Does college education pay off?

We have always thought that when someone faces uncertainty it is better not to swim against the tide. Without knowing exactly how, the current works in your favor. The problem is to find the correct trend. Some are easy to spot, like the population in Europe is getting older, but others are hidden by the media.

In this sense, we think there is a clear movement against wage earners. Even John Maynard Keynes advanced it in a famous essay that predicted that the grandchildren of his generation would barely have to work at all. His prediction was clearly wrong in time, but we are not sure if it was wrong in its content.

There have been many papers related to the future of employment versus automation. Until recently, we were told that the automation process creates jobs as well that, somehow, balances the loss of employees by the machines. But things might be changing, first, because this balance is difficult to keep once the main improvements have been done. Also, because machines are starting to learn from one to another and the need of human beings is decreasing. For instance, in The Future of Employment (Oxford 2013, link here) the authors state that almost 50% of the American jobs are at risk.

If we think the above is true, why betting on expensive colleges for our kids? Georgetown University has published a study about the wages of college students 10 years after the started (link here). If we check the top universities, we find that after paying around 65000 USD/year for 4 or 5 years, the former students are making around 50000 USD/year including taxes. According to some studies, the "P/E ratio" of college education is 11 years (we have calculated almost 10 years), that is, if we invest in our education, we need 11 years of work to make the college worth it. This figure is increasing every year. From another point of view, less employment means lower salaries.

So, what can we do with our children? It's difficult to say and there are plenty of exceptions. For instance, the only way to become a doctor is through college education, effort and time (again it doesn't pay off as it used to). Perhaps the focus should be put on entrepreneurship since they are kids. It is important that they constantly look for business opportunities, even as games. They will have to work very hard because to become successful, knowledge is extremely necessary. To obtain it they will have be curious and learn where to look for information. Fortunately, generalizing, in the internet era there is no need for college education to learn about Austrian economics (mises.org) or programming languages, for example.