Food For Thought - Education Is A Great Economic Leveler

by golbguru on March 17, 2007

We were discussing some of our childhood friends today morning over breakfast; appreciating how some of them earned their education in spite of extreme financial hardships. Back in my junior high school (grades 7 ~ 9) days, we had a large spread between the rich and the poor guys in my class. Some kids came from very affluent backgrounds and enjoyed huge houses and expensive vehicles, while some could barely afford to buy backpacks, text books, and other school supplies. Over the years, most of the kids studied hard and almost everyone has managed some kind of a degree/diploma in their field of choice. From the point of view of my current perception of *rich* and *poor*, almost all of them are doing very well. The average financial well-being at present is at a much higher level than the average financial well-being back in our junior high class. Generally, I have observed the largest visible difference occurred with the financial situation of the poorer kids (of course, there are exceptions to this). The graph below might convey my thoughts in a better way. It’s a very crude graph (like, not all kids ended up with the same level of education), but it does reflect reality to some extent.

education deep-thoughts

I also think that education was largely responsible for the reduction in the spread of the *financial well-being* that you see in the graph above. Though we came from different financial backgrounds, education provided us with almost equal opportunities when we later started thinking in terms of becoming financially independent. It sort of raised us all to a common level without discriminating between the rich and the poor. In other words, it sort of acted as a leveler. Have you observed something similar? Do you know of any other economic levelers that might be in play…but something that we may have never *observed*? Just some food for thought on a lazy Saturday afternoon. :)

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{ 16 comments… read them below or add one }

1 saving advice 03.17.07 at 6:18 pm

I don’t think there is any question that education helps improve earning ability in most cases (this has been shown in numerous studies). I think the question these days is whether the cost of going in debt for an education is worth it…

2 Super Saver 03.17.07 at 7:44 pm

Golbguru,

I agree with Saving Advice. Nowadays, one needs to make sure the investment in one’s education actually delivers the financial return. In the not too distant past, investing in higher education almost always “guaranteed” a great return (relative to cost and student loan debt). Today, a great return is no longer guaranteed.

3 golbguru 03.17.07 at 9:48 pm

Jeffrey and Super Saver: I agree that now a days it’s about trying to decide whether the education is worth going in debt.

In my personal experience (that I talk about in the post), there may have been one or two odd instances where my fellow students did not get the *financial* returns from their education..but generally this was not the case. And there were quite a few of them who availed student loans and things are turning out fine for them. May be most of them made wise choices or something.

On a side note, I think there may be more to the financial well-being aspect of education that just *return on investment*. I haven’t been able to point my finger on anything specific…but if it was all about trying to get a degree that yielded the best returns then everyone would have been doctors or lawyers (or whatever are the highest paying professions). Just thinking aloud. :)

4 plonkee 03.18.07 at 1:22 am

I actually think that one of the levellers in higher education is not just the studying you do, but the broadening of your social circle - which may be more true of those at the bottom end of the income scale as kids than those at the top.

5 Super Saver 03.18.07 at 7:51 am

Golbguru,

Fully agree that return on investment (ROI) isn’t just financial. There are social connections, broadening thinking, and other developmental aspects.

Unless the media is exaggerating the issue, it seems more of today’s graduates are over burdened by debt (student and otherwise) than in the past. Hence, I think “the choice” of which college and how to pay is more important than in the past.

6 Nicole 03.18.07 at 8:15 am

I agree 100% as a poor girl who got a good education and caught up to her rich friends. However, I have a non PC comment to make here. I am a woman in my late 20s. I have noticed ever since college (and I attended an Ivy League school) the enormous number of women getting there to get their Mrs. degree. I am currently in B-school and it floors me how many women are also there to meet their husbands. Their logic is, I will incur 100,000 in debt so that I can have a degree that I will use for 2 years then get married and my husband who I met in Bschool who will make tons of money and I can quit working. Any thoughts from the peanut gallery?

7 db 03.18.07 at 2:13 pm

@Nicole:
As a woman in my late 30s, I agree that there is a certain contingent of women in school who are there to get their Mrs. This isn’t really a new phenomenon at all — its really a tried and true tradition. When my mother went to university in the mid-50s (the first woman in my family to do so) the majority of women were there for an Mrs.

The more shocking thing to me is that this attitude seems to be resurging with a vengence — it seems like after 40+ years of the “sexual revolution” we are experiencing a cultural return to social mores where teen and 20-something females are embracing the notion that they are defining themselves by their ability to get their Mrs. than women my age and immediately before me. I was in the 80s generation when it was still chic to have it all and have a career before family — but I was riding on the coattails of the 60s and 70s generation where they really fought to shatter barriers to their entry in the workforce. My ability to enter was more assured than theirs was; my pressure was more to strive to have it all but put career first.

I think the Brittney Spearsification of young girls has radically affected the way girls perceive themselves as needing to be a sexpot in preference to seeing themselves as self-sufficient, so it’s not surprising that so many seem to be blatently searching for their Mrs. Mix that in with the recent vogue for embracing traditional family values too.

DB
P.S. — Not that marriage is something to be avoided, I think marriage and motherhood is great and I think being a stay-at-home wife/mom is great! I still think a stay-at-hom wife/mom is better served if she’s gotten an education first, but your point is well taken that if that’s a primary goal they should seek out a cheaper alternative than going $100K in debt for education.

8 db 03.18.07 at 2:26 pm

@golbguru:

Count me in as one of those who started off with little and has seen a big leap as a result of education.

My family has always been lower-middle class to high end poor. There wasn’t a lot of money. My mom went to university because my grandmother sacrificed to send her and she also got a scholarship. Likewise, the only reason I got my BA was my ability to get the degree covered largely through scholarships.

My BA was in the liberal arts, and so upon graduation I got a rude awakening in the world of work which didn’t value liberal arts nearly as much as I do. I also had it in my head to go to graduate school. Graduate school and some of my decisions at that point in my life are what set me up for extreme debt pain. I paid for grad school via student loans and also partly through employer compensation. I worked two part time jobs all through my undergrad years, and always had a full-time corporate job while getting my graduate degrees (yes, I have more than one).

Anyway — what’s education done for me? Well, it’s definately helped me get jobs. I have a graduate degree in computer science, but I started in the IT field before I started the computer science degree. The degree helped me be more competitive in salary negotiations. Even my liberal arts degrees have been helpful, though not in ways that are immediately obvious.

I now make 2 1/2 times as much salary each year as my dad ever did.

Oh — one other thought — I’m curious why people think college isn’t as necessary anymore. I disagree; I think it’s MORE necessary. Since I started in IT I’ve noticed it’s getting harder and harder to get a foot in if you don’t have a related degree. And this country BADLY needs to churn out more professional scientists and engineers. Part of the reason that corporations are getting away with shipping that sort of work to India and China, is that we don’t graduate enough engineers and scientists in this country.

Anyway — education is the best asset a poorer person can achieve for themselves.

db
http://www.debtblitzkrieg.com

9 zen 03.18.07 at 11:34 pm

Here’s a twist. I have no degree but I make more money than most of my peers. I’m married to a woman in public service (less money but she loves what she does).

I also work for a company that has tuition reimbursement - which I’m using to its full advantage because I recognize that I may be making more than some of my friends with degrees, I know I’ll hit the ceiling eventually and need something more.

At the same rate, my wife has her associate, degree in fire science and medicine (paramedic/fire fighter) and will be returning to school after the birth of our son. We’ve got a little student debt, not much, but it comes from going to the highly transferrable, but a heck of a lot cheaper, local community college that has an agreement with the state university. Not quite Ivy league, but still well known.

10 db 03.19.07 at 12:12 am

Zen — I’m so glad you found a sensible way to keep going with your education!!! While I don’t resent getting mine, I do recognize that at times I wasn’t making the best choices. I could play the coulda-shoulda game, but I’d rather not expend that energy and just look at the better things I got out of it.

Best of luck to you and your wife!

db
http://www.debtblitzkrieg.com

11 John Corey 03.19.07 at 12:19 pm

I completely agree that education can be a great leveler between those who come from a poor background and those who do not.

Rather than repeat some of the prior points let me add a few more.

You learn to think and to think about theory. How things could be so how to invent the future.

You meet people from a wider circle so you get to mix up the stereotypes more.

If you are really sharp you realize that learning does not stop when you get a degree. You pick up learning skills can be applied until you die.

Libraries, bookstores and other sources of knowledge let you continue independently and rather inexpensively.

Will the web allow more people continue their formal education as it removed some costs and the travel barriers?

Note that many start ups and new ventures are founded by people who did not complete their degree. Is there a correlation between thinking out of the box and not conforming in school?

John Corey
Real estate investor - multiple states and countries
http://johncorey.wordpress.com/ - advice for real estate investors

12 golbguru 03.19.07 at 1:53 pm

Plonkee: of course, it’s a social leveler too. :) How many places (except schools and some places of worship) bring together people from all the social strata and make them think towards a common goal?

Nicole and DB: I have to admit…that’s the first time I am hearing of something like this: getting into an expensive school to get an Mrs. degree. :)

DB: I completely agree with this: “And this country BADLY needs to churn out more professional scientists and engineers.” Many other countries are getting richer just by encouraging quality and quantity of students in higher education.

Thanks for sharing your story.

Zen: I am glad that worked out for you; however, do you sometimes feel that may have made a difference? in terms of money and status?

John Corey: Well said. :)

The web will certainly facilitate certain aspects of formal education…in fact it’s doing it right now and I am sure there will be changes for good in the future.

I don’t think there is a correlation between thinking out of the box and not conforming to school. I don’t understand why someone in school can’t think out of the box…no one’s stopping anyone from doing that.

About startups and ventures, we hear only about the *successful* ones created by people without degrees…I am sure there are multitudes of them who never gain traction. It’s just that we never hear of them because no one’s interested. Also, who says you can’t start a successful startup if you have a higher education degree. :)

13 Nicole 03.21.07 at 3:16 pm

DB-

I agree with you a hundred percent. I think women have taken a major step backward. Maybe it is because they didn’t like their mother’s working. I’m not sure. I think the Britney-fication has alot to do with it though.

Kudo’s to you for getting a comp sci degree. Something to be admired!

Zen - that is the way to go…no doubt…i am all for free ed…i got my undergrad on grants cause i grew up poor…and my grad on my old company…work it zen..work it

John Corey golbguru - I think there is an overemphasis on the folks that dropped out and became entreprenuers…are there any cold hard stats on that one?

14 zen 03.21.07 at 7:17 pm

Thanks everybody - it’s definitely been a worthwhile trip. I made plenty of mistakes along the way to get where I am today (a lot of bad grades, skipping classes and the like). Now I appreciate it all so much more and am definitely doing a world’s difference better.

golbguru - at the moment, it’s not been what I know, but who I know, or, more precisely, who knows me that got me where I am today.
It’s got my foot in the door with my company, and it’s easier to change my path inside then break in from the outside.

15 evan 03.24.07 at 10:05 pm

The graph doesnt say much, doesnt give years or actual statistics. I would disagree with the premise that poor people are doing very well.

16 golbguru 03.24.07 at 10:12 pm

Evan: The graph is my personal observation (not a hypothesis or a premise) of the people who studied with me and I say this somewhere in the post “It’s a very crude graph (like, not all kids ended up with the same level of education), but it does reflect reality to some extent.”

Assuming that it is indeed a premise; if you disagree with that, then I think you have something interesting to say about poor people who become educated. I would be glad if you share your observations with us.

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