As the financial returns to education decline, graduates have to be smarter and more flexible about their careers.
My unifying theory of finance is that everything goes seriously wrong when people start seeing something — a bond, a mortgage-backed security, a crypto exchange — as risk-free when it isn’t. Look at any financial crisis or minor blowup, and that’s always where it starts.
Lately I have been wondering if my hypothesis applies to areas outside of finance — specifically, to education. For years, a college degree was seen as a risk-free asset. It took money and time, but it was near certain it would pay off in the form of increased lifetime earnings. No wonder that we are in now in an education bubble: Lots of people went to college, studied things that aren’t useful, and found themselves overwhelmed with debt. Many more can pay their debt, but work in jobs that don’t require a degree anyhow.
In the postwar era, college was a bet that couldn’t fail. Not many people went to college in the first place, and those who did were rewarded with much higher earnings. And as technology evolved, it made college-educated workers even more productive.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Photo by Laurie Rubin/Getty Images
