The Middle Class College Education Crisis

One of the hot topics in politics lately has been the definition of the middle class.

In my opinion, you’re a member of the middle class if you make too much money for your kids to qualify for college financial aid, but not enough to pay for it without serious pain.

Traditionally, there are three ways to deal with college-related middle class pain: (1) diligent parents sacrifice to save college money from the day their child is born, (2) plan “B” parents draw down on their home equity or 401K to pay tuition bills, or (3) parents simply let their kids fend for themselves; i.e. borrow money or work part time.

Suddenly now, the last two of these options are in jeopardy. Home equity and 401K account balances are in the tank, credit is tighter than it’s ever been in our lifetime, and even the prospect of part time jobs is growing bleak.

Meanwhile, college administrators all over the country are beginning to sweat. Parents will soon receive their 2009 tuition bills and invariably ask themselves a couple of questions: “Is a college education worth this much money?” and “where do we get the money to pay for this?”

Unfortunately, as families struggle to answer these questions, the outcome will be more middle class students dropping out of college. Needless to say, this could be the greatest squeeze of all on working families.

The wealthy will continue to pay for their children’s education. The poor still have access to financial aid, but the children of the middle class will suffer. And without a college education, the next generation of the middle class will, in all likelihood, slide down the economic ladder.

Survival Strategies For The Middle Class College Education Crisis

Things may get a lot worse before they get better, but the same could be said for folks who lived through the Great Depression, World War II, and even more modern times like the days following September 11, 2001.

Sure, the problems were different then, but somehow people found a way to survive and eventually thrive. It’s one of the wonderful things about human nature; we often achieve our greatest accomplishments in the face of adversity.

Different problems demand different strategies. My father pulled himself out of urban poverty by being the first in his family to attend college. Nowadays, lots of people attend college and assume that the diploma they receive will result in a good paying job in their chosen career. As we’ve discussed, this is not automatic and likely to become even more difficult in the future.

 

Does this mean that today’s young people should skip college? Of course not, the right college degree will help you obtain a better career and earn more money. According to the Census Bureau, over an adult’s working life, high school graduates earn an average of $1.2 million; associate’s degree holders earn about $1.6 million; and bachelor’s degree holders earn about $2.1 million (Day and Newburger, 2002).

$2.1 million sounds like a lot of money, but do a little math. If you look at the difference in lifetime earnings between high school graduates and college graduates, the difference is $900,000 — clearly more than the cost of a college education. But do more math. You have to pay for that college education up front and the earnings that follow come much later. Something called the “time value of money” makes this investment less attractive. The math gets even worse if you borrow money to pay for that college education.

So, while a college education is generally a good financial decision, it isn’t a “no-brainer.” The degree you get, the college you attend, your funding strategy, and what you do with your free time during college all combine to determine whether or not a college education is worth it.

The time has come to stop thinking about college as the natural next step after high school or as a fun experience that will help you decide what you want to do with your life. My advice is to think about a college education the same way you’d think about any other big financial decision, like buying your first home. You’d spend hours looking over the house, look at other houses in the neighborhood, the quality of schools, resale values, you name it.

Now think about your decision to attend college. What should you look at, what additional factors should you consider, and most importantly, what can you do differently to make sure it’s a decision with a successful outcome?

Over the next two weeks, I’ll publish seven strategies for making sure your decision to pursue a college education is a good one. Take a look at each of them and consider how you might apply them to your own situation.

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The Reality of Recession Proof Careers

Last quarter, the national unemployment rate was still 6.1%. Most economists consider anything under 5% as “full employment.” The highest unemployment rate in my lifetime was 10.8% in the fourth quarter of 1982 (which was coincidently, the year I got fired).

While 10.8% is pretty grim, it’s still only 5.9% more than full employment. In human terms this means that the worst 6% of companies may fail or the worst 6% of employees may be fired or laid off. This also means that even if this recession is a bad as 1982, 94% of us will most likely survive unharmed.

So what about recession proofing your careers?

I think it’s a dumb idea. Anyone who golf’s knows that the best swing is the one “with the fewest moving parts.” Similarly, the safest career move in turbulent times is the one with the fewest moving parts. Radical moves at times like this are very risky.

That said, I’m not suggesting that you do nothing, I’m simply saying that you should take action to move your career in safer direction.

Career Security Moves

Here are a few career-specific strategies for moving your career to a safer place until this economic storm blows through:

Sales – Salespeople are on the front line and thus the most vulnerable to sudden economic downturns. One of the people I interviewed in Career Secret Sauce; 9 Winning Strategies for Building a Great Career, was a career salesman named Gary McGrath.  His final comment in our interview was somewhat chilling and very appropriate to today’s situation:

“September 11 was even more devastating for salespeople than it was for everyone else. Suddenly, all budgets were frozen and none of my customers could conduct a rational discussion about ever buying anything again. I had a wife and four kids to feed; it was a scary time. I will never forget the feeling that I couldn’t sell anything and it was beyond my control. Since then, I’ve worked every day like it’s September 10, 2001 and I may not be able to sell a thing tomorrow.”

So, if you’re in sales, my first piece of advice is to undertake a critical forecast analysis on yourself. Will the deals you’re forecasting still come through? If not, is there a back-up strategy that will keep them alive and/or bring in a smaller deal this quarter? If no, is there anything you can do with your favorite customers to bring in even small orders?

Your management knows that this will all pass one day and they’ll still need good salespeople when the economy returns. That said, they are likely to use this downturn as an excuse to clear out any “deadwood” that they feel isn’t producing. DO NOT BE THAT DEADWOOD. Hustle for business, help your team, and keep your boss up to date on what’s happening and what your new sales strategy is.

Finally, if you’re in sales and have a chance to move to an area with a more stable income like sales training, marketing, or support, this may be a good time to make that move. Areas like this are safer for people with sales know-how who work hard.

Other Disciplines – In May, I wrote a piece titled The Ultimate Career Secret Sauce for Economic Downturns, with strategies for people in Accounting, Manufacturing, Shipping, and Customer Service. It all holds true today, so I suggest you simply CLICK HERE to read the whole story.  the-ultimate-career-secret-sauce-for-economic-downturns.

Just “Keep Your Nose Clean”

If this recession follows the numbers from 1982, 90% of the workers in your company will remain safe. Your primary strategy for making your job “recession-proof” is to make sure you’re well inside the “safe 90%.”

Now is a time to help everyone around you, volunteer to do things that are outside of your job description, steer clear of bubbling political hot beds, and don’t complain if you’re asked to work on a Saturday or take a pay cut.

Now is a bad time to change employers (unless your company is going out of business) or even transfer to another department that you don’t know much about.

Just remember, as painful as it is to live through, less than 6% of us will be directly impacted. The rest of us just need to stay focused and maintain a positive attitude.

So these are a few strategies for working types. Next post we’ll look at my top strategies for college students who aren’t sure they can afford to finish college.

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Career Myths and Strategies for The Recession of 2008 – Part 1

While most of us are still in shock over the recent downturn in the economy, the reality of the situation is starting to sink in. We are entering a recession, it will last for a while, and people are searching for survival strategies – that includes me!

As you may know, I track the news daily as well as talk to a wide variety of people about what’s happening in the job market.  There is a lot going on, in fact, too much for a single article, so I’m going to break it up into three. The first post will deal with the conventional wisdom advice that is dominating the current business news.

The Myth of The Recession Proof Career

The topic of finding a new field of work that will fare better in an economic downturn has become a popular news story in the last few weeks.  

Here is a story from Hot Jobs that typifies this line of thinking. 

Another piece of conventional wisdom has always been that people seek to escape reality in tough times, so jobs in the entertainment industry are thought to be safe havens. But this week’s guardian reports: “All bets are off on the “recession-proof” casino industry – and Nevada is feeling the losses”

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A few weeks back, Fox News did a similar story on the sporting industry, reporting: “NBA commissioner David Stern said his league intends to trim at least 50 of the 800 jobs in its U.S. work force, more than 6 percent, and says the NBA has shuttered its league office in Los Angeles.”

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Danielle Dubetz of WPTV in West Palm Beach, Florida wrote a nice piece last week detailing a number of emerging strategies for a recession proof career, including the relatively new industry of alternative energy.

Danielle wrote: “Energy-related jobs dealing with oil, gas, alternative energy, and even nuclear are also listed as secure careers during tough economic times.  Environmental careers are increasingly popular as the interest in “green” technologies and combating global warming grows.”

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Both presidential candidates agree that alternative energy will create millions of new jobs, but not so fast. As the world enters a global recession, the price of oil has tumbled daily. Yesterday it dipped below $70/barrel for the first time this year and threatens to drop further.

As I reported back in May — $4.00/Gallon Gas, Innovation, and Your Career — oil prices will drive investment and new job creation in alternative energy industries. Unfortunately, the opposite dynamic is now in play.

Earlier this month the Houston Chronicle reported: “The concept of alternative energy has a lot of momentum,” said Dan Pickering, head of research for Tudor, Pickering, Holt & Co. Securities in Houston. “But lower oil prices make it harder to justify investment. At $50 a barrel, a lot of that investment will die.”

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So, I’d be careful about following conventional wisdom about alternative energy careers.

One of my core principles is that you cannot have a great career without doing well at your job and you cannot do your best work if you don’t like your job. This may sound obvious, but you’d be amazed how many people stick to jobs they don’t like, or take new jobs because “everyone says it’s a great place to work,” only to later discover that it’s the wrong place for them!

What can you do? Plenty, but don’t do anything crazy like jumping jobs. In my next post I’ll examine the realities of recession proof careers and lay down some specific strategies for weathering this storm.

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Think Times Are Tough — Try Being A College Graduate

When I started writing Career Secret Sauce; 9 Winning Strategies for Building a Great Career, I knew in my heart that today’s younger generation would be facing a much tougher world than we did. Little did I know that it would get this tough, this fast!

Since I first starting writing about the economic downturn back in May – Distant Thunder, I’ve been monitoring news feeds from all over the world to see how things are impacting the Class of 2008.

At this point, “my cup runneth over” with doom and gloom.

Most of the time, I enjoy being right, but this time, I wish I’d been wrong.

Want a glimpse of some of the tales of woe that are out there?

Tyson Hunter’s Student Loans

Here’s a heart breaker from last Sunday’s Seattle Times about a fine young man who recently graduated from Boston University and was fortunate enough to land a job that pays well.

“Tyson Hunter dresses sharply, works out most every day and can’t wait to make his mark on the business world.  Hunter, 23, also happens to owe $152,000 in student loans, accumulated in four years at Boston University. He graduated last year with a bachelor’s degree in business administration, and now earns $40,000 a year at a market-research company. 

Tyson Hunter

 

His loan payments soon will top $1,000 a month — the amount of a small mortgage, and about a third of his salary. If he makes the minimum payments, he will retire his student debt when he is 53 years old, having handed lenders some $300,000.”

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Public Sector Scramble in Texas

Here’s another story that reaches beyond the plight of college students from a part of the country that’s generally been pretty solid economically. Today’s Fort Worth Star Telegram featured a story about the rush from risky private sector jobs to the relative security of government work.

“Meanwhile, workers are leaving or being pushed out of private companies and entering what they see as the safer waters of education and public employment. The Region XI Education Service Center has seen about a 30 percent increase in applicants to its alternative certification program, which allows professionals with college degrees to become teachers. The center serves 77 districts and 11 counties, including Tarrant.”

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Is the Public Sector truly a safe haven in this storm? Perhaps, if you can get in, but with this kind of scramble going on, that may be easier said than done. Further, with most state budgets being slashed, the probability of finding an opening may be bleak.

Be Like Pat

There’s this old joke that I tell far too often, but it fits this situation so well, I just can’t help myself.

It’s the story about Pat and Mike.

Pat and Mike were on a camping trip and suddenly there was a loud noise and growl coming from the underbrush. Pat screamed, “What’s that?”

Mike replied, “I think it’s a grizzly bear” and with that Pat grabs his running shoes and starts lacing up.

“What are you doing Pat?” Asked Mike. “You can’t outrun a grizzly bear”.

“I know,” said Pat “I don’t have to outrun the grizzly; I just have to outrun you!”

I have no idea how to solve this problem for all of the young people in the world, let alone the United States, but I do know how to solve it for one person at a time. The answer is in my book and on this web site. Learn the lessons of Career Secret Sauce and apply them immediately.

You don’t have to outrun this crumbling economy; you just have to outrun Mike.

 

 

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