FEATURE: Higher education... what for?

Source: PA

Higher education is meant to be the way to access better jobs. That is, at least, what we have been constantly told. But to what extent is this true? Higher education is, indeed, a via crucis somebody has to follow in order to get to the top positions but this does not mean that everybody that follows a university degree (be it a BA, MA, MSC, MBA or a PHD) will land a good job. Not anymore at least.

Decades ago going to the university was the way to gather all that knowledge that earned you the respect of companies and employers. Since most of the people didn't have the chance to go to university, graduates were scarce and, therefore, in high demand. Now, instead, almost everybody chooses to study a BA at a university. Those who don't take a university course don't actually take it because they don't want to, not because they can't, as it used to be the case. Hence the standarisation and democratisation of higher education (a logical step forward in the educational system, on the other hand) has also brought in its devaluation.

Some time ago those who only had a BA would find a well paid and well regarded job. Now nobody of those do. You are better off working as a shop assistant or as a plumber.

Let's explain it graphically: John and Mark attended the same high school. John decided not to pursue higher education, as he wanted to earn fresh cash as soon as possible, so he started working as a plumber. Mark, instead, thought that his job prospects would be enhanced by pursuing further education, so he decided to enrol on a BA in Journalism. John worked hard, but earned a slightly lower salary than the average. Mark, on the other hand, had to find a part-time job in order to fund his studies at the university, so he worked as hard as John while he studied, during five years. In those five years John bought a car and a house, whereas Mark earned a part-time salary which allowed him to pay for his course fees every year. But it was fine, he thought, as after graduation he would land a good job.

When he graduated, after 5 years, he was already 22. A good age to start his first job. But he soon realised that all he could find were unpaid internships. They told him that it was the price to pay in order to find a place in the industry. A sort of a sacrifice he had to do if he wanted to access to the prestigious and well paid jobs. So he went through two or three internships. In the meantime nothing had changed for John. He kept working hard and earning a fair salary.

After a few unpaid internships Mark could actually land an entry-level job, perceiving the minimum legal wage. It was tough, he had to do many extra hours for free, he had few holidays and a lot of work. But they told him that it was the way to get to better positions. So he worked there. For a year. For two. When he realised that nothing was changing he decided to take a Masters. They told him that an MA in his CV would definitely make the difference. So he took a Masters while he was working fulltime. He even studied a different, more economic-oriented masters, to open up more doors, to make him more appealing for companies. So he gathered all his savings, he spent an awful lot of money, and he struggled for one year combining work and study again. But he managed. And he got the certificate, brand new, that he added to his CV. But nothing changed. So after another year working at the same place and earning exactly the same wage as he was earning three years before (the minimum wage with which he could only pay the basics), he decided to take the big step. In order to boost his job opportunities he decided to study a second Masters abroad, in one of the most prestigious universities in the country. Once again he had to gather the money by combining two jobs, given that the salary he perceived from his main job was too low. So there he was, working from Monday to Friday, nine hours a day, in one job, and from Friday to Monday, six hours a day, in another job. Eventually he gathered the money, he paid the fees and off he went to his new destination.

After another year he had a sparkling CV. 5-year BA taken in two different countries, MA taken in another country. Another MA taken in another country. Four years of work experience in the field. Fluency in four languages.... and still he was unable to find a good job.

In the meantime John still kept working as a plumber and perceiving a better salary than Mark, already 28, would ever get.

And there we have John, 28, working as a plumber for the last ten years, and earning a stable and fair income; and Mark, 28 as well, unemployed, having worked in different low-skilled jobs, some high-skilled ones, having taken three university degrees (two of them while working), and having spent thousands of pounds on an education that did not deliver any result.

The question is obvious: How is it possible that John, basic education and a rather easy life, is getting more money and is living a more stable life than Mark, with different university degrees, languages and different work experience?

Something somewhere went obviously wrong.

Source: Daily Mail

The first reason is that higher education is not a luxury anymore. The democratisation of universities has devalued them. Since everybody can access to university courses, having a BA is the normal thing. It is not something special anymore.

There are of course some exceptions: A degree in a prestigious school or university will probably help you land a good job. But, again, these courses are created by the elite for the elite, and therefore too expensive for a mortal. A Warwick/Oxbridge/Eton... graduate + LSE/London School of Business...MA will land those top jobs. A normal student who can't afford a pricey university is more likely to end up holding a BA and one or two MAs in different universities and, even though in many cases these graduates will be definitely much more skilled and prepared to work than some of those who graduated from top level schools and universities (but who got the money to pay for the course), they won't find a good job. They will land an average-poorly-paid-job.

The second reason is that theoretical knowledge does not prepare you for developing tasks in a practical job. Theoretical knowledge is theoretical knowledge. Decades ago theoretical knowledge was perceived as something extremely prestigious. Those who had this theoretical knowledge would therefore land the best jobs because they were wise and they had been learning in a scholar background not available to everybody.

The third reason is that, even though you can actually find almost a university degree for every single academic field, 90% of them are useless. It is interesting to learn ancient Greek, but you will not be able to compete with someone who can actually manage a business, design a building or simply fix a flooded sewer.

The fourth reason is that many of the tasks needed in a day-to-day basis in a job can be actually done by people who don't necessarily have any theoretical knowledge on the issue. Only an architect is able or even allowed to design a building. Everybody can work as a journalist as long as he is good at it. Everybody can work as a translator if he's good enough in the required language. The journalist who took his degree in Journalism or the Doctor in Philosophy who graduated from a MSC in German Philosophy can't design a building nor fix a flooded sewer. Therefore they won't find a job easily. John the plumber will find a job more easily than them, and will certainly get paid more than them.

The fifth reason is that nowadays companies want people who can develop many different tasks, so rather than hiring three skilled people who will carry out their different skilled work, they want to reduce costs and hire one person who can do the work of the three of them, maybe not as efficiently as they would, but which will definitely be cheaper.

The sixth reason is that in many countries the higher degree you own, the more you should be paid by law. These are called "professional categories" in some countries, and it means that if you hold an MA, you must earn more than someone who just has a BA, even if you are developing the same tasks. Companies don't like that, because this implies that they have to pay more for the same task that some other less skilled worker can do. That is why they either obviate this soft law, or they opt for hiring someone less skilled. This is particularly current in low-skilled jobs that students look for to fund their higher education. The result is clear: some BA students tend to hide to potential employers that they hold a BA in order to land a low-skilled job that will allow them to pay their even further education.

The conclusion, hence, is obvious: if you want to land a good job you need money. An awful lot of money. Save money enough to pay a BA at Oxford University and be good enough to get into Oxford University. Afterward, once you have graduated, save even more money to pay even more money to get into the LSE or the MIT. And after that you're done.

If you don't have the means to do that, the best you can do is spotting the career opportunities before actually choosing a BA. Try to get into the best "normal" universities, cross your fingers, work hard, be one of the best if not the best of the whole university, and maybe you will be able to, at some point, find something not very bad.

If not you can always forget about all this fuss and focus on sewers and waterpipes and keep working since you are 17 as a plumber, earning more (and more stable) money than your scholar counterparts.

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COMMENT: Metropolis vs. Ex-colonies. Roles reversed?

Source: Daily Mail

PIGS' economic situation is not new. Greece's economy is preparing for its second bailout, after the first one, worth €110bn, failed to boost it. In 2010 its sovereign crisis peaked at a 120% of its GDP (€216bn) and over €20bn were thought to be evaded every year from the Greek tax system. Ireland and Portugal are going through a bailout process, Italy recently announced the biggest spending cuts in decades in an effort to tackle the financial crisis in the country and Spain's economy keeps sinking, with the highest unemployment rate of the whole European Union (almost a 21%), with the collapse of its main industry (building industry) and with financial problems that forced small banks to merge in big entities capable of resisting the crisis.

What is rather new, however, is the situation of some of their former colonies. European powers created a vast network of supplying colonies all around the world, that they exploited for centuries. After lengthy struggles (most of them violent), almost all of these colonies became sovereign states, but in most cases what remained after European colonialism were lawless territories with rivalries that led to bloody civil wars, unexisting economies, and a massive dependence from the ex Metropolis.

Now, tables have turned in some cases. In 2011 Portugal and Spain have become some of the most badly hit economies of the whole European Union. But some of its ex colonies, such as Angola, Paraguay or Brazil are experiencing an economic boom despite the financial crisis.

Public debt in 2010 (% of the GDP)

The difficult situation in Portugal has forced many Portuguese to leave their country, some of them transferring to the ex colonies, trying to find a new life. Exactly the same that people from the ex colonies did until recently, but all the way round.

According to The Economist, in 2007-08 there were 45,000 Portuguese registered in Angola. Only one year later, they were 92,000. Also Angolan banks have started buying stakes in Portuguese banks, as Banco BIC has just done with Banco Português de Negócios. The IMF has forecasted a growth of a 7.8% of Angolan GDP in 2011 and a 10.5% in 2012.

The same can be applied to Brazil, where its two economic giant hubs, Sao Paulo and Rio de Janeiro, fight to be considered the most appealing centre where to invest in the country.

Rio has been designed to host the 2016 Olympics, which will bring millions in cash and investments to Brazil's Treasury. Also, in 2010 foreign direct investment peaked at $7.27bn in Rio and $2.73bn in Sao Paulo. The cost of living in both cities has increased in the last year. In 2011 Rio was the 12th most expensive city where to live in the world (it had been the 29th in 2010). Sao Paulo fared even better, entering the top 10 most expensive cities in the world this year (from the 21st position in 2010).

Spain, formerly regarded as one of the most powerful economies of the world (its GDP grew an average of a 3.5% before the crisis and it was the fourth biggest economy of the European Union), is now surpassed by some of its former colonies. According to the CIA World Factbook, in 2009 Spain entered recession, growing a -3.7%. Last year its GDP still grew a -0.1%. On the other hand, in 2010 Paraguay's GDP grew a 15.3%, Argentina's a 9.2%, Peru's an 8.8% and Uruguay an 8.5%.

On the other hand, it is said that the financial crisis is a worldwide crisis affecting every country, but figures show that the hardest-hit economies are those of the so-called developed countries, such as in Western Europe, US, Canada and Japan. South America, Southern Africa, China and even Eastern Europe are doing relatively well (see map above).

Seeing these figures it is easy to understand why foreign investment is shifting to new markets, and why migration trends might have changed.

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COMMENT: A stagnant economy?

Source: Treasury

The announced cuts and the increase of the taxes are trying to boost the British economy, which now face the hard task of overcoming the hangover left by the deep financial crisis that hit the whole world in 2008. However, Chancellor of the Exchequer, George Osborne, also was forced to announce that despite the reforms and the cuts the 2011 growth forecast for the British economy will be downgraded from 2.1% to 1.7%. Similarly, the forecast for the following year, 2012, will decrease from 2.6% to 2.5%. Finally, the economic forecasts point out that inflation will remain between 4% and 5% in 2011, and will fall to 2.5% in the following year.

The aggressive cuts announced by the British Government will affect various key sectors. The good news is that concerning fuel, the duty is being cut by 1p per litre, and the planned inflation rise in fuel duty, scheduled for last April, was delayed until 2012. These measures will be covered by an extra £2 billion tax applied to the main oil firms present in the North Sea. However, the VAT on fuel will not be reduced. Concerning other key products, the Government won’t reform the planned rises in alcohol and tobacco tax, of 4p on a pint of beer and 15p on a bottle of wine.

Regarding the borrowing, the forecast is £146 billion for this year, £2.5 billion lower than expected. Osborne forecasted that the borrowing will fall to £122 billion in 2012 and £29 billion by 2015-2016. The national debt forecast for this year will reach the 60% of national income, rise to 71% in 2012 and finally fall to 69% by 2015.

Source: Treasury

Is the British economy facing a real threat of stagnation?

All these measures aim at reforming the badly-hit British economy but, will they be enough? Most business groups hailed the Budget, and agreed that would create new jobs, but there are fears among the oil and gas producers, who argue that the £2 billion tax in oil companies will damage a key sector in the UK. On the other hand, the Institute of Fiscal Studies calculated a loss of £200 per household on average after the announced measures were finally applied, last April.

The new measures are regarded as little adjustments that won’t fix the whole problem in the British economy. They are seen as a plan that hopes for growth, rather than an actual plan designed to boost economic growth.

Source: Treasury

Wales, the poorest region in the UK

Wales eyes the Budget with hopes and fears. The planned extra £65 million over the next five years is good for the Welsh economy, yet it fails to balance the negative impact of the announced cuts in the region. Wales is currently the smallest economy of the whole United Kingdom, with an average GDP of less than half as that of London.

Wales also faces the problem of big unemployment rates, the highest of the whole country, peaking at 9%, some 126,000. It is obviously becoming a very worrying problem, and the cuts announced in the previous Budget won’t do any good to it.

The words of Plaid Cymru’s MP, Jonathan Edward, make it clear: “The truth is that the UK Government has no plan B for Wales, and worryingly there is a very real threat of a decade of economic stagnation”.

Yet an extra £65 million over the next five years, including up to £34 million in 2012 is a gift that Wales has to embrace. Yes, it fails to relieve the Welsh economy, but still, it is equivalent to a 0.1% increase in the Assembly Government’s resources. And we see it as the stepping Stone for the recovery of the Welsh economy.

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FEATURE: The spanish economic hangover

Source: Reuters

August 27th, 2010. Sergio wakes up. He feels tired. As an editor and technical director, he has been working in the design of the new show that the TV channel where he works will offer from September. But he also feels worried. Yesterday night he received a phone call. The director of the TV wanted to meet all the workers the day after. Today. In the last months the TV has been struggling to survive the economic crisis. Up to ten workers have been fired. Wages have been reduced.

Sergio arrives. All his colleagues are already there. He can see their worrying faces. Juan, the Director, comes with another guy. He must be one of these important persons who take serious decisions. Juan starts speaking. He stops. He struggles to continue. "The owners just decided to close this TV. It was the only way to balance the accounts. We are all sacked. All of us".

EU figures show that Spain is currently the Eurozone's fourth biggest economy. According to the Spanish Statistics Institute, its unemployment rate peaked at 20% during this year, the highest rate among all the European Union states. Its national debt rose to 64,4% of its GDP at the end of this year and its Public Sector has a debt of over a 50% of the GDP , according to the Spanish Savings Banks' Association. Three years after the advent of the economic crisis, Spain's economy hasn't found the way to recovery.

"The forecast for our budget deficit is 10%. We have an unemployment rate of 20%. Our pension system is bankrupt. We can't have our own monetary policy. We have almost 3 million civil servants and 17 different public administrations. Our building industry is collapsing and tourism is in its lowest peak. The Spanish economy is going wrong, without initiatives, with dreadful perspectives and without a stable structure" , says Carlos Sánchez-Cutillas, Spanish economist and member of the Valencia School of Economists.

Sergio is just one of the 4 million Spaniards that can't find a job in their own country. Whereas the rest of the Eurozone slowly starts growing up again, Spain is unable to overcome the crisis. Is one of these peripheral countries which have been badly hit by the financial crisis. But why does the situation in Spain remain so severe?

"We are in a bad situation because we don't have a proper industrial structure. We never stimulated investigation and development... What happened is that when we joined the European Union in 1986 we found a rich Europe which was keen to fund our development, because they needed new markets. They gave us millions of pesetas before and euros later to stimulate our industry, our services, to build roads... But now these funds are over, and Spain has wasted these 25 years of free money" , explains Sánchez-Cutillas.

Source: Seeking Alpha / Instituto de Crédito Oficial

Carlos Alfonso, Income Tax Inspector at the Spanish Ministry of Economy, points out that the building industry was one of the engines which boosted Spanish economy. "Spain relied an important part of its economic growth on a speculative sector. Any normal income generated in Spain by an economic activity was taxed by a 45%. But benefits derived from buying and selling flats were taxed by an 18%. That created a huge speculative activity. For example if I earned €1.000.000 in my job, I had to pay €450.000, whereas if I bought five flats and then sold them for €1.000.000 each, I would only have to pay €180.000 per flat, making fast money" , says Alfonso.

Property prices have fallen 22.5% since 2007, and 1.4 million homes remain unsold, according to Seeking Alpha . Tourism, the other economic sector in which Spain based its growth, was badly hit during the crisis. Although Spain is one of the leading touristic destinations in the world, Spanish and foreign tourists started cutting their spendings and saving money by not going on holiday. For over 4 million Spaniards -a 20% of the whole Spanish workforce and a 40% of young people, according to Seeking Alpha - holiday trips are a luxury they simply cannot afford right now because they are unemployed. Like Sergio.

"It is not coincidence that charity institutions such as Casa de la Caridad or Cáritas have registered a vast increment of people who come to these institutions in search of aid. Families that a few years ago didn't need any help are queueing at the entrance of these institutions asking for food" , states Spanish Sociologist Óscar García. However, García warns that we shouldn't only blame on politics or economists: "Many people preferred closing their eyes and believing that everything was going well, that the Spanish economy was rising very fast. Then they decided that they would ask for a loan and go on holidays to an exotic destination, or they bought a fancy car while they actually were paying mortgages they couldn't assume" .

Spaniards look forward to the future. The Government's forecast for 2011 shows a tiny recovery, with an economic growth of 1,3% for the first time in the last three years. But the European Commission lowered this forecast to 0,7% in 2011 and 1,7% in 2012; and also forecasted an increment in the unemployment rate, which will reach 20,2% in 2011 before lowering to 9,2% the following year, showing that Spanish Prime Minister Zapatero will have to work harder on the matter.

The Government has just launched a special package of measures in order to cut spendings and boost the economy, such as ending the monthly €426 wage for unemployed people and selling parts of public-owned companies and institutions -airports, national lottery...- but they will prove insufficient, experts say. Spanish public spending reached €350,213 millions in 2010, 20,317 more than in 2009 and 35,691 more than in 2008, according to the Ministry of Economy and Finance.

Source: Seeking Alpha / Instituto de Crédito Oficial

"The Spanish government has been giving public aids and funding to everybody, has increased the public spendings without taking into account the principles of efficiency and economy that should be regarded in every important decision. Because of this, the Public Debt has reached a peak of 9,2% in 2010, which will lead to an increment of taxes and cuts" , explains Alfonso Pérez-Pretel, Spanish economist and President of Iberaudit auditing association.

The current situation of some EU peripheral countries such as Greece, Ireland and Portugal has raised the topic of a possible bailout for Spain. Greece and Ireland had to be saved by the EU. Portugal seems to need a bailout. It is not that clear in the case of Spain. Spanish economy is two times the size of Ireland, Greece and Portugal's economies combined.

"Europe can't save us. Our economy is much bigger than Ireland's, Portugal's and Greece's. But what is rather likely to happen is that the EU will fund our economy, because we are in debt with Italian, German and french banks, and therefore they can't let us die. What Spanish economy needs is a change in the Spanish society", states Sánchez-Cutillas.

"We need a political agreement to restructure the Public Sector, axing those organisms and institutions which aren't strictly necessary. We would avoid duplicities in the different administrations and unnecessary spendings, decreasing our deficit and being able to invest in generation of employment" , says Pérez-Pretel.

November 19th, 2010. Sergio wakes up. He hasn't found anything yet. Anything related to his former job position. He is now open to anything. He has gone to few interviews for a job position as a waiter. He hasn't been selected. He is the face of the economic crisis in Spain. He is just one of the over 4 million Spaniards victims of an economic turmoil which will take years to overcome.

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