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Source link: http://archive.mises.org/14133/goodbye-college/

Goodbye College

October 2, 2010 by

Brick and mortar institutions of higher learning, while still in their early stages, are dying. You need only look at your recent Wall Street Journal or Financial Times newspapers for an example of discouraged companies refusing to hire overpriced labor. Colleges are simply churning out graduates who demand wage compensation for skills they haven’t developed.  As an example, look at the unemployment rate of MBA’s in 2009 versus 2007.

Unemployment Rate among US MBA Graduates

 

(% of students without job offers three months after graduation)

 

1. YALE UNIVERSITY, SCHOOL OF MANAGEMENT

in 2009: 8%

in 2007: 6%

2. WASHINGTON UNIVERSITY, OLIN BUSINESS SCHOOL

in 2009: 8%

in 2007: 4%

3. HARVARD BUSINESS SCHOOL

in 2009: 8.8%

in 2007: 3%

4. STANFORD UNIVERSITY, GRADUATE SCHOOL OF BUSINESS

in 2009: 10%

in 2007: 3%

5. MIT, SLOAN SCHOOL OF MANAGEMENT

in 2009: 12.8%

in 2007: 2%

6. UNIVERSITY OF MARYLAND, SMITH SCHOOL OF BUSINESS

in 2009: 13%

in 2007: 2%

7. UNIVERSITY OF CHICAGO, BOOTH SCHOOL OF BUSINESS

in 2009: 13.5%

in 2007: 2.4%

in 2007: 2%

Yet, in spite of all the headlines about MBA programs needing reform, MBA enrolment is still increasingly high.

The question that is never asked among these debates is why companies require degrees instead of skills? Or more specifically, why do companies still believe that degrees translate into skills? Aside from the glut of college students via the government-vehicle of cheap credit and the problem embedded in signaling education, at some point in time consumers must ask what it is they receive from these brick and mortar institutions that they couldn’t receive free through internet.

For example, students of my discipline, mathematics, may learn math from the comforts of their home, in a series of progressive youtube videos (starting from arithmetic and ending at second semester calculus) from wonderful free sites like Khan Academy . Furthermore, these students may purchase the previous edition of their math textbook (usually only a few years old) for roughly 1/10th of its original price. Or, the more ambitious student may receive the equivalent of an undergraduate degree in mathematics from the professors at The Massachusetts Institute of Technology; having access to online textbooks, lecture notes, problems, examples and video lectures all for free at MIT OPEN. Or, even here at the Mises Institute, students may study under the classical liberal tradition at The Mises Academy for about the cost of a college textbook.

The point is simply that the internet is changing the way we educate ourselves in subjects like mathematics, and employers and institutions of higher learning are lagging behind. There is still, and, simply, may always be demand for physical classrooms (but even this is need of reform)

{ 33 comments }

Legend October 2, 2010 at 3:42 pm

These unemployment rates are no doubt shocking but to be fair, a lot of people are probably holding out for their dream job, especially at top schools. For example, a former banker may want to break into private equity or venture capital but isn’t able to and hence is waiting, instead of going back to his old job. This is certainly the case at HBS and Stanford.

It definitely makes you wonder about the cost of an MBA though, which will set you back well over $150,000 to $160,000 over 2 years (including expenses).

olmedo October 2, 2010 at 4:54 pm

“why companies require degrees instead of skills?”

why the mises isntitute demands mainstream economics PHDs among its academic staff instead of a more diversified background?

Curt Howland October 4, 2010 at 7:22 am

Likely because Ron Paul is busy right now.

Tennanja October 2, 2010 at 5:41 pm

I have been thinking about this for some time now as i feel i have developed suitable skills for the jobs that i am seeking but none of the employers are interested in even interviewing me because i lack the degree that they are looking for. What i think would be a great idea and possibly an actionable buisness plan is to start a group that certifies you for certain skills that way you can pursue your education in a personally driven direction instead of a college setting and you only need to clear this groups testing ( which could be administered for a much lower cost than running classes and the group wouldn’t care how many credits you take from them before they will give you a degree) then employers will have a way to see if the prospective employee has passed certification in an area, instead of only seeing if he has a degree of a certain caliber in a similar field.

Daniel Kuehn October 2, 2010 at 6:37 pm

You don’t think a major financial crisis might have something to do with these unemployment rates – particularly since we’re looking at MBAs?

It hardly seems plausible to attribute this to some sort of paucity on the part of brick and mortar institutions.

Skills and degrees are not the same thing, but they aren’t unrelated. The college wage premium is still very high and as long as it is people will demand a brick and mortar education.

What we probably have too much of is four year degrees. Some of those could probably be two year degrees. And of course the high school dropout rates are depressing.

Unemployment rates are the wrong thing to look to in the middle of a depression – your argument is ridiculously transparent when you compare 2007 to 2009. Look to price signals, and then try to tell me brick and mortar institutions are dying. The internet is a powerful tool for gaining knowledge and skills, there is absolutely no doubt about that. That doesn’t mean brick and mortar institutiosn and degrees have run their course. To suggest that is absurd.

Slim934 October 4, 2010 at 7:34 am

Your argument loses a great deal of force once we recognize that without federal student aid (look at the previous tax receipts story) then most of the people IN colleges would likely choose to drop out for simple reason of being unable to pay. There is a reason that college tuition gets hiked up in the neighborhood of 5 times the inflation rate.

The price signals for higher education are supremely screwed up by federal intervention so I would posit that looking at that metric produces incorrect conclusions also.

Andrew_M_Garland October 2, 2010 at 6:41 pm

Sorry to say, it has long been settled that tests by employers are unfair. The law prevents employers from testing for general ability, and discourages testing for job-specific knowledge. If employers could describe and give their own tests, then prospective employees could qualify by acquiring knowledge in any way they wanted, including self-study. There would be much more competition for colleges.

Formal degrees and prior experience are highly valued as a way to validate a person’s knowledge without giving a specific test.

I hired programmers as part of managing a software group. The HR department told me that I could ask technical questions, but to never write them down in any “formal” way. They were worried that someone would claim I was giving a “test”. Any test was illegal unless proven to be non-discriminatory in effect when applied to different races.

James Taranto of the Wall Street Journal: [edited]

Most professional jobs require basic intellectual aptitude. Since the 1970s the Court has developed a body of law that prevents employers from directly screening for aptitude.

In Griggs v. Duke Power Co. (1971) a black coal miner claimed discrimination because his employer required a high-school diploma and an intelligence test as prerequisites for promotion. The court ruled 8-0 in the miner’s favor. “Good intent or absence of discriminatory intent does not redeem employment procedures or testing mechanisms that operate as ‘built-in headwinds’ for minority groups,” Chief Justice Warren Burger wrote.

This became known as the “disparate impact” test, and it applies only in employment law. Colleges and universities may use aptitude tests. Elite institutions lean heavily on exams such as the SAT in deciding whom to admit.

For a prospective employee, a college degree is a very expensive way of showing that he has, in effect, passed an IQ test.

College is an Expensive IQ Test

Brandon Adams October 4, 2010 at 1:03 am

Your HR department is misinterpreting the case law. In Griggs v. Duke the employer was requiring a general skills and knowledge test that was found to be biased in favor of white applicants. The skills tested had little to no relation to the job being applied for.

A test measuring skills and knowledge directly relevant to the job would be fine. Just don’t make any analogies involving regattas.

Slim934 October 4, 2010 at 7:41 am

“In Griggs v. Duke the employer was requiring a general skills and knowledge test that was found to be biased in favor of white applicants.”

I do not see a misrepresentation here. The court itself determined the criteria for what was “biased in favor of white applicants” correct?

Even assuming it was blatantly biased in favor of white candidates how on earth would a company that goes through the work of developing such a test know a priori whether the test itself will screen out one race over another? It seems to me all one would have to do is show that one race passed/failed more than another and use that as evidence of inherent bias in the test.

prettyskin October 2, 2010 at 6:55 pm

That doesn’t mean brick and mortar institutiosn and degrees have run their course. To suggest that is absurd.

Why is it absurd? Is it because you say so?

Matvei October 2, 2010 at 7:15 pm

This isn’t my fight, but I agree that it is rather absurd to assume that brick and mortar schools will go away. Some subjects, like foreign language, arts, etc. are best taught in person. It is more likely that the brick and mortar schools will simply downsize and rewrite their mission statements/business plans.

Dave Albin October 2, 2010 at 8:28 pm

That will be the painfull part – they have clearly overbuilt and overhired a bunch of tenured profs, union maintenance people, administrators, etc. The consequences of malinvestment are coming to higher education. There will be no such thing as “simply downsize” – it will be a long and painfull fight.

Bryan October 3, 2010 at 12:20 am

As a language fanatic, I can guarantee you that it is much more efficient and cheap to self-study foreign languages with the internet and textbooks. Plus, you could do a year of Spanish immersion in South America and come out speaking better Spanish than most people who spend four years and $40,000 studying it at college. For foreign languages, you need exposure to the language spoken by native speakers. College campuses won’t get you that. However, I transformed my room into a Korean language lab with only Korean TV and films, Korean books, Korean comics, and Korean websites that I visit daily.

SirThinkALot October 4, 2010 at 10:38 am

That would happen in a free market, but since schooling is rigedly controlled(and at the lower levels, effectively monopolized) by the government, I gurantee they’ll do everything they can to prevent that from happening….

Russ the Apostate October 2, 2010 at 7:36 pm

It’s absurd because if all colleges become virtual, how will parents get rid of their kids? *grin*

Bala October 2, 2010 at 7:37 pm

The idea of evaluating the worth of these B-Schools based on the unemployment rate among their graduates is not appropriate. It leaves a lot of important factors out of purview – factors like unemployment rate in the general population, unemployment rate in the specific age-group of the MBA students as they graduate, the job profiles and income levels targeted by these students (I’ll take a bet that many of these unemployed people would be able to find a job if they were willing to accept a different job profile), etc.

Further, as a person who has been peddling the idea of doing an MBA in a good B-School for the last 11 years, I find this article short of understanding on what exactly B-Schools offer. I personally feel that it is going to be extremely difficult to package the learning that is offered at a B-School into an internet-based course. I’ll probably even stick my neck out and say that it is impossible. The reason I say this is that the learning in an MBA programme is (IMO) largely experiential and that it is the stimulation of the mind in that environment (peers, faculty, resources, course structure, etc) using the tools that are used (readings, case studies, live projects, class discussions, group activities, etc) that leads to the transformation of people into (more) effective business decision makers. The challenge of packaging all these intangibles into an internet-based course are, IMHO, enormous.

Jesse Forgione October 4, 2010 at 3:56 pm

Internet-based courses are only one part of what someone does when educating himself outside of the school system.

The only things you really miss out on are cynical, thought-killing professors and a mountain of debt.

Vedran October 2, 2010 at 10:56 pm

There are real costs to finding information on candidates. Think about it. Companies hire salaried workers in HR departments. How can these HR people discover if someone really knows something. Every professional’s resume should be well-written. It’s not hard to sound smart in an interview with some practice. In the whole process, it’s hard to differentiate the really smart person and the faker. They often appear to be the same. At least the person with a degree has some sort of educational foundation even if they are fakers. They have obviously taken time out of their week in an attempt to improve their skills.

Further, the business world does respect skill in cases where it is certified. Take for example the CPA and CFA exams. These are thought of more highly than MBAs.

Lastly, I’m not surprised that MBAs are unemployed. Real business skills are Accounting, Finance, and Statistics. An MBA is just general business undergrad 2.0. Sure, you’re better of than an undergrad degree, but you’re still not specialized in anything really.

prettyskin October 3, 2010 at 9:27 am

We specialize in things that we are not good in and turn around and call ourselves specialists.

Bruce Koerber October 2, 2010 at 11:14 pm

Thanks for the info about Khan Academy.

Robert October 3, 2010 at 5:44 am

A very common issue in Europe: Degrees and skills are required almost at the same time, which makes it very difficult for MBA and other graduates to get employed. However, there are also “thinking companies” understanding that theory needs to be proved in practice and that young people need to get a chance. They invest in graduates and develop company-tailor-made skills.

J. Murray October 3, 2010 at 7:47 am

And people laughed at me when I decided not to go with the MBA and go straight into the business world.

El Tonno October 3, 2010 at 9:58 am

Related: The Ranking Wars (via http://www.math.columbia.edu/~woit/wordpress/?p=3197)

“For most academics though, the real ranking that matters is not that of how good a job one’s institution does in training undergraduates, but the ranking of the quality of research in one’s academic field. Where one’s department fits in this hierarchy is crucial, affecting one’s ability to get grants, how good one’s students are and whether they can get jobs, even one’s salary. The gold standard has been the National Research Council rankings, which were supposed to be revised about every ten years. It turns out though that the task of making these ranking has somehow become far more complex and difficult, with more than fifteen years elapsing since the last rankings in 1995. Since 2005 there has been a large and well-funded project to generate new rankings, with release date that keeps getting pushed back. Finally, last year a 200 page book was released entitled A Guide to the Methodology of the National Research Council Assessment of Doctorate Programs, but still no rankings.

Recently the announcement was made that all will be revealed tomorrow at a press conference to be held in Washington at 1pm EDT. I hear rumors that university administrations have been privately given some of the numbers in advance, to allow the preparation of appropriate press releases.

The data being used was gathered back in 2005-2006, and the five intervening years of processing mean that it is rather stale, since many departments have gained or lost academic stars and changed a lot during these years. So, no matter what happens, a good excuse for ignoring the results will be at hand.

Based on the confidential data provided to them last week, the University of Washington Computer Science and Engineering department has released a statement characterizing this data as having “significant flaws” …

The UW Dean of the College of Engineering has a statement here where he claims that, despite 5 years of massaging, the NRC data contained obvious nonsense, such as the statistic that 0% of their graduating CS Ph.D. students had plans for academic employment during 2001-5.”

Ben Ranson October 3, 2010 at 11:17 am

“The question that is never asked among these debates is why companies require degrees instead of skills?”

I think it would be better to ask the broader question, “Why do so many college students enter into courses of study that have little economic value?”

The answer, in part, is demand created for degrees by persons intending to work for the government and in government controlled industries.

The Princeton Review’s list of most popular college majors is as follows: 1) Business Administration and Management/Commerce, 2) Psychology, 3) Nursing, 4) Biology/Biological Sciences, 5) Education, 6) English Language and Literature, 7) Economics, 8 Communications Studies/Speech Communication and Rhetoric, 9) Political Science and Government, 10) Computer and Information Sciences

If you look at the list, it is easy to see that a large portion of college students intend to work for the government and are arming themselves with the appropriate degrees.

JFF October 4, 2010 at 8:47 am

Or really don’t want to work at all.

Ben Ranson October 5, 2010 at 10:43 am

All too true… sadly.

r October 3, 2010 at 12:05 pm

Khan Academy doesn’t end at Calculus 2. It contains at least enough more material on calculus to fill 2 more semesters, as well as courses on linear algebra and differential equations.

anonymous October 3, 2010 at 12:54 pm

I agree with Mr. Dyke’s argument, but I have one small critique. “Dieing?” Unless we are referring to “the process of using a sharp implement to cut material,” the standard English spelling for “the cessation of life” (to which I believe Mr. Dyke was referring) is “dying.” I could forgive this in any other situation- but in an article about higher education, and in the first sentence, no less!

Jeremiah Dyke October 3, 2010 at 1:01 pm

Good catch! Never forgive me for these errors. I am a horribly impatient writer who rarely proofreads anything

Anupam October 4, 2010 at 7:51 am

Agreed, In the era of free education over the internet, its ridiculous to spend a 6 figure amount on higher education.

You would rather invest those into a franchisee business and make better returns on your investment.

Mind you a 6 figure fee MBA at top institute does not guarantee a great job. If et al, you would be more stressed than before with the commitments you make at your corporation.

billwald October 4, 2010 at 11:34 am

In the bad old days most of the people who went to college didn’t need a job. Needing a degree for a job is a post WW2 phenomenon which has degenerated into using an advanced degree requirement simply to cut down the pool of applicants.

Howard Cornett October 4, 2010 at 1:18 pm

Check out http://www.personalmba.com for a new way to learn what is in a traditional MBA at a much lower cost. I am not affiliated in any way. I just use and appreciate the site and the information. It has really helped me get better at what I do.

collegeinfopro October 28, 2010 at 4:59 am

Really interesting post, agree with you that in today’s fast life brick and mortar universities are lagging far behind and online courses are really gaining grounds but I do not think the it is the end of the brick and mortar universities.

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