Economics · Education

How Academic Unemployment is Covered Up

I recently had a coaching call with a teenager who wanted my input on the subjects he considered studying. As so often, his teachers told him nonsense along the lines of any degree being a good degree. He was even told that the university would not matter that much because “a first is a first”. In this context, a “first” refers to the degree classification in the UK system. Well, particularly in a place like the United Kingdom, the reputation of your university matters an awful lot, so deceiving someone young and impressionable in that regard is rather disingenuous.

The interesting part of this conversation was his claim that there was no harm in studying a subject that does not directly lead to a job because “statistics show that unemployment for graduates of that subject is very low.” This leads to the problem of statistical trickery. In reality, the Western world has been experiencing mass unemployment since at least the 1970s. In order to combat this, higher education has been expanded, partly with the motivation of keeping people off the unemployment register for a few years. In several Western countries, it used to be quite normal to spend an obscene amount of time at university. I remember that in the early 2000s in Germany it was seen as completely normal if it took you ten years to get your first degree. Back then, that first degree was roughly equivalent to a Master’s degree, so it was not quite as egregiously bad as you might think, but it was nonetheless ridiculous.

You also have to take into account how unemployment is determined. This differs from country to country. It is not the case that being out of work is the sole criterion. You also have to actively look for a job. Furthermore, many countries do not count the underemployed as unemployed, even if they only work for a few hours a week. That entire topic is quite fascinating, or off-putting, depending on your predisposition. In any case, it is a wonderful example of how politicians deceive with statistics and well worth your time.

Academic unemployment is a serious issue, particularly in countries in which there are high tuition fees. That does not mean that the absence of tuition fees entails that you can study whatever you want. There is still the issue of opportunity cost, so make your choice wisely. Leaving university with debt the size of a mortgage is truly crippling. Yet, losing out on years of income is also devastating. Compared to your economically more successful peers, you will likely never catch up. Sure, some of your peers may get divorced and be forced to start over from close to zero in their 30s or 40s, but their misfortune does not equate to your increased financial success, with the exception that you are female and at the receiving end of a divorce settlement.

The reason why academic unemployment is often surprisingly low is not that industry cannot find enough English, History, or Gender Studies majors to hire. There is, of course, the bloated public sector, which soaks up a good chunk of graduates who would otherwise be unemployable. Government also forces companies to “diversify” their workforce, which is something you will have come across if you have ever been involved in a grant or project application targetting a government agency. It is not at all uncommon that you cannot even apply if your company does not employ a certain number or percentage of females or minorities. Thus, hiring otherwise unqualified people has become a cost of doing business in the West.

Still, there are only so many graduates with useless degrees that can be hired by government or forced upon the private sector. There are other methods that keep the percentages down. To make it simple, let’s consider a graduating cohort of 20 philosophy students who all hold their freshly printed diploma from Eff U in hand. The philosophy department of Eff U proudly tells you that while there is some unemployment for recent graduates, employment figures five years down the line are close to 100%. Jane Doe things this is amazing and enrolls. She spends years perusing literature on feminist philosophy, and gives a wide berth to any course that has a reputation for being more technical, like logic or philosophy of language.

Some of the male philosophy students at Eff U are drawn to logic. By their senior year, they have spent some years going down that rabbit hole, which leads them to graduate with a substantial number of credits in computer science and mathematics. They do not find employment as philosophers, but they may manage to snatch a position as junior software developer or business analyst. Thus, they are not counted as unemployed. A small number of graduates go on to graduate school, pursuing a terminal Master’s or a PhD degree. Thus, they are not counted as unemployed either. Some panic upon realizing that there isn’t a red-hot market for philosophers, but they took a module in philosophy of law, which gave them the impression that law and philosophy are not that different. They go on to law school, which keeps them off the unemployment register. On a side note, philosophy graduates have either the highest or among the highest average score in the LSAT, which is a standardized admissions test for US law schools.

There are other options. Some become teachers. Some do conversion degrees. The more attractive women may get a gig as representatives for big pharma, or marry a wealthy man. All of this keeps them off the unemployment register. Yet, none of the groups we have looked at, with the exception of those who go on to graduate school, have directly benefited from their philosophy degree. They succeeded despite of it. Consequently, they could have studied something else instead and, for instance, picked up programming skills on the side or, in the case of the ladies, worked on their looks, and their life outcomes would have been similar. Lastly, there are those who are not so lucky. They have their philosophy degree, but there are just no jobs available for them, but it takes some time for the message to sink in, so they spend their time applying to random jobs in vain.

Now, let us look at how the numbers get fudged. First, you have to ask where unemployment statistics are from. For instance, if you graduate from a UK university, your alma mater will reach out to you six months after graduation and ask you what you are doing. If Jane Doe does not respond to those queries, she is invisible in those statistics, even if she is genuinely unemployed. I assume it is only for the sake of convenience that that survey lumps together people as being “employed or in further education”, conveniently ignoring that some people choose to get another degree in order to mask unemployment. In any case, any statistics based on self-reported student feedback are of little value as the data tends to be highly biased.

Official numbers can be quite creative as well. Here is an example of how the numbers get fudged in Germany when it comes to academic unemployment: Let’s say Jane Doe did everything the way she was supposed to do. She finished her degree, could not find a job, and afterward formally registered as a job seeker with the federal agency for work — yes, that is a direct translation of the name of that agency (“Bundesarbeitsagentur”). Should she, after not finding “relevant” work decide to get a job as a bartender after a while and, a little later, again register as unemployed, she is no longer counted as an academic. You can probably see how this can be abused.

You may think that I am describing a caricature of reality. However, academic degrees are nowadays a dime a dozen. Even graduates of top universities are no longer guaranteed a job. What is more, there are several countries that have pushed tertiary education so much that the unemployment numbers of university graduates are higher than those of non-graduates. One example is South Korea. Other industrialized countries are probably not far behind. Consequently, if the field you want to go into does not offer a solid path into employment, there probably is none and you are only wasting your time.


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4 thoughts on “How Academic Unemployment is Covered Up

  1. Interesting that you think academic exclusivity is a good thing, If education or rather STEM education is so good, why not reduce its exclusivity. That’ll benefit all of society to have more graduates with good degrees than bad ones.

    Further, on your point about degrees being a dime a dozen, I have to point out that even though I agree with you for the most part, a good PhD from a good school is still good all in all. I’ll like to know your idea on this?

    I am actually contemplating doing a Phd in Economics over there in Germany so your comment is highly appreciated at my end. I did got into a Phd program a while back and didn’t finish for personal reasons. (needed to move countries and money) But as it that I have made some money, I can afford to study.

    What do you think about a PhD and reading for one in Germany?

    Thanks for any response Aaron.

    1. There is no arbitrary exclusivity to STEM subjects. In fact, there are even elite institutions like ETH Zurich where admission practices are very liberal because the expectation is that anybody who is not cut out for it will simply drop out. It does not get much more democratic in academia than that.

      A PhD from a decent school in a very small number of subjects can be a good choice, but the numbers work against you. Spend an afternoon looking up PhD holders from top schools online, and you’ll find that plenty end up in jobs they could have had without that degree. There is a bona fide glut of PhDs these days.

      I would say that the opportunity cost of a PhD is too high. If you are smart enough to get into a good quantitative PhD program, you are clearly smart enough to do very well for yourself without those letters after your name. Furthermore, there is not a single German university with an international reputation that is not due to historic reasons. If I’m not mistaken, the top school for Economics is the University of Bonn, which is at best an also-ran on the international stage. For a more detailed answer to your question, I’d suggest you book a consultation.

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