Business & Economics

The commencement address that won’t be given

Robert Reich

Members of the Class of 2012,

As a former secretary of labor and current professor, I feel I owe it to you to tell you the truth about the pieces of parchment you’re picking up today.

You’re f*cked.

Well, not exactly. But you won’t have it easy.

First, you’re going to have a hell of a hard time finding a job. The job market you’re heading into is still bad. Fewer than half of the graduates from last year’s class have as yet found full-time jobs. Most are still looking.

That’s been the pattern over the last three graduating classes: It’s been taking them more than a year to land the first job. And those who still haven’t found a job will be competing with you, making your job search even harder.

Contrast this with the class of 2008, whose members were lucky enough to get out of here and into the job market before the Great Recession really hit. Almost three-quarters of them found jobs within the year.

You’re still better off than your friends who didn’t graduate. Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school degree, the rate is double that.

But even when you get a job, it’s likely to pay peanuts.

Last year’s young college graduates lucky enough to land jobs had an average hourly wage of only $16.81, according to a new study by the Economic Policy Institute. That’s about $35,000 a year – lower than the yearly earnings of young college graduates in 2007, before the Great Recession. The typical wage of young college graduates dropped 4.6 percent between 2007 and 2011, adjusted for inflation.

Presumably this means that when we come out of the gravitational pull of the recession your wages will improve. But there’s a longer-term trend that should concern you.

The decline in the earnings of college grads really began more than a decade ago. Young college grads with jobs are earnings 5.4 percent less than they did in the year 2000, adjusted for inflation.

Don’t get me wrong. A four-year college degree is still valuable. Over your lifetimes, you’ll earn about 70 percent more than people who don’t have the pieces of parchment you’re picking up today.

But this parchment isn’t as valuable as it once was. So much of what was once considered “knowledge work” – the kind that college graduates specialize in – can now be done more cheaply by software. Or by workers with college degrees in India or East Asia, linked up by Internet.

For many of you, your immediate problem is that pile of debt on your shoulders. In a few moments, when you march out of here, those of you who have taken out college loans will owe more than $25,000 on average. Last year, ten percent of college grads with loans owed more than $54,000. Your parents have also taken out loans to help you. Loans to parents for the college educations of their children have soared 75 percent since the academic year 2005-2006.

Outstanding student debt now totals over $1 trillion. That’s more than the nation’s total credit-card debt.

The extraordinary rise in student debt is due to two related facts: the cost of a college education continues to increase faster than inflation, and state and local spending per college student continues to drop – this year reaching a 25-year low.

But this can’t go on. If unemployment stays high for many years, if the wages of young college grads continue to fall, if the costs of college continue to rise and state and local spending per college student continues to drop, and if the college debt burden therefore continues to explode – well, you do the math.

At some point in the not-too-distant future these lines cross. College is no longer a good investment.

That’s a problem for you and for those who will follow you into these hallowed halls, but it’s also a problem for America as a whole.

You see, a college education isn’t just a private investment. It’s also a public good. This nation can’t be competitive globally, nor can we have a vibrant and responsible democracy, without a large number of well-educated people.

So it’s not just you who are burdened by these trends. If they continue, we’re all f*cked.

Cross-posted from Robert Reich’s blog.

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Comments to "The commencement address that won’t be given":
    • Mac

      There are plenty of jobs in the STEM fields. Unfortunately most of our American students would rather get degrees in business, law, journalism, economics, English and underwater basket weaving. My daughter is a junior at Cal and was looking at the help wanted ads in her field of genetics. There were thousands…just sayin’

      [Report abuse]

    • Joel Malard

      Typical annual fees at McGill University, Canada for a bachelor of Science based on 30 credits taken during Fall and Winter terms. (Source here.)

      International Canadian Quebec
      Tuition 23328.00 5858.10 2167.80
      Total Fees 25451.72 7417.22 3726.92

      Other Canadian Universities would have comparable fees, and the UK also had lower fees the last time that I checked, in the early 90′s.

      I guess that is big government, still a large proportion of those students come from south of the border, that is US, and move back home for their graduate studies.

      In my opinion the main difference is that some countries value health and education as national assets, whereas other countries value them as personal assets.

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    • hoapres

      We need more jobs.

      We don’t need more college graduates

      >> You’re still better off than your friends who didn’t graduate. Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school degree, the rate is double that. <<

      What if the college diploma is being used as an expensive and unwarranted aptitude test ?? The job may not have required more than a high school diploma but was filled by a college graduate since the employer was able to obtain a college graduate to do the job. In the past, the job market was sufficiently good that a college graduate obtained a job requiring a college degree.

      I am amazed at the number of college graduates that are working at Walmart, retail mall clerks, day laborers, etc.

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    • Sherman

      Professor Reich indeed paints a very bleak picture for the young college students that are recent graduates or soon to be graduates. Unfortunately, I concur with his assessment, although I wish his was dead wrong and I am completely mistaken in my interpretation of recent trends.

      My deeper unsettling fear in regards to the current disenchanting situation is not simply an anemic economy leading to joblessness and underemployment for many (especially hurting the young generations) but the consequences of a lost generation struggling in disappointment and disillusionment. With the abundance of idle hands and discontent minds, cultural disintegration, social turmoil, institutional collapse, and the likes are not unwarranted concerns. The alarming response is that there isn’t one, at least not one that a majority can support.

      When will we stop bickering and unite (at the government levels – state and federal, in the business world, and as citizens) to urgently and cooperatively combat the problem(s) at hand? My take is not anytime soon and more lives and dreams will continue to decay and die indefinitely.

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    • Anthony St. John

      Sherman, what we really need is more PHILOSOPHERS who have learned and thought deeply about multidisciplinary social, political, economic, environmental and scientific problems, trained to provide leadership to implement solutions, that is if we can fix our destructive Us/Them political dichotomy first so that philosophers will be allowed to prevail.

      Seems like the framers of our U.S. Constitution were the last great politicians and leaders who really knew how to make great things happen using the concept of COMPROMISE that has now been overwhelmed. But we still had a civil war anyway and it looks like we are in the midst of another civil war in Congress today. We are too damned myopic and specialized for our own good.

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    • Anthony St. John '63

      Prof. Reich, the worst case scenario fact of life is that our generations’ legacy to the “F*cked” generation is never-ending and overwhelming Poverty and War, proving that we haven’t improved our civilization to be any better than that of Ancient Greece. We have only made it possible to drive ourselves to extinction with higher rates of decline and fall than ever before.

      The least you and your colleagues can do is to teach them to learn and think at the same time so they can still have a chance to overcome our failures.

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    • Koran-harian

      Indeed, our universities must focus on producing graduates who can solve multidisciplinary social, political, economic, environmental and scientific problems, and provide leadership to implement solutions with the sense of urgency required to guarantee acceptable quality of life for their own and all future generations.

      As of today, the “f*cked” generation has to figure out on their own how to survive and adjust to the rapidly changing world that previous generations haven’t had to deal with since the Great Depression and WWII, obviously we never learned the lessons of that history because we have totally failed to prevent it from happening again.

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    • Walter Wendler '75

      Open Letter to High School Graduates

      Dear Graduating Senior,

      I must beg your pardon for a somber reflection amidst the joy of your accomplishment: not to be a wet rag on the festivities of graduation, but to shine a light on the realities of post-secondary education.

      If you are going on to a state university, your GPA is a 3.5 or better, your ACT or SAT score is at the 70th percentile – placing you in the top 30% of current test takers – and you enter the University this year, about 56% of students with similar qualifications will graduate in 4 years. What’s surprising about this number is that it’s not higher, closer to 85 or 90%. But college is tough. That is what you pay for.

      On the other hand, if you’re going to a university with a more typical 2.8 GPA and are at the 45th percentile on the ACT or SAT, the likelihood of finishing in 6 years drops to well below 50%. These are not great odds. These aren’t like the odds that you had in high school, when graduation was nearly guaranteed. Success takes more than showing up. Access does not automatically equal success.

      It’s not surprising that if you are well-prepared for college study – a good GPA, ACT/SAT score, and class rank in the top 50% – you are more likely to succeed.

      Nearly 2 out of 3 students on the way to a baccalaureate degree borrow money. This has not always been the case, and this new norm is troubling. While the high school experience is funded by the community, the university experience is not. Furthermore, the drop-out rate for those who take loans is nearly 23%. Imagine taking out a loan for a car, only to find out on delivery that the price include the engine. Now imagine you were still on the hook for monthly payments.

      If you haven’t achieved solid academic performance in high school, don’t believe a university, its leadership, advertisements, or admissions officers when they tell you not to worry about going into debt for your degree. They have no responsibility for making the payments, and they have different interests than you.

      They need paying students.

      Stoking a deceitful dream of a life of middle-class ease – an over-financed, media-hyped charade – is the real deception, and the weight will fall on your back, not theirs.

      It’s a shameful, elaborate sham, when 1 out of 2 college graduates this year are unemployable in their chosen field.

      Look carefully at the costs and benefits of university education.

      University officials may not tell you the truth: enrollments could drop.

      Bankers will not tell you the truth: interest income will fall off.

      Gorvernment officials will not tell you the truth: elections will be lost.

      Talk to family, friends, and educators for counsel, and listen to those who are really concerned for you carefully.

      If you choose to attend a “second best” university, you may be lulled into thinking that your chances for graduation will improve significantly. Not true. You will find, at good mid-major institutions and many teachers colleges, that high-quality faculty demand energy, interest, intellectual acuity and classroom performance; and, if you haven’t exhibited these in high school, the likelihood that you will spontaneously develop them amid the distractions of university life is nearly nil. There are very few curve breakers.

      Maybe you can find a low stress major and get through on little work. You probably won’t find a job – remember half don’t. Econ 101 tells it like it is –YGWYPF. And if you’re borrowing, you’ll be paying for a long time.

      A degree with a major in a low-demand field, with salary prospects near minimum wage and $25,000 to $50,000 in debt – is less valuable than a good high school diploma with four years of experience.

      Unenlightened? Call me a caveman. Cruel? I think of it as honest.

      Here is the substance of my advice as you graduate.

      One: If you have to borrow money to enter a university straight away, don’t. Go to a community college. Pick rigorous courses that you know will transfer and get them at an 80% discount off the cost of state university prices. Prove yourself and become eligible for scholarships and grants.
      Don’t borrow a dime.
      If you need a boost to finish after demonstrating ability at a community college, borrow sparingly in the last two years, but never in the first two.
      Never.

      Two: If your life circumstance requires you to work and study simultaneously, do it. There is no law of the universe that says a college education must take four years. If it takes more, and you can do it for cash, do it. Don’t borrow money.

      Three: Consider carefully with your family, and counselors you trust, the dollar value of your career path choice. Find a way to graduate from college in a chosen career option with little or no debt. I applaud volunteers and humanitarians. I support your desire to do noble work. Just don’t go into ignoble debt to do it.

      Four: If you are taking out loans so that you can walk to class in C-note Nikes, checking a Diesel watch to see if you’re late, you are acting foolishly. Sorry for my insensitive straightforwardness. When every friend you have heads to Acapulco on spring break, don’t go. Go do something noble, create capital, work, study. But, don’t spend and don’t export borrowed capital.

      Five: Lastly, if you think you worked hard in high school, know that any university worth its salt will have you working at levels 4 to 5 times more challenging for a good GPA.

      If you think this sounds crazy, please, just show this to someone unbiased that you respect and ask them.
      When you find your path, study hard, work diligently, and challenge yourself intellectually.

      All the best in your future.

      Sincerely,

      WVW

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    • Anthony St. John

      “To Learn without Thinking is Fruitless;
      To Think without Learning is Dangerous.”
      Confucius understood this ca. 500 B.C. and we still haven’t evolved beyond the Fruitless/Dangerous dichotomy as proven daily on cable news shows with 24/7/365 political rhetoric that is Fruitless and Dangerous.

      This is why we need People-to-People communications to join together to demand politicians that will fix the problems in 2012, politicians who can Learn and Think at the same time, and to hold them accountable on a daily basis.

      It’s time for the “F*cked” generation to evolve and lead the way.

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    • Amelia Sue Marshall

      Thanks to Professor Reich for elucidating the economic realities of our times. Today’s graduates may be f*cked, but all is not hopeless. There are things you can do to beat the odds and succeed.

      Back in the day (1980) when I graduated from Cal with a BS in EECS, it was a time of exuberance and confidence; we graduates were mostly debt-free, and there was a good range of jobs available for us. But still, in order to put food on the table AND pursue happiness, it was necessary to use some of the non-academic skills and attitudes that can also serve the current generation well:

      - The sweet spot is the overlay of what you’re good at, what you feel passion for doing, and where the jobs are. Aim for that sweet spot.

      - Stick to what you’re good at. Studies indicate that people achieve more and are happier if they rely on their inherent talents. Aiming for difficult challenges is a better strategy for hobbies, sports, and volunteer work.

      - Use creative, original thinking as you find your first job after college: Visualize what you want to do, find the person who hires that kind of worker, and convince them to hire you, even when there are no posted openings. It is all about personal connections. As a Cal graduate, you will be seen as a hot property.

      - Work ethic. Imagine yourself in the shoes of the small-business person. It is up to you to make the business successful. Be on your job mentally 100% when you’re working. Whether you are a self-employed entrepreneur, a worker in a small business, or a salaryperson for a corporation, the non-slacker attitude will help you succeed in the “real world”.

      - Passion: As the late Steve Jobs said, if you don’t have passion for your work, you will not be successful, because professional success can be so difficult.

      - Have the highest standards of integrity. Create a reputation that you are a reliable person who never lets others down. Doors will open, as if by magic.

      My $0.02, from a successful old alumna.

      -

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    • robert conner

      What Mr. Reich fails to mention in his speech is that the QUALITY of the education provided at the college level has fallen. I’ve seen, and interviewed for job openings, many young recent college graduates that can not speak in coherent sentences. Many have unrealistic views on the value of their services. The real world is harsh, and competitive and the new generation of educators do not prepare their students for those harsh realities.
      The issue I see with people like Mr. Reich, is that they often confuse education with intelligence. I know a lot of well educated idiots.. And I also know many intelligent people without college degrees. Which would you prefer to hire?
      Maybe colleges should teach more than liberal arts. Maybe they should teach students the value of hard word, maybe even train them to do a job in the real world. But then…the old adage is almost always true… Those that CAN…DO…those that can’t…teach!

      Not until our education systems learns that college is meant to prepare our young for their future adult lives, will things improve for each graduating class.

      Good Luck students, you’ll need it!

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    • Avi Rosenzweig

      The re-purposed telemarketing agency that’s been assigned to cover Reich’s blog by some hidden PAC doesn’t care about most issues, so they can only come up with some generic bromides on the topic of education, and tell their paid staff to riff on those themes.

      You can get more specific by looking up the Repooblican and Romney campaign positions on education — for them it is yet another way to redistribute the aspiring middle class’ money upwards to the 1% that hold all the loan debt.

      Mitt Cheney — oops, I mean Romney — isn’t going to be putting out his hand to help anyone trying to make his or her way in the world. That would be a violation of their hot-airey laissez faire-y worldview where rules are for the many, not for the few. Real Americans know better than to return to the GOP failures of the past.

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    • Anthony St. John

      Indeed, our universities must focus on producing graduates who can solve multidisciplinary social, political, economic, environmental and scientific problems, and provide leadership to implement solutions with the sense of urgency required to guarantee acceptable quality of life for their own and all future generations.

      As of today, the “f*cked” generation has to figure out on their own how to survive and adjust to the rapidly changing world that previous generations haven’t had to deal with since the Great Depression and WWII, obviously we never learned the lessons of that history because we have totally failed to prevent it from happening again.

      [Report abuse]

    • citoyenne

      “What Mr. Reich fails to mention in his speech is that the QUALITY of the education provided at the college level has fallen. I’ve seen, and interviewed for job openings, many young recent college graduates that can not speak in coherent sentences. Many have unrealistic views on the value of their services. The real world is harsh, and competitive and the new generation of educators do not prepare their students for those harsh realities.”

      Mr Conner, we are facing global warming. We need to re-fashion our houses to be energy efficient. We need medical care. We need (according to you) better education. We need to remediate our forests, farms, and coastlines and rebuild our infrastructure. With all of those tasks that need doing, WHY do we have unemployment? Why is our employment environment so harsh and competitive? Could it be (gasp!) because of people like you? People who bill themsleves as “job creators” when in fact they are really “job destroyers”? Before you talk about unrealistic views of what recent graduate services are worth, you might want to look in a mirror. Before you assume that educators must bend students to YOUR harsh world, maybe you should wonder whether the economy can be re-fashioned into a system that serves people; instead of people serving the economy.

      “The issue I see with people like Mr. Reich, is that they often confuse education with intelligence. I know a lot of well educated idiots.. And I also know many intelligent people without college degrees. Which would you prefer to hire?”

      Certainly not you. You sound like a well-propagandized idiot.

      “Maybe colleges should teach more than liberal arts. Maybe they should teach students the value of hard word, maybe even train them to do a job in the real world. But then…the old adage is almost always true… Those that CAN…DO…those that can’t…teach!”

      So, what do you do? Work hard? Teach? Neither?

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    • Anthony St. John '63

      Well stated Prof. Reich, more and more posts on the Berkeley Blog are telling it like it is whether it is PC or not, and never has a higher standard of university integrity been needed more.

      It’s time for graduates in the new “f*cked” generation to fight back, during the 2012 presidential and congressional elections, taking people-to-people global communications to the next level to produce and implement solutions to out of control political, economic, social, educational and environmental problems as fast as they can to save their future, it’s the one major advantage they have today like never before.

      We are losing voting rights, civil rights, women’s rights as we write these posts and comments.

      We need a whole new generation of patriots, along with the heroes who are risking their lives for us in the Middle East, to fight for the survival of American Democracy before the oligarchs make it impossible to restore without another revolution.

      [Report abuse]

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