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June 23, 2011 at 10:47 AM
PIMCO provocateur and bond fund legend Bill Gross garnered much attention in his latest missive questioning the value of a college education in today’s tough economy. Gross praised efforts to promote entrepreneurship or vocational training, while assailing the conventional liberal arts degree, which he described as “a four-year vacation interrupted by periodic bouts of cramming or Google plagiarizing.”
The PIMCO portolio manager is clearly onto something. It is clarifying for investors to know what not to invest in, and there may be ways investors might “short” a conventional college path whose value is in decline.
A website that offers college advice recently described what it called the “law school bubble,” lamenting the plethora of graduates with six-figure indebtedness and little prospect of employment. The site notes that law school student applications have trended up — Cornell saw a greater than 50% increase in 2010 applications, for example — at a time when legal pay and job offerings are in decline.
The medical profession may be no better than law from a financial perspective, according to Boston University economist Laurence Kotlikoff. Crunching the data for Forbes, Kotlikoff found that a doctor comes out only slightly ahead of a plumber in terms of lifetime earnings once you factor in the physician’s many years learning instead of earning; tuition; loan interest; and taxes paid. For all his effort, the doctor comes out with just a $500 a year advantage over the plumber. And growing dissatisfaction with the regulation, paperwork and bureaucracy of the health care system is leading an increasing number of those doctors to opt out of the system altogether even if that means lower incomes.
