Internship

Unpaid internship is yet another thumb on the scale in class warfare. Only those who have family money backing them can afford to make the first step into prestige jobs. Watching the internship phenomenon and the student loan debacle makes me wonder whether the invisible hand is once again picking its own pocket.

Business owners are perfectly happy to get talented and driven young people to work for free. Of course, in the long term this reduces the pool of people available to fill those positions. If only those from well-off families need apply, then there is a vicious generational cycle as fewer families are in a position to help their children up the vocational ladder.

The student loan problem is sheer short-sighted idiocy. The rest of the industrialized world realizes that “subsidizing intellectual curiosity,” as Ronald Reagan so stupidly put it, is a net gain for society. Educating people is one of the highest return investments we make. In various ways our friends across the Atlantic either provide free or virtually free higher education.

Aggravating the situation, higher education costs have been outpacing inflation. Since the 1980s the average college tuition has gone up by over 500%. Most of this rise, as Catherine Rampell wrote in the NYT, is because state aid to state colleges drops with every recession. When the state budget gets tight, aid to education is the first victim pitched over the taffrail. When the economy recovers the aid doesn’t, so tuition costs ratchet up.

However, the banks make money from about three-quarters of student loans, and their interest is, well, interest. They are being loaned money by the Fed at near zero interest rates and making money loaning it out to students at 6.8%. The combination of increasing tuition and interest rates has three major effects. First, it scares off some unknown number of potential students altogether. Second, it directs students towards degrees that should lead to greater personal financial return, as opposed to greater general societal benefit. Third, it tends to keep these new graduates docile in their jobs while they are paying off those loans. It is similar to employer-based health insurance in this way.

As an aside, I am interested to see what happens if/when Vermont gets single payer health care. I am thinking of all the people who are quietly suffering bad bosses and wretched jobs “because we need the insurance.” I imagine that the country song “Take This Job and Shove It” will become a leitmotif in HR departments throughout the Green Mountains.

Back to internships and loans: Back to the future. The general direction of these developments is back to the days before the G.I. Bill, when there were fewer, smaller colleges and universities with fewer, richer students, most destined for the smaller number of elite jobs that required degrees. A college education was as much a marker of class status as an indication of practical knowledge.

Not even the banks want this. At some point the reduced customer population offsets the greater return per customer. The universities, having expanded to accommodate the masses, don’t want to accordion back down to the elite student bodies of the early 20^th century. And, of course, everybody in general wants a reasonable opportunity for higher education. However, by chasing the short term dollar we are heading there.

The opening move is to think about what kind of educational landscape we want as a nation and recognize that our present policies point us in a different direction. Then we need to think about medium to long term consequences and legislate with those in mind.  I like Senator Warren’s proposal to loan students money at the same near-zero rate we extend to big banks. Australia already does essentially this. It’s a start. Absent an economic recovery that refills state treasuries, the feds should redirect some money from various corporate subsidies and military boondoggles to reducing tuition at state universities. Corporate subsidies and taxes are the right place for this because, after all, we are training their future employees.

Whenever I hear about the student loan issue I wonder who is out there, making that decision about going to college or not. I can visualize some intelligent, creative, original thinker, looking at the costs and the job market. Maybe this is the person who will discover the technology that changes our lives for the better, or negotiates the supposedly impossible peace treaty, or creates the work of art that defines an era. Or maybe, lacking the platform for developing his or her talent, this person’s potential is lost. Aside from prospective superstars, how many decent, bright young people will live with their potential undeveloped, and what will that cost us as a society? There are no guarantees, but higher education is one of the best gambles we make.