In a booming economy, it makes sense to forgo college for earning and advancement opportunities
This is the first episode of a podcast series we are developing called Career Toolbox, a podcast dedicated to helping you turn your job into a career. The host if Fernando Pagés Ruiz, our Latin America Editor.
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Welcome to ProTradeCraft's Career Toolbox.
I’m Fernando, and I’m here to help you turn your day job into a career.
One of my guys quit last month. He was tired of getting dirty and believed he could find a better career selling cellphones for Verizon. He’s an outgoing, charming kid and the cellphone company offered him a base salary and commissions.
One month later, he’s back on my jobsite. He discovered the base salary plus commissions added up to a lot less money than what I pay—unless he sold a ridiculous number of phones.
Many people (including myself) have gone through this—leaving the trades and coming back after finding there’s not much out there that pays better and allows you to be yourself.
Today we’re going find out why when I introduce my guest, Elliot Eisenberg, Ph.D. in economics.
"When you overbuild, the hangover's inevitable. But when you under-build, the chances of having a recession or a banging hangover next morning are very remote."
But first, let’s start with the money.
According to the Bureau of Labor Statistics, among the top 50 jobs for a person without a college degree, 17 of them are in construction-related fields, everything from building foremen to insurance adjusters.
You might be getting dirty today and walking around in a white shirt with a clipboard in hand 20 years from now, all the while making good money.
An elevator installer rakes in about $79,000 a year, a typical plumber can make as much as $90,000, hell, a laborer without much more than a good attitude and a pulse starts at nearly $20.00 an hour.
The cellphone company paid the employee I mentioned $11.00 an hour plus commissions. If he sold about 50 phones a month, which was not easy to do, this added another $0.10 to his hourly wage.
But if he were to stick with the trades, get certifications and job training, his salary would grow, from the $20 an hour I pay him today, to a median salary of about $104,950 a year (again according to the Bureau of Labor Statistics)—should he rise through the ranks and become a project manager a large homebuilding or construction company.
Let’s talk about being yourself. If you have ever worked in an office, you’ve encountered what they call water-cooler culture, where small talk and gossip are the norms, you have to watch your manners and act just so. Everybody’s very sensitive, and politics rule.
At the jobsite, nobody cares about your personality. If you can nail trim without leaving hammer marks and tighten up a fitting so it won’t leak, you’re golden. Come with tattoos and unshaven; it’s not your demeanor so much as how you work that counts, and not how you look.
Sure, if you want to get a white-collar position in time, you’ll have to clean up your act. What I’m getting at is you’re free to be yourself on the jobsite. For many of us, it’s a relief to put up with the racket of power tools, but not to worry about how we dress or conform to polite society. All the while, we're doing something useful and creative—we're building and remodeling.
My guest, Elliott Eisenberg, was a senior economist the National Association of Homebuilders. Today he travels the talk circuit entertaining and enlightening folks with his take on the national economy. Talk about a guy who does not care about dress codes and social norms, he wears a bowtie, and I have seen him standing on a table addressing a crowded room of builders, smiling ear-to-ear, because the guy is funny, and he has good news for our industry.
Elliot, welcome to ProTradeCraft’s debut episode of Career Toolbox.
"This is great! thank you for having me." (EE)
Of course. Let me start with a very basic question and the one I posed at the top of this podcast, With all of the din and the dust, why the hell would anyone want to get into the building trades?
"This is a booming time right now. There's a vast labor shortage, in all the trades, plumbimng, heating, cooling, everything, rough carpentry. The pay is good job promotion opportunities are there, and wage growth is almost six percent a year, almost twice as good as the national average, because the dirth or workers is so acute.
This is ridiculous."
Ridiculously rich opportunity, but you know, a lot of my hammer-jockeys are gun shy from the last recession. They worry about making good money today and setting themselves up for the next crash. What’s the carryover?
"There's always this sort of problem. If people go into architecture, it's boom and bust. Businesses come and go, you can't plan forever your life, but it's a pretty easy to say, the next five or ten years, the chances of having a recession like we had before where we had a vast over-supply of workers with massive unemployment is ridiculously low."
"We're under-building dramatically right now. We should be building 1.5 or 1.6 million unites per year, we're building 1.2. And the shortage is gewtting worse every year as we continue to under-build. So, even if we have a recession, the demand for construction, the demand for homes will continue. Albeit a little more slowly than now, but what we had in 2008-09 was a once-in-a-lifetime experience."
A lot of economists are predicting another recession in 2019 or 2020.
"Even if we go into a recession, it'll be a normal recession, we'll get out of it. Job growth will continue, the home shortage that persisten before the recession will continue after the recession. The problems are that cities don't allow new construction to be undertaken. It's hard for builders to build, to get buyright land and so on and so forth."
"So, this demand won't go away, its going to be there for the forseeable future. This is a great time to get into it."
OK, you’re an economist saying things like supply and demand. Can you give us a tailgate economics lesson in supply and demand?
"Sure. If you look at it today, job creation is about 2.4 million, 2.5—whatever, that translates into about 1.2, 1.3, or 1.4 million new households per year. People who move out of their parent's house and live by themselves or with housemates."
"But we're only building 1.25 million units right now, so we're underbuilding by about 100,000 right there. On top of that, there's demand for second homes, there's tear-downs, and there are natural disasters."
"If you add all of that in, we're under-building by about 300,000 maybe 400,000 per year. And we've been doing that now for the better part of a decade. So, we're underbuilt by about 3.5 million or 4 million units.By contrast, back in 2006-07, instead of building 1.2 million, like we're building now, we were building 2.1 million. That's 50% more than we're building now. We were vastly over-building."
"So, when you over-build, the hangover's inevitable. But when you under-build, or yoiu under-drink, the chances of having a recession or a banging hangover next morning are very remote."
Overbuilding is like drinking too much; you risk a really bad morning. On the other side of that, under-drinking, as you describe, seems like the safer path because we are practically assured of waking up without a hangover. But is there a lost opportunity cost associated with economic under-drinking?
"If you’re looking for certainty in life, you're never going to get it, except death and taxes, as they say, right? So, this is a great opportunity right now because the worker shortage is acute. Over the course of three, four, or five years, in such an environment, the worker shortage is so acute, the chances for overtime are terrific. The chances to learn new skills are better than they would be at a normal time."
"So, three or four years in a hyoper active environment like we have today is worth extra years, like every year today lis like a year and a half, so to speak (I'm not litterally saying that, but you get my point). Your exposure to new opportunites, new skills, new bosses is much better now than its ever been before, so if you're interested in this profession, seize the bull by the horns and go.”
So, with the building boom seemingly sustainable for the next decade, and under-staffed, you’re saying that every day, month or year of experience you gain on the job during this situation, it’s worth than at other times precisely cause there is so much more opportunity to learn, stretch your skills, and grow as a trade craftsperson.
Does it make sense to consider college?
"It depends on the person. I mean, some people who want to go to college and enjoy construction could go into construction management. That's a great career, it pays well. there's a shortage of those people too, it's no surprise. But not everybody is meant to go to college. This notion of 'you have to go to college or you're a loser' or it's a stigma of some kind does everybody a disservice."
"The key thing is to get a skill, whether its elevator repair, aircraft technitian, dental hygenist, whatever it is, nursing assistant. there are jobs out there, you go to two years opf community college, it costs a few thopusand a year, and withing two or three years, you can be earning sixty or seventy thousand dollars."
"That's a great return on your investment. If after five or ten years you'tre bored, or if a recession appears, you can indulge your desires to go back to college then, when the opportunity cost is lower, not now when the chance of making really good money and lots of overtime is really high."
Plan your college vs. construction future
So if you’re in the trades today, and you’re thinking about college. Between now and the enrolment date, back up your decision with data and lay the groundwork for your next career steps with these punch list items:
1/ Look up a few salaries of professions that you think you’d go after if you were to go to college:
- Business Administration
… whatever. Look up those salaries.
2/ Now, look up the cost of college tuition he closest state school.
Multiply that number by four, and you are looking at the rough amount of cash you’ll have to pay to gain the earning potential in the salary exercise we just competed.
But that is not the whole opportunity cost; it’s only part of the opportunity cost. The other part is to look at how much you’ll NOT earn in the four years it takes to earn the degree.
If you're getting paid $20/hour right now, that's about $41,600. So, $50,000 is a nice round number, and it's not too far off. So, as you get more skills and you get a few raises, you can average about $50,000/year for the next four years (that's not a stretch), it means you're going to accrue almost $200,000 of unrealized income if you go to college now.
3/ Do the math
So do the math, it’ll cost about $80k to go to the University (including room and board) for four years, during which time you will NOT earn $200k as a carpenter. Add them up, and it totals $280,000—that's a pretty wide swing.
If you come out of college and get a job right away at a starting salary of $60,000 as an accountant, it will take 28 years to break even!
In other words, the ten thousand dollars difference that you're earning because of a college degree, it'll take 28 years to make up for the 280,000 you invested in getting that degree.
Maybe college is a good plan for those without construction skills unless you’re going for a plastic surgeon, where you can make $250,000 or half a million dollars a year.
But do the math BEFORE making a decision.
For more economic edification, visit Eliot's economy blog: www.econ70.com