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The latest screamfest from the various teacher's groups is that they're "grossly underpaid."

Well, no.

First, let's not forget that teachers are paid for 12 months but work 9.  Indeed the "standard" school year is 180 days.  The standard man-year of work is 2,000 hours -- 40 hours across 50 weeks.

But 180 days is 1,440 hours, not 2,000, or 72% of a standard work-year.

And before you talk about "overtime" do realize that professionals don't get paid overtime.  I never did as a professional writing code or building networks for other people.  It's a professional job, and is exempt -- just as is being a teacher.

So that "horrible" $40,000 salary (which, I remind you, typically comes with 100% health care coverage for the entire teacher's family, an expense that is nearly always over $10,000/year) is actually $50,000 / 0.72 or approximately $70,000 in salary.

That's underpaid?

Uh, no.  It's grossly overpaid, especially considering this:

Earlier this month, the 2017 National Assessment of Educational Progress, aka The Nation's Report Card, was released. It's not a pretty story. Only 37 percent of 12th-graders tested proficient or better in reading, and only 25 percent did so in math. Among black students, only 17 percent tested proficient or better in reading, and just 7 percent reached at least a proficient level in math.

Leave the racial disparity behind for a minute.

Exactly why would anyone get paid anything if only one quarter of those who were the "product" of that work met the objective requirements to be considered acceptable?

Why is not that the question put to these "teachers"?

Is there some "reject rate" acceptable in any production of anything?  Certainly.  Some percentage of parts made in a factory fail to pass inspection, some percentage of wafers in a fab don't make it into the final output as a computer chip, etc.

But if your success rate is only 25% on the basic facts that define the ability to function as an adult in society, say much less understand the physical and economic world around you then you have no right to be out pounding the street demanding more money.

You ought to be cleaning toilets with a toothbrush and the taxpayers should be taking up arms at the rank theft you demand from them to produce defective output on an everyday, every year basis -- and have been for decades.

This is not a new problem.  When I ran MCSNet after a series of bad experiences with so-called "graduates" with nice, polished resumes who couldn't make change for a $20 without a computer telling them exactly how much it was it became obvious that (1) they didn't write their own resume and (2) they were functionally illiterate and innumerate.

Yet they had in their hand a credential that said they (1) could read and write and (2) could perform mathematics both at a 12th grade level.

Those credentials were lies.

I instituted two tests before you could get an interview; when you came in and presented a resume you were shown the conference room and given a pencil, piece of paper and the two tests; nothing else was allowed inside.  The first was a request to write a basic business letter informing a customer that his account was disabled because he hadn't paid his bill, and to please remit the balance to continue service.  The second was a four-function (addition, subtraction, multiplication and division) mathematics screening with 20 questions on it.  You needed a 90% on the math to pass and the letter had to be grammatically correct and formatted as a reasonable business letter.

90% of the applicants failed one or both and more than half failed screamingly, either being completely unable to compose a business letter that could be read and understood as reasonably correct English or failing to get even half of the math correct.  More than a few applicants literally walked out leaving behind two blank pieces of paper for "answers", unable to do any of it.  A couple actually wrote things like "**** you" on the test before walking out, clearly unable to do any of it.

Most-alarmingly was the fact that more than a third of those who claimed to be currently enrolled in college, including at UofC, applying for a part-time job while in school, were unable to pass these screens.

I kept every single test and associated resume in a large horizontal file for what I expected would eventually be an inevitable allegation that I was "discriminating" in some form or fashion.  This was downtown (2 Prudential Plaza) Chicago.  Let me point out that of those who were unable to write said business letter not one of them could have possibly also written their own resume and as such they had already lied in the application process (and thus were not going to get hired) before coming in the front door.

The enabling liars who issued these people their diplomas are the same people pounding the streets right now.  They were the ones who gave out the "As", "Bs", "Cs" and even "Ds" to these students -- but passed them instead of handing out well-deserved "F"s for years from one class to the next without actual achievement having taken place.

These very same teachers are openly and publicly being paid to commit fraud upon the taxpayer and the US marketplace on a literal daily basis.  Three quarters of those who they deem "competent" through a 12 year cycle of fraud are in fact not competent and this number includes high-achieving areas.

In most major cities I assure you that the actual percentage of incompetent "graduates" is at or above 90% because it was in the 1990s and this report's statistics make clear that it still is.

Think about this folks because everyone's excuse is that oh, there are a few bad teachers, but most are good.

What are the odds of someone getting through 12 years of schooling, the first six or so taking place with one or two teachers for the entire year, then in the subsequent six year or so with a half-dozen teachers each75% of said students are incompetent when they graduate, and it is not true that basically every single one of them is guilty of fraud?

Let's put some math to it -- if three out of four students are incompetent at graduation then with a single teacher for a single year a minimum of 75% of all teachers must be committing fraud by certifying acceptable performance when it is not true.

That is, only 25% are performing honest work with a single year of experience -- that is, a single trial.

But it's not one year.  It's 12 years, and for roughly six of them the student has a half-dozen teachers each year, not one.  So we have 6 instances in the first six years and then 36 more over the following six, for a total of 42 instances, any one of which could fail said student and prevent them from going forward.

What are the statistical odds of running that gauntlet where only 25% of the teachers do honest work against 42 trials?

The answer is in scientific notation and has 25 zeros to right of the decimal.  To put not-to-fine a point on it you're more likely to be hit by an asteroid while getting your mail this afternoon, then struck by lightning on the walk back to your house by a factor of several orders of magnitude than to encounter a string of honest teachers given these rates.

Bluntly: Essentially all are guilty of fraud upon the taxpayer and the public.

This is one of the largest and longest-running frauds perpetrated against the American population and taxpaying citizen ever and anyone in this profession deserves to be consumed by a rabid coyote.

Not only should every one of these "teachers" be fired they should all be criminally prosecuted and tossed in prison; the United States would be better off if the kids of this nation spent an hour a day in the library doing whatever they wanted instead of attending school.

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There's an interesting article in The Atlantic that contains a graph you should pay attention to:

This is the number of hours you must work at minimum wage to pay for a credit hour at Michigan State University.

In 1979 it was about 10.  Now it's about 60.

Note that a "full load" is generally considered over 12 credit hours per semester; let's take the minimum (you usually need 120 hours to graduate, so this would be a "five year" plan); this means you would need to work 120 hours (or about 10 hours a week) to pay for school while in school.  That can be done along with the academic load.  It also can be done during the summer. Note too that tuition is nowhere near the entire cost; the usual "all in" price is about double tuition expense, so you would need to work 20 hours a week to cover it.  Again, that's doable -- two 8 hour shifts on the weekend and an hour four nights a week, and you're good.

Today, at six times that cost, it cannot.

The conclusion, however, is backward:

Is it any surprise that so many students today are suckered into taking out non-dischargeable loans, in growing chunks, to pay for their bachelor's degrees?

Wrong answer.

The reason the price went up 600% is the availability of those loans.

That is, it was the financialization of education that made this possible, because it is through financialization that entities sit down and figure out exactly how much they can extract from others in a transaction, causing the price to rise right to that limit.  At the same time they lobby vigorously for "ever-easier-appearing" (but more-onerous in fact) terms that increasingly transfer the fruits of the result of whatever has been financialized from the buyer to the seller through that increased price!

The result of this paradigm and the unholy alliance between banks, Wall Street, Washington DC and the colleges themselves is that the marginal utility of college degrees for many, perhaps even the majority of students, is now negative.

Remember that the school, the lender, Wall Street and Washington DC do not care about individual outcomes.  They could give a damn about whether college is a good deal for you.

That is what happens when anything becomes financialized; the only metric that matters is the aggregate outcome for the financial chef; that is, his goal is to strip all but one penny of the benefit on average from the participants and keep it. 

The closer he gets to that goal the more money he makes.  He does not care about your outcome, only that in aggregate the pool of "buyers" keep just enough that the next group will come in the door.

In other words so long as they can point to a few rocket scientists that make $100,000 a year right out of school that you can only make $30,000 and leave school with $150,000 in non-dischargeable debt,  thereby virtually guaranteeing financial hardship if not outright bankruptcy, does not matter to them at all!

The colleges are not only aware of this they are willing participants in that they have their own finance offices that will help you arrange for your own fiscal destruction and, if they (or you) can talk your parents into it, theirs as well.

This must be stopped -- but until the financialization of education is reversed it won't be.  Until that day comes the best you can do is to take a long, hard look at the numbers and figure out how to get the education you want without taking any debt at all.  If that cannot be done given your specific set of circumstances then in most cases what you're proposing to do is objectively a bad deal.

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So by now you have three reasons to tell the college finance office to go blow a donkey when they "propose" that you go into debt to fund your education.  You can read them here, here and here again if you need to.

Now I'm going to give you the biggest reason of all not to do it, and it has to do with your personal wealth over time.

It's simply this: Statistically speaking you will never get rich working for someone else.

Oh sure, there are exceptions.  You might wind up working for the next Google before it goes public, and be far enough up the food chain that you get stock options and the company hits the home run in the public markets and those options vest and they're successful long enough for you to cash them out.

That's a lot of "ands", by the way, so let's put probabilities on it.

  • Working for the next Google: 1 in 10, if you work for a startup. 9 of 10 fail entirely.
  • Being far enough up the food chain to get a lot of options: 1 in 5, if you're high-skilled.
  • The company hits the home run: 1 in 10 again; from venture capital to IPO with nothing that blocks them in the middle somewhere due to a mistake.
  • The options vest: 75%, probably, provided you get the other three first.
  • The firm succeeds long enough to cash them out: Lockup periods and all, you know.  Maybe 50%.

So how's this work out?  .1 * .2 * .1 * .75 * .5 = 0.08% chance.

In other words, less than 1 in 1,000.

Still think this is a good path to getting rich?  Uh, no.

By the way, I still have some paperwork somewhere around here with a bunch of options that I was granted in a spin-off that ultimately did go public.  So I got 1-3, and guess what -- the firm failed anyway and thus the options were worth zero.

Oh well.

This, by the way, is why you never, ever count those options as part of your compensation when you're figuring out whether to take an offer in a non-public firm, even if it's planning to go public.  The odds are overwhelming that you have a nice small stack of pieces of paper with their highest and best value will be found in starting a campfire or your BBQ in a few years.

Now sure, there are exceptions.  Google has its share of millionaires, as does Facebook.  But remember that people win the Powerball all the time as well -- this does not make buying Powerball tickets a good investment.  In fact the lottery, just like options in non-public companies, are a stupidity tax to the extent that you actually expect either to be worth anything.

What options in non-public companies are is an incentive for you to work hard in an effort to make them valuable.  They do a very nice job of that, by the way, and my comment on the odds has nothing to do with whether they're proper to grant to people.  They clearly are, and they clearly serve a purpose, but the purpose isn't making you, the grantee, rich.  It's to do the firm's level best to spike your performance in your job to the maximum possible extent.

So how do you get rich?  You work for yourself.

Let me clue you in on a secret to working for yourself: It is utterly essential that your life overhead is as low as possible in order for you to succeed in working for yourself.

The reason is this: On average you will fail at least once, and probably more than once, before you succeed.  It is only through having a very low life overhead in the form of essential spending that you will personally be able to get through those failures without being rendered destitute, having creditors chase you, being thrown into the street or all of the above.

Don't be fooled either by the claim that you "have to" go to college to earn a good living.  That's a lie.  You can do a number of things that don't involve college yet make a darn nice living, and give yourself the opportunity for entrepreneurship.  How about plumbing or electrical work?  Both have no college requirement and reasonable apprenticeship or certificate requirements with you actually getting paid to learn the trade instead of the other way around.  There are dozens of others, from various forms of physical labor to intellectual labor such as web design, and the nice thing about all of them is that none require going into debt of any sort in order to gain the "first job", and most have a direct path into self-employment.

Now let's look at the economics.  Let's assume instead of four years in college you instead spend them apprenticing for electrical work.  Let's further assume you can make $15/hour doing so as an apprentice, then $25/hour once you have the certificate or license.  There are 2,000 working man-hours in a year, assuming 50 weeks of 40 hours and two weeks off for vacation.

So in the first two years you earn $30,000 each, and then $50,000 the next two.  You do not blow all of this on creature comforts nor do you go into debt.  Instead you stash 20% of your gross and live frugally.  In those first four years you have amassed $32,000 in savings and have no debt.

The college graduate, on the other hand, has $52,100 in debt and at the nice low current interest rates will be paying $522.35 a month on graduation.  The problem is that at graduation if he gets a $50,000 a year job he has $4,166 a month in gross income less the $522.35 in loan repayment, or $3,644.32 before taxes.

You, earning $50,000 a year at the same point in time, have $4,166.67 a month in gross income and no debt obligation at all.

Now let's assume two things: First, from that day forward you both live equally frugally and spend the same amount.  Second, the $32,000 the trade-follower amassed continues to expand.

Let's assume that inflation is 3%, or roughly historical averages (yes, that's 50% higher than Fed target, but it's reality over the last 50 years or so.)  Let's further assume you can earn 6%, or 3% after inflation, and that we will do so for 45 years before you retire.

That $32,000 the non-college-goer amassed turns into $440,467.55.

What's worse is that if you both live under the same standard of frugality from that point forward for the next ten years the non-college goer gets to add $6,268.20 to that balance every year for the first ten while the college graduate has to pay off the debt.

Now let's look at what happens.  The college graduate has zero saved at that 10 year point.  The non-graduate has $139,926.99, and both are living under the exact same standard.  The entire difference is the loan repayment the college graduate has to make.

Can he make this up over time with better salary?  Maybe.  How much does he have to make up?  More than you think.

Guess what happens in 35 more years?  The non-graduate has $1,075,490, and all of that is due to (1) living frugally during the four years while the college grad is in school and (2) socking away only the loan repayment he is not making during the next ten years.

By doing just those two things the guy who doesn't go to college has over a million dollars when he's 65.  Note that this is a quite-conservative set of assumptions -- if you can manage to get an 8% return (hint: not without a lot of risk you can't!) then that "nut" is over $2 million at age 65.

Note that neither of these guys stuck one penny in a 401k or 403b, or anything like it, from that 10 year point forward.  The college graduate is literally over a million dollars behind in retirement income at the point his student loans are paid off and he's also 14 years behind in contributing -- a crippling deficit that will require that he both make a hell of a lot more money and save more of it to catch up.

Now here's the other part of it.  Neither of these two guys will get truly rich doing this.  The college grad and non-grad will work for someone else and while both can find their way to retirement and be ok, neither is going to hit the jackpot and retire at 40 on this path.

And here's where the real bad news for the college guy who has to take out loans comes from.

During those first ten years the college grad can't start his own business because he needs that $500+ a month every month without interruption -- if he doesn't pay he's screwed, permanently.  There is no way for him to cut way back for the inevitable bad months while starting up a business where there is little or no income.

The non-graduate has the option at any point in time to split off from working for someone else, and after a decade or less he's going to be in a utterly excellent position to do so, assuming that he or she does good work.  And it is there, in entrepreneurship, that one finds the path to wealth.

Wealth, by the way, is not really about having a lot of money when you get to 65.  Wealth is actually about freedom.  The choice to change careers, to raise your kids and be there for their important times, to take a day or a week off when you want to, to "retire" at 40 and go do something else.  To have a kid that needs you there for him or her in some form or fashion so you back off on what you're doing and voluntarily accept far less economically for a while, because you can and in doing so you'll be ok. You can never do these things working for someone else; that set of options simply doesn't exist.

If you're a young adult there is one thing I will tell you above all else that will impact your economic success in life: Do not go into debt no matter how it's sold to you or what someone claims you can accomplish with it.

Either find another way or do a different thing.

How do I know this is utterly true and works?

Because I've been there and done that, both personally and in business.

That is, in fact, why I can write this column, and why you're reading it today.

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