Take this short quiz. When you finish, consider this – if you knew the answers, when was the last time that knowledge increased your output at work or earned you a raise?
Even if you knew that all the answers are true, it’s unlikely that knowledge ever created a salary-related payoff for you. That's because if you ever learned this information, it probably happened in a traditional school – not in an environment designed to give you directly useful working skills.
Traditional Education as Corporate Subsidy
The above anecdote serves to define our modern scenario and a critical underlying problem. Annually, more than $100 billion in taxes are levied against the U.S. population. This money is subsequently spent on higher education to teach ‘facts’ that fail to produce monetary returns. The sum rises as students and their families take out college loans. The situation poses a few critical questions:
To a significant extent, a college degree is merely a signal to a potential employer that “I, the possessor of a degree, can follow the rules of a hierarchical institution and achieve an expected outcome.” Most companies recognize that signal. They may pay that individual more than another candidate who lacks a degree based on the assumption that someone who has earned a degree in a structured higher education institution will be abler – and perhaps more apt – to follow instructions without the employer having to spend extra time managing them.
Presuming this hiring consideration is true, and it is, our tax dollars are in effect subsidizing a corporate search for employees who will follow directions. And it’s happening at the cost of hundreds of billions of dollars while massively increasing debt burdens for the country, institutions, and individuals.
A System to Replace Subsidized Higher Education
There is most certainly a better way. It costs less, eliminates a large segment of taxation, provides more benefits to society, and was used extensively before the widespread emergence of public education in the 1800s. The government could cease to offer higher education subsidies; leaving the job to corporate apprenticeships, corporate training, and private education.
The proposal is not as far-fetched as it may seem. It's happening already. For example, IBM is investing more than $1 billion to implement a new education model that blends high school, higher education, business, and students (P-TECH). The schools offering this unique, business-funded and business-guided curriculum provide students with an education focused on the needs of the companies as well as a zero-cost high school and associates degree, and a promise of (at least) a job interview upon completion. The important aspect here is that the firm is spending its own money on a semi-private education system to teach its potential employees specific curricula designed to produce a higher return for its own benefit. Similar examples with equally large budgets are popping up across the professional services and high-tech manufacturing industries as well.
Leading organizations like IBM already appear to recognize the need to (re)train employees to function in the business world, and they are willing to pay billions of dollars to make that happen. So why should those businesses, and everyone else for that matter, pay taxes to subsidize apparently valueless educations? The short answer is that they should not be willing to do this.
The Profile of a Modern Apprenticeship
Imagine a current scenario where a firm like Microsoft offered programming apprenticeships. An interested student would take a test that Microsoft created and administered to ensure the student has the right baseline programming skills to succeed. Once confirmed, the student would enter into a modified labor contract with Microsoft to enter into the program (for example, accepting a lower salary than would be available to a present college-educated person and/or a guarantee of a position upon successful completion of the course). Both parties would benefit: the apprentice enters the workforce earlier, without debt, while gaining four years of experience that would have otherwise been spent in a classroom, and the company gains a highly-specialized, more productive employee.
This structure introduces three measurable benefits to businesses, communities, and the economy. Once in play, the benefits have the potential to be circular and self-replicating, generating exponential value over time.
Benefit One: A stronger workforce means a stronger future
If taxes for education subsidies are unnecessary, businesses have more money to invest into quality apprenticeships, R&D, stock buy-backs, and a host of other actions that would directly increase profits and secure the future value of the firm. Competition for students would go up because high-quality workers are necessary for profitability, sustainability, and growth. Corporations would be incentivized to provide benefits for these promising individuals – at no tax to society.
Benefit Two: More money in the economy
From an economic standpoint, eliminating educational subsidy taxes frees individuals and communities to buy and save more. Those dollars funnel into firms, yielding a higher capacity to provide specific productivity-enhancing education for their employees. That training produces individuals with the capacity to earn increased wages, which puts more money into the economy for saving and spending. It’s a complete positive return cycle.
Benefit Three: Specialized Education
As the government’s role in the provision and oversight of education goes down (or away), those funds currently being wasted on mass education are reintroduced into the marketplace. Businesses and private providers can use the infusion to create and promote specialized and demassified education designed specifically to produce worker productivity and increased wages. Again, this step heightens individual and corporate outputs, puts more money into the economy, and continues to produce and release valuable economic resources for better uses.
Assessing What’s Possible in Modern Post-Secondary Education
Today, we’re standing at an inflection point in higher education. Students are accepting lifetime debt burdens to pay for education. Firms are investing billions of dollars into corporate training – because doing so is proving to be profitable. And government organizations are seeking to lower social expenditures, which include higher education subsidies. It’s readily conceivable that the confluence of these events may result in the elimination of subsidies while students and firms accept a new competitive reality in which state-sponsored higher education disappears.
These realities do not guarantee we’re on a path to such a drastic change. However, something in the present system will ultimately break, and a major shift will ensue. While the extreme scenario of the disappearance of government-subsidized higher education seems unlikely, it’s reasonable to expect that U.S. businesses will continue to move toward a firm-provided education model. Examples exist and have proven to be differentiators as firms compete for employees seeking work that offers clear professional development and a promise of advancement. Regardless of how far we move on the spectrum, the best-case scenario is one in which organizations, firms, and government entities work together to understand and shape the future.
It’s time to envision the future of education and the potential of a corporate-led model.
Phil Cunningham is a Senior Associate focused on the integration of technological and human processes to enable successful, large-scale IT implementation, transition, and adaptation within the public and private sectors. Phil earned his his MBA at George Mason University and his Bachelor of Science from The College of William and Mary. He currently is a PhD student in Experimental Economics at George Mason University.
Toffler Associates is a future-focused strategic advisory firm. Our Future Proof® business consulting approach helps global leaders understand how future shifts impact current decisions so they can take advantage of opportunity, manage risk, and create future value.
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