San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Wednesday, May 6, 2015

Education Does Not Make You Rich

I am sick and tired of hearing people confidently declare that getting a college degree practically guarantees a person will make more money over his lifetime than those who do not get college degrees.  As a lifelong janitor who does not sport a college degree on my wall, although I did waste some money on a couple of classes before I figured out I could make more money by cleaning those classrooms than by sitting there and listening to the government approved drivel coming out of the mouth of the professor, I resent the allegation that I will never become a millionaire simply because I have not attended a government approved institution of higher learning (ha, ha, ha,....I can't help but laugh when I write that....it is kind of like military intelligence) and received a piece of paper from that institution informing anyone who cares that I attended classes on Mexican American studies and underwater basket weaving. 
I read an article on CNBC.com yesterday that was exactly of this sort.  I quote it entirely here:
"Americans with an advanced degree are 50 times more likely to become millionaires than those without a high school diploma, according to a new study.  In a paper, William Emmons, a senior economic advisor, and Bryan Noeth, a lead policy analyst, both at the Federal Reserve Bank of St. Louis' Center for Household Financial Stability, found that wealth and income is 'strongly linked' with education.  The likelihood of a family without a high school diploma having at least $1 million in wealth in 2013 was 1 in 110, compared with 1 in 20 for high school graduates. It was 1 in 4.6 for college graduates and 1 in 2.6 for families with a professional/graduate degree, according to the study."
"The median family without a high school diploma had 81 percent less income and 95 percent less wealth in 2013 than the median family with a graduate/professional degree. The median income for those without a high school diploma in 2013 was $22,320, down 1 percent from 1989; for those with such a diploma, it was $41,190, down 16 percent.  For those with a two- or four-year degree, median income was $76,293, down 5 percent, and for those with an advanced degree median income was $116,265, up 4 percent. (All dollar amounts are adjusted for inflation.)  Between 1989 and 2013, accumulated wealth increased 45 percent for families with a professional/graduate degree, to $689,100. It increased by 3 percent for those with a college degree, while dropping by 36 percent for those with only a high school diploma and 44 percent for those without a high school diploma.  Granted, other factors can play a role in the link between wealth and education, including family wealth and inheritances. And there is no guarantee that more education brings more wealth. But the study said that education and wealth 'are highly correlated' and are likely to become stronger in the coming years."  (Story found here.)
I do not have to own a college degree to know that correlation and causation are two different things.  The fact that the study concludes that a college degree and annual salary are "highly correlated" tells me nothing.  Although I do not know if anyone has done the study I suspect that I could find a high degree of correlation between a college degree and being a statist.  I also suspect there is a high degree of correlation between having a college degree and participating in the state sacrament of voting.  I am thoroughly convinced that there is an extremely high degree of correlation between a college degree and being a college football fan.  Along with that correlation goes another between a college degree and the amount of beer one consumes annually.  All of these are fun things to talk about, or to argue about at the bar while we are slamming beers, but they tell us nothing about the real world in which I live.  In fact, studies such as this do exactly the opposite.  Studies like the one cited above create false hopes and expectations in people who believe that going to a government approved college somehow magically means they will eventually become millionaires.  A lot of people are in for a shock.
I expect to be one of those one in twenty high school graduates who becomes a millionaire.  My janitorial business continues to grow and with discipline and dedication to an investment program there is no reason why I should not attain that goal.  Not having a college degree does not hinder me in my pursuit of millionaire status one iota.  'Iota,' by the way, is a Greek word used by intelligent people to express the idea of smallness or insignificance.  See, I don't even need a college degree to talk like a college educated person.   On the contrary, if I had taken the money I used to capitalize my janitorial business and spent it on a college degree I would have seriously set back the time table for my future millionaire status.  I didn't graduate with tens of thousands of dollars in debt.  Instead, I took that ten thousand dollars and used it to be capital equipment and supplies.  That seems like a far more productive use of those funds than wasting them on a degree I would never have used.
I don't have anything against those people who wish to become indentured servants to the owners of their student loans and go to college.  I am sure they will have a jolly time extending their high school years by four to six more years while they pursue their degree.  They get to party and hang out with members of the opposite sex.  They get to attend football games and drink beer.  They get to engage in all sorts of diversions that keep them away from the real world.  But eventually they will have to grow up and enter the free market, that is, if they do not want to go straight from college to the welfare rolls or their parent's basement.  According to Pew Research, 36% of all adult children aged 18-31 are living with their parents.  A full 50% of those adult children own college degrees.  Go here for the proof.  I wonder how their millionaire plans are working out.  Maybe they are spending all that time in the basement doing something other than playing video games.  Maybe they are concocting a sure-fire way to predict the future direction of the stock market.  Good for them.
There are times when a college degree makes sense.  If you are seeking to be an engineer or a scientist it is very important to obtain a degree in your chosen field of interest.  There is great utility for a Bachelor of Science degree. But what about a Bachelor of Arts?  Who has ever actually used such a degree, other than to qualify yourself to teach the same useless information to others?  If you are a trust-baby and you will never have to work a day in your life I guess it makes sense to pursue a Bachelor of Arts degree if you really have an interest in one of the arts.  Although the article I quoted above did not make the distinction, I suspect that those college graduates who went on to become millionaires were holding Bachelor of Science degrees and not Bachelor of Arts degrees.
The bottom line is that a person does not become a millionaire because he has a piece of paper from a government accredited institution.  A person becomes a millionaire because he works hard in a field that has many customers who value and want his work.  It is also a requirement that one have a long term time horizon and a commitment to a disciplined program of regular investment in order to become a millionaire.  These qualities are qualities that allow folks to graduate from college with degrees as well as succeed in serving others in the free market.  There is indeed a correlation between a college degree and the higher income but the cause of the higher income is hard work, discipline, a long term time horizon and the free market.  Make no mistake about it, a person becomes rich in this life because of his efforts,  not because of government programs.  Government approved degrees have nothing to do with future wealth.  Don't believe any government-loving statist who tries to tell you otherwise. 

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