University, Employment and Student Debt

Oct 2014


“Imagine your most boring class. The class with the most pointless busy work. The class with the teacher who makes you want to stab a pencil through your eye. Now imagine you are in that class all day. Monday to Friday. All year. No summer vacation. No spring break. Just that one dull terrible soul-destroying class. For the rest of your life. That’s what it’s like to work a job you hate”

– Reddit Comment


“There is no such thing as “the real world” and frankly, I have yet to meet an adult. Everyone pretends that somewhere between 18 and 25, we all grow up, learn how to do things and act like functional normal people. That is all bullcrap. No one knows what they are doing, we are all bumbling around making fools of ourselves and there is also no such thing as normal. You will find that the struggles you thought you would leave behind in high school follow you everywhere, all that changes are the stakes.

Instead of gossiping about who kissed who, you gossip about who divorced who. Instead of the popular kids being determined by athletic ability, it’s determined by money and power. Instead of trying to impress a teacher to get a good grade, you are trying to impress a boss to be able to put food on the table. All the while, you put on a front trying to act cool, calm and collected and wondering why the hell you are the only one who doesn’t have their shit together. What teenagers need to know is that you will never have your shit together and that’s okay so stop trying to grow up and find this magical real world and just enjoy the good things and try to be a good person regardless of age.”

– Ask Reddit


When my dad was at university it was free. Today the average uni student graduates on average with $40k in debt. And with fee deregulation, as is taking place in Australia, that number is likely to go up to $60k or even $100k. And if the US is any example, where fee deregulation has already occurred, to study at an ivy league could lead someone even as high as $200k in debt.

Deregulation is synonymous with fee increases. The argument goes that it creates competition which will lower prices. So if you’re someone like the government you can comfortably cut funding to universities and the uni can charge more to make up the difference. But universities would have to compete with each other to get the best students. This competition is supposed to stop the price from going up too high. This is all correct in theory but doesn’t really work. What it just does is make something that was affordable more expensive, perhaps infinitely so.

That is a very dangerous line of thinking and is wrong. Because economic theory doesn’t work to reduce prices when it comes to a market such as this. Normally, opposing entities that offer the same product will compete with each other for customers thus reducing the price. The price goes down as they compete to win demand.

But not when the demand is so great it outstrips the supply. How do we know this to be the case? It’s because university is hard to get into. And the best courses at the best universities are the most difficult to get into. They literally have to create entry requirements just so they can turn down most of the people who want to study there.

In Australia, there are only 39 universities. Graduating hundreds of thousands of students each year. 39 competitors is not a lot of competition. Certainly not when the customer base of students is ever increasing. It will increase so long as a degree is the surest pathway into getting a job. What is dangerous is when you create a system where a person has to go into debt to get something which may not provide much value.

That something is being part of the affiliation of a university. They have hundred year histories and what you are buying into is a network of other people who went there. It becomes like a club where by being part of it can significantly increase your fortune in life. Historically, the university was meant as a transition to a meritocracy from aristocracy. Wealth would just be passed down from one generation to the next based on affiliation.

If you were part of a big family you would be set up for life. Governments created a new system where people would earn based on merit not because of heritage. That system heavily funnelled people into schools and universities as a means of judging this merit. But we’ve now created the same thing.

The university becomes like the big family of old. The stamp of coming from an elite university is more important than what the person is capable of doing. So more and more people began to see it as a prerequisite and now invest to be part of that extended network. It’s who you know and this is where you meet them.

The university, when they had a monopoly on education, without meaning to became a proxy for a persons perceived value. If people wanted to learn they had to go to a university. That isn’t the case anymore. People don’t go just to learn, they go because it will benefit their future earning potential. Which is why they will pay ever increasing amounts to get something diminishing in value. That delta which is the difference is still net gain for the person doing it.

I’ve always felt it very ironic. Universities claim their product is education and should be done for the sake of learning. But the very way people pay for university is structured like an investment. And all investments must also have a return on investment. Paying for university is structured uncannily like a leveraged buyout. You take out a huge loan, then you pay for the degree which you use to get a job. Then the income earned from the job is used to pay the loan.

It seems to be a steady uptake where university fees seem to be constantly increasing. You can see it by looking at average fees for qualifications and average student debt. In the 1970s a 23 year old would graduate with no student debt or with enough they could pay off with a part time job. You could pay off your student debt working at a restaurant in the holidays. Now it takes years of full time work, earning a decent salary.

As we approached the 80s and 90s, that debt lingered around $20k. As we crossed into the new millenia that figure approached $30k and $40k. Today that figure is approaching $60k, $70k. These are also averages. It’s not uncommon to see someone graduate with over $100k in debt. Or for hyper elite institutions even to cross into the low $200ks.

This is an increase faster than inflation. This is interesting when contrasted with average wage increases. Median wealth has increased over this time also but to a lesser extent. Which means fees are increasing faster than people can pay them off. It would be fascinating to understand why that is.

What is interesting is that even with fee increases, the number of enrolments doesn’t decrease. It actually increases. It has never stopped increasing. The proportion of young people who want to get a university degree is always increasing. It’s largely because people will pay anything to get a degree. It is deeply culturally ingrained that a university education is the pathway to a better future and for the most part it is. But that is, for the first time in history, starting to become a questionable rhetoric.

Loading up the youngest generation with debt is going to have profound and unseen impact. When they grow up, they will be paying off debt, which means that is money they are not spending. They won’t be able to buy houses, take out loans, make investments, the very things which stimulate and grow a healthy economy, because they are paying off debt. If enough debt is accrued over a large population it will adversely affect an economy.

What you are seeing from a birds eye view is a slow delineation and corrosion of the value of a formal university degree and its place as a pathway into the workforce. That is actually a huge deal. We’re foraging into unknown territory. Because for nearly as long as there has been an industrial workforce this has been the case. What will replace it? I don’t know.

Perhaps self learning or experience will become the basis for getting a job. If it ever did, it would be a beautiful thing. Because then what would be the point of getting a degree in the first place? There wouldn’t be any. So no one would need one. And perhaps instead the debt they would have accrued can be invested in a better performing asset class. A system built in a way for new entrants to have to pay $50k just to have a seat in the game seems like a bad system.

Having said that, it’s still the best investment around these days. It’s well documented that a degree qualified professional will earn about a million dollars more over the lifespan of their career than their non-degree holding counterparts. And more advanced degrees earn more on average than less advanced and so on. That number is debated but the point is worth thinking about.

Where on the curve does that reside. And what does the curve look like. If you had to guess, you’d surely conclude it’s probably a logistic curve where the value of a degree increases at a decreasing rate and tapers off over time. Which means there is some limiting maximum and we just haven’t reached it yet.


One of the biggest defenders of university degrees are actually the people who already have them. By this, I mean, the previous generation. The generation who benefited from cheap or free education. It is easy for them to see the value in it because they didn’t struggle to get it. But the world changed, seemingly without them noticing, and now I think you’d be hard pressed to meet a young person who doesn’t at some level question the value of going so far into debt to get a qualification that no longer guarantees anything.

They are defending an old status quo instead of asking what the new one might be. This is politically unpalatable in the same way that stopping subsidising fossil fuels are. If the government stopped subsidising fossil fuels, thousands of jobs would be lost, but it would also mean green energies could compete with them on an even playing field. A market.

When you subsidise something you artificially lower the price of it. Green energy can compete with fossil fuels, but not at an artificially low price that is impossible without subsidies. If they did,
Green energies would become more efficient, lower their price and crush companies that rely on fossil fuels. But this can’t happen because of people who will defend an old way of doing things with declining benefits.

A lot of this is short term thinking. If you keep doing what is best for you in the short term, when you arrive at the long term, there are no more short terms. Because the investments needed to benefit people in the long term won’t pay off in the short term and that’s ok. What you want long term should always be cheaper and more education. I’ve always felt whenever someone advocates in favour of increasing the price on something people need, it is a slippery slope for something bad about to happen.

There are few instances where deregulation has resulted in a net positive. Only in fields where innovation is restricted due to excessive regulation. Those are really the only places which benefit. In a field like education, deregulation is something of an oxymoron. As a government, you can’t spend decades funding something. And then suddenly leave it to market forces. Because you’ve effectively already given someone a monopoly. And as a government, you benefit from having an educated population.

Because then there will be more educated people who will earn more income and buy more things from more companies creating more jobs and paying more taxes. Education proves to be one of the best investments in creating a prosperous society. The incentive is actually to heavily regulate universities to keep the prices low so they are accessible by as many people as possible. It is like a government doesn’t want to swallow their own argument. You can’t advocate the benefits of getting a degree than create policies which increase the cost of getting that same degree.

Another ad hoc explanation is that universities haven’t really changed that much. The content changes but the way they operate hasn’t. You pay them tuition, they teach it to you. Simple. But if it were really up to market forces, then you would see innovation and new types of models on the old. This is more explanatory than it seems. It’s actually the proof for why you can’t deregulate a university. Because then their product, a degree, becomes a commodity. Commodities don’t change very often. And companies that make money selling a commodity need to sell it in vast quantities.

One model for a new type of university would be one that had a new business model and was completely elastic to job demands. The university could be completely free and then simply take a percentage of future income from their students. So you could study a free law degree and then when you work as a lawyer the university would take 2% of all your future income. That would be a much better deal than what students get currently.

And the law degree would be all about how to win as a practicing lawyer instead of rehashing boring 18th century law ethics. This kind of a model would work spectacularly well for engineers, doctors, teachers, you name it. It would bypass the farce that is universities pretending they are just places for learning instead of a place to prepare you for a job where you also happen to learn. But would need a huge injection of capital to get started. But not as much as what universities receive in subsidies. I hope a very wealthy person decides to do this.

Most uni students would secretly have a feeling they aren’t really learning that much. Or that what they are learning about isn’t relevant anymore. It’s because university education often doesn’t keep up with what the job market wants. And this is true. It’s because what a university teaches and what a market values aren’t the same thing. And that is the big lie sold to students all this time. The market values the piece of paper not the knowledge. Recruiters look at whether or not they have a degree not whether they know XYZ.

This has produced a world where someone graduating right now is remarkably under equipped. What they’ve learned isn’t what may be valued anymore. Universities have not kept pace with what a market wants. You can see it the most clearly in pharmacy and law. More law and pharmacy graduates occur than there are jobs available for them. This shouldn’t happen and is academic inflation.

It is when there are an increasing number of degree qualified professionals than there are jobs available to them. The reason a degree was a guarantee of a good future was because of diversification. Few people went to university, so those with degrees stood out and got better jobs as a result. As the war ended, more people started going to university, where previously they would have just joined the military.

Now when everyone has a degree, you have to get a better degree to stand out while previously just having one is all that mattered. So now students worry they won’t get a job without a masters. Soon it will be a doctorate on top of a masters. But the further down the path of education a person gets, the less likely they are to veer from that path and do something they love. Precisely because they’ve invested so much time, money and effort doing so. Which makes people remarkably unhappy.

If the opportunity cost of doing something else is high, then you don’t have the option to quit or change. Which is exacerbated because you are so indentured in debt to even get to where you are. This is a perfect recipe for unhappiness and is why I’d bet so many people entering the workforce in jobs they don’t really like start to feel helpless, unhappy and as if they have no choice.


The question becomes when will it stop. That seems to be an interesting question. Because it is unlikely fees will ever suddenly go in reverse and decrease. Which means student debt is unlikely to go down. At some point, the benefits of having a degree won’t balance the cost of getting it and like anyone holding onto a toxic asset, they will just stop buying it.

A degree should never for example, put someone in a worse off position than they were without it. And for a lot of people that is precisely what happens when they go so deep into debt just to get it. It’s one argument for there to be free education. Or to have it heavily regulated to reduce the price.

It is somewhat irresponsible on the previous generation. They benefited from a thriving job market and from cheap or free education. So of course, they can’t let that be the case for the next generation. We must suffer the sins of our fathers. It is terribly ironic when someone who studied a degree for free advocates in favour of increasing university fees.

The next generation is heading into a poor job market. One of the worst, where in a many cases a job just isn’t available, it doesn’t exist anymore and many of the jobs that remain are unfulfilling and create unhappiness. Why has this occurred? Well, it’s because of a lot of things.

Globalisation and the internet have made it so companies are competing with the whole world. Automation has removed the need for people in a lot of areas. A robot can do 10 times faster what a person can. Academic inflation and hyper competition where qualifications are more homogenous. And since deregulation of a number of industries, 3 global financial crises just in the last 2 decades including 4 separate bubbles, evaporating wealth like it was steam. As wealth gets destroyed, so too does security in the future.

Automation and globalization are actually good things. They have unlocked whole industries and as you automate work, it speeds things up and makes doing them faster and creates new ways of doing things. But this has also made it so that labour is now cheap and readily available. Where people could previously make a living providing labour they can’t now. Now ideas, ingenuity and creativity play a more central role.

It is indicative of a kind of broad shift in the way wealth is being created and will be in the future. We are starting to both rely less and less on big companies that employ everyone but also depend heavily on super corporations that own and create everything. There will be some balance but the job of the future might just be extended freelancing.

You can also see it with the rise of entrepreneurship. Entrepreneurship is the riskiest pathway to wealth creation because it has the highest likelihood of burning out. Low levels of entrepreneurship correlates to high levels of corporate safety. Why would you do something risky when you can do something safe. The safe route is slowly narrowing and becoming less available.

People previously could get a job in a company and work there forever knowing the job will always be there for them. This isn’t the case anymore. Long term employment security is scarcer and is why entrepreneurship is being seen as a possible alternative. If you can’t get a job, instead you’ll create one.

The whole notion of work is kind of silly. People espouse the virtues of a hard days work and how important it is to be working but then most of what people do at work is boring, unfulfilling, mundane, unnecessary and demeaning. That work is valuable whether or not it produces anything of value. And we funnel young people into this system and way of thinking saying it is the best we have.

But in this assumption is a kind of lie we’re telling ourselves. That we need to feel important and that work is the only way we can do that. And so having a place where we do this work, a job, is of huge importance. But it’s not so. And young people know that and feel very often that we’re being sold a lie.

In the 18th century people worked longer and harder and we were sold the idea that technology would free us from ourselves. It would eliminate most of the work and they could do whatever they wanted and loved. Technology would come and automate all of the “work” and all that would be left would be leisure time. This is actually more possible than people acknowledge but can only be done with a big welfare safety net.

It was that ideal which underpinned a capitalist system and how we got the 8 hour work day. Before it was common to work longer than that. The hope was that it would soon become a 7 hour, then a 6 hour and we would do less and less work as technology amplified the amount of work that could be done. So we could do less to get more done. John Keynes famously predicted by the 2000s we would have a 15 hour work week. Evidently he was wrong.

The flaw no one saw is thhreefold: that there is no limit to how much work can be done; how much people will want new things creating more work to produce them; and that in a system which rewards the amount of work done people will choose to work more thereby earning a larger reward.

There is no singular point where work has been automated. And most of the benefits of this don’t go to everyone, they get funnelled to the people who own things. Labour intensive jobs are replaced with knowledge intensive jobs and is why the levels of education needed for a job have exploded.

This is a wave universities rode and why they are what they are today. It’s why it is a truism that you go to school then to university, and then even graduate school before eventually getting a job. It’s because education is preparing you for a knowledge profession. When jobs were labour intensive, this level of education would be unnecessary.

To predict how this will take change in the future, what will knowledge based work change to as much of the skilled knowledge work can be done by computers. The answer is probably creative work. And so there will be an explosion in industries that require creativity and the creation of new things. So the education of the future will be one that teaches and values thought, imagination and lateral thinking. Something computers have a hard time doing.

It’s not all doom and gloom but rather very promising. It is as they say, bad things are a sign of good things to come. We live in what is probably the best time to be alive. All measures indicate that we are the happiest people with the most choice and relative comfort that have ever existed and this trend is only increasing.



Rather than simply let legislation pass that would increase the cost of education for Australian students. We decided to actually do something about it. A friend, Liam Parry and I got together 2 weeks before the legislation was to be voted on and designed a kind of digital protest.

Liam is a very passionate activist and organises a number of the whole city wide protests that sometimes occur in Melbourne CBD. We took 15 of the most highly researched, most prestigious articles written by economists and Nobel Prize Winners that directly and factually refute the introduction of deregulation to student fees.

We compiled a list of all the email addresses of all the politicians that were voting in favour of the deregulation legislation. And then we wrote a script that would rotate email accounts emailing those links accompanied by quotes from their own politicians that are directly refuted by the articles (ie some of the best economists around).

2 weeks before the parliament were set to vote, mainstream news predicted the legislation would pass. We then started the protest.

For 2 entire weeks, each politician who was in favour of fee deregulation had their email bombarded with thousands of emails from different email accounts each with links to why they are wrong and why they should instead vote against the legislation with each of their own points in quotes and refuted by one of 15 separate essays and articles.

It would have seemed to them like a giant well organised digital protest from thousands. Really it was just a software engineer and an activist.

2 weeks later, the legislation was voted down in parliament. Apparently a number of politicians who were previously for deregulation suddenly became against it. And the law couldn’t pass through the senate because they could no longer get the voting numbers it needed to pass.

It was successfully and emphatically voted down. Leaving the real winners as Australian students who won’t have their university fees suddenly increase on them. Some news articles predicted a 3X increase. It helped prevent Australia from adopting the US model of university fees. And lowering the cost of tertiary education for everyone.