17 or 18 years of age is a crucial time in life for young people today. Think of it, until that point, almost everyone is DEBT FREE because frankly speaking, we spend very little for our education up to Form 5 or Form 6. Even those who are graduating from private and international schools have no debt to their names because their family coffers can afford the fees.
But after 17, the DEBT JOURNEY begins. It begins because parents and students are under enormous pressure to sign up for tertiary education – starting with Foundation courses, A-Levels, Diplomas and eventually Bachelor Degrees and Masters. The pressure is created by two phenomena, first – grade inflation and secondly, low barriers of entry into tertiary education institutions. Grade inflation leads many people into believing that they are indeed in the top echelons of intellectualism and hence need to make it to the highest qualifications possible to secure high positions in their careers. Grade inflation is happening all around the world due to grading leniency as means to encourage more people to stay longer in the education system. In the Malaysian context, you will recognize grade inflation when an SPM high scorer spells ‘achieve’ as ‘archive’. Low barriers of entry on the other hand is a result of many private institutions of higher learning competing for the same limited number of students and lowering the entry requirements to be able to accept more students.
Of course, there is no harm in more students pursuing higher education if they are interested and are willing to continue on the higher education pathway, but the question is, at an individual level, is that a sound economic decision?
ESCALATING LIVING COSTS
The first reason why students must rethink their higher education dream is the rising cost of living in this country. Prices of houses have shot up a few folds, and living expenses are following suit. A house that had cost RM190,000 in 2003 now costs RM500,000. Similarly, a household of four which used to run on a budget of RM1000 a month (excluding rent) in 2003 now needs RM2500 to make up for the inflation rates on groceries and bills and to cater to major lifestyle changes which include more frequent eating out, increased in-city travelling (increased petrol, parking and toll), smartphone and broadband spending, and child care charges.
WHY DO COSTS KEEP RISING?
It is important for young people to know that inflation and increase in prices we are experiencing today are not the outcome of government policies, although policies can influence them to a certain extent. Most of our inflation happens because we over depend on IMPORTED materials, labour, capital and technology. We also consume too many expensive things made abroad but we export very little, mostly commodities and other items of lower value.
PAY HAS NOT GONE UP THOUGH. WHY?
The above situation has resulted not only in inflation, but also in stagnation of pay. Beginning salaries have not increased much in the last 10 years, hovering around RM1800 to RM2500 for most entry level positions. The stagnation comes from both an oversupply of degree holders and also because machines and software combined are replacing people across jobs in manufacturing, marketing, book keeping, data management, security and many others. To compete with machines, we must be able to produce innovative and world leading solutions. However, as far as our country is concerned, we are importing an increasing amount of ‘brainwork’ from abroad. Imported brainwork is the content (music, movies and literature), knowhow and technology (sophisticated machinery, hardware and complex software) that we buy from foreign companies. So instead of paying our people for their intellectual work, we are paying people abroad for their superior work and solutions.
THE PRIVILEGE FACTOR
Add to this complexity the various levels of demographic, social and family privileges some have and some don’t. Firstly, young people whose families are already residing in cities need not pay for accommodation as they can stay with their parents. Secondly, those from communities with wider business ownership will have higher placement opportunities due to increased trust and common value systems. Thirdly, those from well-connected households will have their parents/relatives helping them out in terms of placements in preferred companies and organizations. And then there are those who are from English speaking households or those who graduate from foreign universities who have the language and exposure advantage when applying to certain organizations.
HIGHER EDUCATION: WORTH IT OR NOT?
Given the living costs, the pay prospects and the above privileges that are only available to a select group of people, does it make sense for 17 and 18 year olds to spend the next 5-6 years in tertiary education? If having a degree is not a guarantee for a good paying job, is it worth spending the next 60 months trying to pass paper after paper for the final qualification only to make it into the ‘seeking employment’ category.
The answer to this goes back to economics. First off, let’s look at the cost of tertiary education (beyond SPM). For the public pathway that involves STPM or matriculation and later public universities, the challenge lies in securing places in viable courses as places are limited and competition is very stiff. As a result, many students end up in courses with poor job prospects. Fee wise, this pathway is highly subsidized by the government but even so, there are reports of many students living on minimal subsistence due to lack of sufficient funds to cover the escalating living costs especially across institutions located in more expensive urban areas.
But the more interesting scenario is the one facing students who are opting for private tertiary education. This is where extra challenges abound as most students are forced to take out huge study loans (from approx. RM30,000 to RM150,000 on average for fees and living expenses for the entire pre-university and degree combined) and hence find themselves embarking on the ‘vicious cycle of debt’. It becomes vicious because graduating from more glamourous courses from private institutions of higher education doesn’t automatically translate into well-paying degree-level jobs that allow them to quickly pay off their loans, but most people won’t know this until they actually start applying for jobs.
The bulk of students will find themselves in jobs that don’t require degrees, but instead require EXPERIENCE and specialized SKILL SETS/EXPERTISE. They will then realize why these job offers don’t discriminate between Diploma holders, Degree holders and Masters holders (check job portals for jobs such as Marketing Executive, Sales Executive and Project Supervisor and you will know). Because even if one has Masters, there’s no immediate value one can bring to the job. That extra years of learning theories and assessing various hypotheses in a class room setting as an undergraduate or postgraduate student doesn’t add direct value to the production value chain because of the way companies and the production of goods and services are structured. They are built in unique environments within unique ecosystems and operate in their unique ways based on prevailing market conditions, shifting consumer tastes, changing regulatory pressures and unfathomable idiosyncrasies of the management and the owners.
THE ALTERNATIVE MODEL
In contrast, if one had joined the company at 18 years of age as an Admin Assistant or the Store Assistant and gained experience on the job while pursuing a Diploma part-time or some related certification, in that 5 to 6 years, one becomes ‘experienced’ in that environment and is already a ‘semi-expert’ and thus becomes a more valuable asset to the company. Joining the job earlier saves on the costs of tertiary education, and provides the crucial insights on the kind of expertise that should be acquired and what sells well in the market. It provides young people a reality check of the world around them. Using this information, young people can pursue further courses/certification that are RELEVANT to their career growth and with options such as part-time or online learning (think of platforms such as YouTube and Skillshare tutorials), they can continue collecting their salaries and progressing at their workplaces.
So, imagine saving RM500 a month from one’s salary for 6 years from the age of 18 – that is RM36,000. Imagine being a senior at work by 24 years of age. Imagine being equipped with knowhow that makes you indispensable at work while fresh graduates scramble for a callback from companies they apply to. Imagine building strong connections company-wide and across the industry. And imagine being totally debt free – not a single cent owed to parents, to PTPTN or to the bank (or the loan shark) while having enough money in the bank to pay 20% of the price of a low rise apartment in the suburbs. Imagine being offered double or triple the pay by rival employers with every new certification completed – think Amazon certification, Google certification, Oracle certification, Juniper certification and more traditionally, ACCA, ICAEW, CCNA, CCNP, CCIE, CISSP, Boilerman certification, Project Management certification, Plumbing certification, Electrical Wiring certification and hundreds of others. Imagine, achieving all this before turning 24 years old!
This is not impossible in today’s digital world but young people must change the way they think and the way they plan their lives and there are plenty of colleges that support working people to pursue further studies at minimal costs. At the end of the day, the quest should be to build your capital (that is your wealth) so that you don’t have to stay in a rented house all your life and depend on employment for the rest of it. Building capital earlier in life helps one to own crucial assets like a home, and liberates a person from the need of having to work until they die.
WHO’S GOING TO MARRY ME THEN?
Lastly, here’s another real concern among our young people in this country – they worry that without higher qualifications, they may have to marry down – and they are quite right as it has become a norm in many families to match people by their education levels. Well for that, think of it this way – be debt-free, cash rich and marry someone who is debt-free and cash rich too. That’s RM72,000 in combined savings and it is way better than being a degree holder straddled with RM70,000 of debt, marrying another degree holder straddled with another RM70,000 of debt (making a total household debt of RM140,000), looking for jobs together in perpetuity.
So the best way forward is to weigh your options carefully. Think wisely. Do lots of research on the job opportunities. Talk to families and friends you know about the areas of work that you have an affinity with and decide carefully. Tertiary education comes with all its glory and greatness. But it should be only that. Not debt and lifelong burden. Your life. You decide.
This article was originally published here.