." In the context of attaining a college education, the opportunity costs were investing the direct costs involved with college attendance, in the stock market or a mutual fund, or working a full-time job. 

But what if the direct costs associated with attending college or a university at that matter, had all gone to waste? What if employment prospects for these post-secondary graduates are a scarcity? 

This, in fact, is the case. 

As economist Andrew Jackson recently wrote in the Globe and Mail, "the supply of post-secondary graduates now greatly exceeds employer demand for their education and skills across a wide range of occupations". Evidence is shown in a recent CIBC study, which shows that fine arts and applied arts graduates are earning 12% LESS than high school graduates once their education costs are factored in. 

Beyond the prospects of employment, we must first look at the costs of attaining a post-secondary education. Tuition fees (in Canada and across the world) have risen faster than inflation since the 1990's, as today's student would pay twice as much for an undergraduate degree than they did in 1996, and nine times as much in the 1970's. However, even beyond the ever-increasing costs of university attendance, the competing pool of graduates is twice as large as it was in 1990. 

For example, according to Macleans, two-thirds of new teachers in Canada cannot find full-time work, forcing them to be employed in jobs outside their field of work, or even sometimes, jobs that require no post-secondary education at all. 

This makes us question, is there really always a return-on-investment from attaining a post-secondary degree, or is the money better suited for other opportunity costs?

What's interesting is that research from the US government suggests that only ONE of the top nine occupations expected to create the most jobs in this decade actually requires a university degree (according to the Telegraph UK). 

But then, why are politicians and governments, knowing these facts, advocating for more people to graduate with post-secondary degrees? 

If President Obama gets his way, there will be an even greater number of disappointed students with fancy degrees working as a barista at Starbucks, paying off 5-figure student loans for years to come.Unfortunately, degrees don't always equate to prosperous lives anymore.

Just recently, I came across a Ted Talk, given by author Simon Sinek, who popularized the concept of the "golden circle".

Although the golden circle was supposed to be used for inspiring great leaders and marketing, I think the basic concept of it can be applied to choosing higher education as well.

"What" represents what you do or sell. For a company, it could be a computer. For a student, it can be what degree you wish to attain, or what job you wish to have in the future.

"How" represents how you'll achieve your "what". For a company, it could be your USP (unique selling proposition). For a student, it could mean which post-secondary institution to attend, what grades to get, who you network with, and so on and so forth.

Most importantly is your "Why". It represents your purpose, cause, calling, etc,,. Profit is not your "why", it's a result. Very few companies know why they do what they do, and in my opinion, I think students do as well. 

Companies and corporations fail because they go from the outside of the circle to the inside. They have a clear understanding of what and how they can achieve their goals, but don't understand why. Innovative and successful companies, like Apple, go from the inside out. Sinek used this example:

1. Why: "Everything we do, we believe in challenging the status quo, we believe in thinking differently"

2. How: "The way we believe in challenging the status quo is making our products beautifully designed,   simple to use, and user friendly."

3. What: "We just happen to make great computers, want to buy one?"

Too few students are attending post-secondary education institutions for the right reasons; profit, pressure from parents/society, and more. Many know what they want to pursue, and how they can pursue their dreams, but few know why. In these uncertain economic times, I'd suggest sorting out the "why" first - higher education is a large and risky investment. If your sole reason is for profit, it may not be the smartest choice. Ask yourself, "Am I doing this for the right reasons? Would I do this regardless of how much I get paid?" before wasting precious scarce commodities such as your time and money on a job where you may not even need a degree. Look for apprenticeships, become a manager at McDonald's, become an entrepreneur, teach break-dancing; the possibilities are endless. 

As University of Massachusetts economist Nancy Folbre stated, "We no longer live in the 'Golden Age of Human Capital'". Reflect upon your choices, and make the right decisions for YOU.