Are Graduates Paid Too Much?

It is a commonly held belief that the most sustainable way to grow a country's economy and increase the speed of its development is to focus efforts on entrepreneurs and small businesses - which in turn increases the number of jobs available and provides more 'output' when talking in GDP numbers.This belief is underwritten by a simple proverb:

"Give a man a fish and you feed him for a day.  Teach a man to fish and you feed him for a lifetime."

By empowering citizens to take action and create for themselves, you can (theoretically) cultivate sustainable change that will affect generations to come - real lasting impacts.

So if we accept that thought process as valid, the solution often thrown around is to throw money at small businesses and vendors to help them get off the ground and build something sustainable.

I think this is short-sighted, and here is why:

In general, the people who are thrown that money either do not have the ambition (or desire) to build anything bigger than what they need to survive.  (To clarify, they don't want to build the next Google.)  As a result, that money spent is not leveraged at all.  It may help a small number of people, but I believe there is a lot more value still being left on the table.

As a complementary measure, I think we should also be encouraging our brightest and most ambitious young people to become entrepreneurs and build something of their own.  The natural fire burning within them should push them to nurture a much bigger vision, possibly impacting vast numbers more in their community than your typical small business vendor.  In addition, the disruption and competition caused by big ideas from the youth is undoubtedly beneficial for the economy as a whole.

So how do we encourage our brightest youths to build something?

Incentives cost money, simple as that.  Money that most countries don't have, or more likely - won't be willing to spend.

A more insightful question might be:

How are we discouraging entrepreneurship in our youngest and brightest today?

If we could identify the aspects that are pushing people away from creating value, perhaps we could remove those to symmetrically achieve a similar result as incentives would, without the direct cost to the country's pocket.

One such disincentive is purely money-based and I want to discuss it:

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Typically, as a top-performing student exits tertiary education in almost any field - corporates are ready to offer extravagant job offers straight out of university, with a few of locking in talent permanently for their company.

After the stresses of studies, a relatively large paycheck looks really enticing and it is really difficult to turn that down in order to jump into the deep end and start your own business.  It's a very difficult trade-off to make.

As a result, many would-be entrepreneurs justify the corporate job by saying:

"I'll just work there for 3 or 4 years, save the money I make, so that when I quit - I have the capital necessary to start my own thing."

And it is a noble thought.  Capital is undoubtedly very powerful in an entrepreneur's hands and pushing the dream a few years down the line gives the illusion that you will have more valuable experience by then.

What often gets underestimated however, is the position you will be in 3 or 4 years down the line when that decision becomes important.

Chances are, the expectations of the corporate world, coupled with an aspirational desire to improve one's lifestyle means that a young graduate, with lots of disposal income, will be looking to buying a new car, house and all of the bells and whistles that come with it.  The monthly repayments are pretty steep, but that's ok - because you are making a large salary at your company. (for now)

3 or 4 years down the line, when it's time to jump ship - the repayments don't stop.  The lifestyle can't be winded down as quickly as a resignation letter can be written and the time-lag on those payments become weights, dragging you down.

Shackled by the fixed costs for that car and house - it becomes much more risky to step away from the guaranteed salary and enter into the uncertain world of the entrepreneur.  As the risk increases, the confidence in one's ability decreases, because there is now less runway for the new venture (Less margin for error).  As risk-averse creatures, the smart option is to stay at the job.

The would-be entrepreneur never makes the leap.

So the question remains: Are we paying our new graduates too much?

By lowering the starting salary for talented youngsters, perhaps they maintain a more sustainable lifestyle which enables them to take the leap later on?

I am very aware that this argument has many flaws, the biggest of which being that corporate and governmental interests are not at all aligned and such a suggestion would be nigh-impossible to implement because of all the politics involved.

It is an interesting thought-experiment nonetheless.  

Something to chew on.