Gary North's REALITY CHECK: Why the Job Market is Slanted in Favor of College Graduates

Submitted by Editor on Wed, 01/09/2004 - 02:00

College graduates make more money than non-graduates, unless the non-graduates own their own businesses. Why? Your first guess is probably incorrect. So is your second.

Gary North & The Daily Reckoning


Issue 374
August 31, 2004


College graduates make more money than non-graduates, unless the non-graduates own their own businesses. Why? Your first guess is probably incorrect. So is your second.

In this report, I am going to reveal a few of the dirty little secrets of what I call the college racket. This will get me into trouble with politically correct readers. But at this stage of my career, I don't have many politically correct readers.

Have you thought about going back to college in order to earn more money? Have you thought that you should send your child or grandchild to college -- again, for monetary purposes?

Look before you leap. Then leap smarter.


In the August 24, 2004 issue of "Early To Rise," the editor summarized the findings of a pair of authors who argue that the reason why college graduates make more money than non-graduates is that the college experience gives graduates the opportunity to develop habits that help them in the business world. These habits include:

showing up on time
paying close attention to assignments
completing assignments on time
doing more than the minimum required
struggling with difficult tasks
organizing tasks by priorities

To which I would add:

going to fraternity parties and smoking whatever the two authors were smoking just before they compiled this list

Let me discuss in greater detail the reality behind this list.

Showing up on time . . . for the first two weeks of the term, after which, having gotten a reputation for showing up on time, the student then cuts 50% of the remaining classes, and no one notices -- especially in classes of 300 students, which are common for freshman and sophomores.

Paying close attention to assignments . . . beginning approximately 24 hours before -- make that the night before -- the assignments are due.

Completing assignments on time . . . approximately 15 minutes before they are due, probably handed in by the student's roommate because the assignment-completer is snoring after an all-night writing session.

Doing more than the minimum required . . . such as adding a couple of footnotes to the term paper that the student downloaded from or one of a dozen rival companies.

Struggling with difficult tasks . . . such as tapping buttons on the cash register at Wendy's, where the student earns the money needed to pay for all those term papers.

Organizing tasks by priorities . . . fraternity party on Friday night, football game on Saturday, sorority party on Saturday night, recovering from a hangover on Sunday.

The main reason why anyone would believe that these habits are best learned at college is that he spent way too much time in college.


Re-read the list. Which of these habits could not be learned in an apprenticeship program in a medium-size business, preferably in a field that interests the student?

showing up on time
paying close attention to assignments
completing assignments on time
doing more than the minimum required
struggling with difficult tasks
organizing tasks by priorities

He would be doing relevant work related to his interests. He would receive instruction from a mentor who really knows how the job should be done.

Added benefits: he would be making a small salary. He would learn how to budget his money. He would make the break from his parents at his expense, not theirs.

I call this win-win-win: apprentice, employer, parents.

Why should any rational person believe that these habits are learned best in a non-profit, sheltered environment that is run by bureaucrats whose top priority in life is attaining tenure -- the ultimate shelter from the free market? Which of these habits is learned best in 50-minute classes, three days a week, with a four-week vacation between terms, a one-week Easter vacation, and a three-month summer vacation?

If these habits are best learned in a college environment, then why doesn't any business on Earth adopt a collegiate format to promote its workers up the corporate chain of command? Why do businesses use weekend seminars, week-long conferences, and other time-constrained formats?

The envelope, please. And the answer is: "Because non-collegiate formats produce profitable results."


The typical business has routine tasks that are used to screen candidates for higher positions. These tasks require little personal initiative. They require the list of skills we have already read about.

A businessman reduces his cost of hiring someone to do these tasks by hiring a person without much experience, because most people have already gone beyond these basics if they are even remotely successful. They are not entry-level workers. They can charge more per hour.

The businessman also wants to hire someone who will not quit the crummy entry-level job. He wants continuity.

He looks for someone who has done boring grunt work without complaining, and has finished the work.

A college graduate has shown that he has been willing to suffer enormous boredom, broken only by weekend parties, for five or six years. (Very few students get through in four years, as their savings-depleted parents will tell you in private.)

Here is someone who has survived years of a system designed by bureaucrats to produce bureaucrats. He has either been subsidized by his parents (50% of college students) or else has paid his own way (that's the one I want to hire). He has put up with years of academic nonsense spouted by left-wing bureaucrats who could not hold a regular job in industry, let alone run a business.

Here, in short, is a certified drudge. Better yet, he has been certified at someone else's primary expense: parents, taxpayers, and donors with more money than sense.

Back to the list. Which of these is not learned in high school?

showing up on time
paying close attention to assignments
completing assignments on time
doing more than the minimum required
struggling with difficult tasks
organizing tasks by priorities

Anyone with a B-average has done all this. Anyone with an A-average has done it even better.

Then why not hire students just out of high school? Why not hire them, put them in a college-degree-by-examination distance learning program, split the expenses ($6,000/$6,000, total), get some work out of the students in entry-level positions, see which ones are actually productive on the job, keep the students in the company for four to six years because of this minimal, corporate tax-deductible academic subsidy ($6,000), and gain their loyalty -- a commodity in short supply?

Why not? I have no answer. I know that's what I would recommend if I were the head of the personnel division in a large company.

Would you rather have a college graduate on your staff who learned the business in your firm while getting his degree by correspondence or night school, or would you rather hire a graduate who may have downloaded his term papers, spent his weekends in an alcoholic haze, and spent his parents' retirement plan?


In the controversial book, "The Bell Curve," the authors' main argument -- ignored by most on the book's reviewers -- is that America's elite three dozen universities attract the elite students: the top 2%. These students are then educated in the same academic outlook. The danger, the authors wrote, is that this process discourages intellectual diversity. The best and the brightest think alike.

Before the mid-20th century, no societies in history had skimmed off their brightest young people in order to run them through the bureaucracy. There were always bright people down on the farms. The brains were distributed geographically and socially. No longer. They go to elite colleges and get hired by elite businesses. Or they start their own businesses. They associate with people like themselves. They support the same sorts of causes. One of the main ones is to give to the alumni associations.

"The Bell Curve" also committed a major offense. It reported on the effects on corporation hiring policies of racial legislation: non-equality before the law. There are state and Federal laws against businesses' use of employment tests that screen for brains if the tests screen out racial minorities. "The Bell Curve" stated the obvious: these tests do in fact screen out disproportionate numbers of certain politically protected racial minorities. "The Bell Curve" was savagely attacked by political liberals for saying what everyone else knows is true.

So, elite businesses that want to attract the best and the brightest hire from the elite universities and a handful of professional schools. The schools administer the tests at their expense. This is how the old boy network works today.

Non-elite businesses that want to hire reasonably competent people hire graduates on non-elite universities.

Why do they specify "college graduates only"? Because if they didn't, the Equal Employment Opportunities Commission would take them to court for racial discrimination. The EEOC's argument: "If this job does not require a college degree, then any favoritism shown to college graduates is a disguised form of racial discrimination and illegal." So, businesses that would otherwise promote from inside the company dare not do this. They therefore discriminate against non-graduates.

Businessmen know, for example, that a Ph.D. in economics or an MBA from one of the best business or management schools has imparted little or no practical knowledge to their graduates. It takes five years of on-the-job experience to make them useful. About all they learn of immediate value in grad school is how to use Microsoft Excel, which is the digital grandchild of VisiCalc, which a Harvard Business School student coded for the Apple II computer as a way to get his classroom assignments done faster. Companies are not hiring the mathematical, arcane drivel that these students have learned. They are buying the brain power that was required to master academic journal articles written by tenured professors who could not hold a job in private industry at their present salary level.

Oh, yes: one more thing. The business gets indirect access to the digital Rolodex that the student presumably acquired while in school -- a list of the best and brightest. The graduate is part of a network. Businesses lease these networks by hiring key students.

College screening is how the NBA and the NFL have recruited players for decades. Unlike baseball teams, which use a farm club system, the NBA and the NFL have used colleges to screen the biggest and the fastest. They let colleges make big names out of key players. Then they bid for the services of these players. The result is skewed hiring racially. Hardly any white guys, no Jews, and no Eskimos.

One of these days, the EEOC is going to take the NFL and the NBA to court. If you believe this, you probably also believe that college is where students learn to pay close attention.

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The way to become a good manager is to spend years under the direction of a good manager.

Any firm with a good manager should try to hire student interns who are not out of college. They should apprentice under this manager. This may mean offering summer jobs to students recommended by professors at a community college or local university. Or it may mean adopting an apprenticeship program that involves paying a student half of the expense of earning a college degree by correspondence/Internet. Or it may mean recruiting on campus in a conventional way.

The key is to leverage the business's most skilled managers. The multiplication of managers is the way to increase the company's rate of return on investment.

This is what large companies in theory do, but corporate bureaucracy seems to dip such programs in cement. I don't think entrepreneurship can be taught, but skilled management can. Out of systematic training through apprenticeship to skilled managers, a few entrepreneurs will emerge. A business should joint-venture projects with these people. The 3M company does this. The most famous result is Post-It notes.

I would rather hire a non-graduate who has initiative, screen him on the job, and get him enrolled in a local college part-time or in an on-line degree program at one of the handful of distance-learning programs that cost under $4,000 a year. I have written about this before.


Instead of going to college full time at 18, a wise student will seek employment by a company on a part-time basis and take his college work by examination. His college degree will cost him $12,000 instead of costing his parents $35,000 to $140,000. He can pay his own way through school. He can gain his independence at 18.

He will be trained on the job by people who know how to make a buck. He will have a four-year to six-year head start on his peers. At age 22 or 23, he will have a college degree and work experience that will impress a would-be employer. He will be in a position to rise in the existing chain of command because his employer knows he is now a marketable commodity in the business world. The employer will have to pay him more money.

Very few students do this, and very few parents even consider asking their college-bound children to do this. By the way, 60% of all students who start college fail to graduate with a bachelor's degree. The money spent by their parents on tuition, books, room, and board goes down the drain. Talk about a high-risk crap shoot!

If parents would set aside half of the money they planned to spend on a child's education and give the child this money as a college graduation present, the parents would be far better off, and the new graduate could make a down payment on a house or start a business.


College graduates make more money because they have been screened at college, at their expense or their families' expense. Then businesses pick up the newly minted graduates and stick them in low-paid, entry-level jobs. (I am not speaking of engineering graduates.) The screening process is bureaucratic, which large, bureaucratic companies appreciate. In the case of the elite universities, the screening process is IQ-based, which the premier companies appreciate. "Racial discrimination? Us? Perish the thought! We are ready to hire as many of Those People that Harvard or Yale or Princeton can produce."

A cost has been imposed by this government-regulated employment system on people without a college degree. They are not given a shot at entry-level jobs.

Most companies that screen exclusively by a college degree are bureaucratic companies. They place more emphasis on obedience than innovation. This is not the kind of company that an innovative person should work for.

If I were 18, or if I had no college degree, I'd earn one as cheaply and as fast as I could, probably by correspondence, while working part-time at a firm in a field I was interested in. I would learn the business while getting paid. My goal would be starting my own company in (say) 10 years -- or taking over the one that has employed me.

Every system has loopholes. This includes the collegiate system. I have outlined my recommended strategy in a free report, "Never Pay Retail for a College Education." Order it by sending an e-mail to:

If you don't have a college degree, you can earn one. If your child doesn't have a degree, he or she can earn one. Earn it cheap, fast, and on the job. It rarely matters what you majored in. It only matters that you earned the degree. The degree a screening device, not a training device.



Abraham Case Study #420 comes from a sales motivation consultant. He is a specialist in the mortgage market.

When I started my consulting business I was not sure what the best way to build my business would be. The first thing I did was utilize direct mail. I was on a very limited budget and figured this would be the fastest, most economical way to get the word out. After studying your vast library of direct mail pieces, I recognized that using a "question" as part of my headline would greatly enhance my results. The headline read: "Do You Want Your Loan Officers To Stop Quoting Interest Rates and Start Increasing Your Profits?"

The first benefit of using this headline is that it addressed one of the biggest complaints stated by mortgage company managers and owners. I took your idea of identifying what the biggest complaint is of my target audience, and created a headline that specifically addressed their concern and identified the result that they were seeking.

The headline counts for 80% of the response rate for the offer, direct-mail experts estimate. It can, when compared with a truly bad headline. I'm not sure it's 80% when there is a good offer and snappy ad copy. But it's high. A bad headline gets the ad tossed out or skipped over.

The second benefit of this marketing plan was that I also followed up with phone calls within 1 to 2 weeks of the mailing. The headline allowed me to easily remind them of what the mail piece contained. Because of the headline, many people remembered receiving the mail piece therefore making it easier for me to start a dialog with them.

This is an expensive marketing campaign. Follow-up calls consume time. But he was selling an expensive service, so he needed additional selling.

Another tremendous tool I use in all of my marketing materials is Risk Reversal. I got my first client because of using this strategy. My client had been sent the marketing piece with the risk reversal on it. After many tries, I finally got him on the phone. After doing a brief explanation of my services on the phone I asked him if we could sit down and discuss it further, he agreed and we scheduled a meeting. Just before we hung up, I reminded him that I had a money back satisfaction guarantee.

There is nothing better than a money-back guarantee except a double-your-money-back guarantee.

When I met with him and his top managers, one of the first questions he asked me was to tell him more about my satisfaction guarantee. My risk reversal proposal was simple. I told him if he was not completely satisfied with my training services upon completion of the program, simply return all of the materials and he would owe nothing, period. He asked me if there was a catch, I said what catch could there be, you are not going to pay me until after the program was delivered This program was a 6 day on-site training program for $5,000. This was more than he ever spent on a trainer program before. I know that the only reason I got the opportunity to sit in front of him was because I took all of the risk away from him. I made it easy for him to say yes and by offering the risk reversal, it also displayed confidence in my ability to deliver. The client paid me in full half way through the program!

He must have been good, because a $5,000 refund is tempting. But if you're not really good, don't get into the high-ticket seminar business.

Today, as before, every brochure has the risk reversal. Every letter to past, present and future clients contains the risk reversal as a "PS" or "PPS" at the bottom of the letter. No other trainer in the mortgage field has this risk reversal and I know I have gotten so many new clients because of this unique offer.

You can see the advantage he has. He is the only guy willing to make the offer. This sets him apart from the competition.

Then came another tactic: referrals

When I started my training business I did not know many mortgage company owners that I could just walk into their office. What I did know were attorneys that represented mortgage companies. I proceeded to meet with my attorney friends and get them to not only give me the names and phone numbers of key people at each of their mortgage company clients offices, I got them to pick up the phone and call them. These phone calls gave me tremendous credibility and opened doors for me faster than I ever could have imagined. Using someone else's database and connections is a tremendous way to build credibility quickly amongst your potential clients.

The second part of referral systems is the easiest one of all to implement. Asking for referrals from your existing clients has been what moved me from working just in my local market place, to developing clients throughout the United States.

. . . I advise them [clients] that part of our agreement is that once they are satisfied with my services, I expect them to give me at least 2 qualified referrals to other clients that they feel can benefit from my training services. In addition to the names, my client is expected to call the referrals and introduce me. This system works like a charm and consistently provides me a constant stream of new clients. . . .

To create your referral system you must let your prospects know what is expected of them in the beginning of your relationship.Youmustalso continually remind them that referrals would be greatly appreciated. If your customers understand the rules of engagement in the beginning, the likelihood of them complying and giving you the referrals that you need to grow goes up tremendously. Make sure you deliver more than is expected and the referrals will never be a problem!


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