If I were to move to another country, it would be Switzerland. I see a lot of myself in the country. It is productive, wealthy, and non-committal to relationships, much like the kind of person I want to be. The thing that interests me most is its economy. It fascinates the hell out of me. Switzerland is one of those rare countries that has such a strong economy that it causes problems...for its own economy.
When it comes to finding a relationship, or even casual flings, the Pick-up Artist community has nothing on a college degree. Beautiful, educated women want to date handsome, educated men, but there is not enough educated men to go around. Those were the findings in the well written book Dateonomics by Jon Birger. Usually when you see the word ‘economics’ in a book title, the writing is dense and you’ll be doing most of the work to understand it. That’s not the case with Dateonomics. Birger combines research from a variety of fields - economics, sociology, demographics, psychology, and evolutionary biology - into a very fascinating and easy read.
The basic premise of the book is that gender ratios affect the way men and women date. When there are more women than men, men tend to be less committed to a single partner and less likely to marry. When there are more men than women, men are more monogamous and will invest long-term in one partner.
Birger looked at a variety of groups to illustrate this effect. He compared the dating pools in religious groups, cities, and countries, but the biggest pool he looked at was college graduates.
College graduates prefer to date and marry one another. Whether it’s right or wrong, people use education level as a signal of how intelligent, socially adjusted, and employable potential partners are. However, fewer men go to college than women. Women who want to date men with a similar education level find that those men are less committed to the idea of marriage.
Birger has data to back up this claim. Using the U.S. Census Bureau’s American Community Survey from 2012, he found that there are 5.5 million college-educated women in the 22 to 29 age range and only 4.1 million men. That is 4 women for every 3 men.
The women who don’t find a spouse in college find their options get more limited as they get older. Whenever one of the college educated women marries one of the college educated men, suddenly the remaining women are competing with 3 others to get 2 men.
If another woman gets married, that means the woman who is still single will find that there is only 1 man for every 2 women.
(This guy has it made!)
With this lopsided ratio, men are less willing to form a monogamous relationship. Birger interviewed several men and women in cities and colleges that reflect this trend and found similar stories. Even average looking men begin to think they’re studs because women become more competitive over them. The men found the longer they held out for marriage, the better options they had.
This finding is similar to what is found in nature. Male animals in general will become more monogamous and invest in one partner when females are in equal numbers or less than them. They become less monogamous when the ratio is in their favor because it is to their advantage to mate with multiple females to pass on offsprings.
In cities with higher imbalances favoring men, women invest more in gym memberships and the way they dress to attract these men. Birger found countless stories of men (many of whom were socially awkward growing up) who graduated college, moved to these cities, and left their girlfriends because of the sudden attention they received.
The most heartbreaking chapters he wrote were about women in an ultraconservative Jewish community with an abnormally high gender imbalance who were held to absurdly high beauty standards and whose parents must pay a dowry reaching six figures to get them a husband.
The Mormon community isn’t any easier on women. Since men are more likely to leave the religion as they get older, Mormon women who place a preference on finding a ‘Godly’ man find their options get even more difficult. Birger wrote about several Mormon men who found ‘ways around’ waiting until marriage to have sex because their options were so large.
Birger didn’t just talk about how awful men are. Similar to female animals in nature, women become more choosy with their partners when the ratios favor them. Where female animals usually go for stronger and more aggressive partners, women have higher expectations of men’s ability to provide and their height when the ratio favors them.
Birger found an old article from the Los Angeles Times that interviewed a woman in China, where men outnumber women, who said:
“I would rather cry in a BMW than smile on the back of my boyfriend’s bicycle.”
Women expect men to court more, be taller, and show more ambition when the imbalance is in their favor. In these cases, men are more incentivized to become more monogamous and work harder on their careers. Both historically and currently, economic growth tends to be higher in areas where men outnumber women. Credit card debt is also higher for men in these areas.
Birger’s laid out the kind of impact he hoped this book would have on people. He hoped more men would realize that investing in their education would lead to better dating opportunities, which would lead to more available partners for women. He hoped that women and men who prioritize dating would consider whether they really wanted to move to New York or SIlicon Valley.
I think his most noble goal, and where I hope he succeeds, is that young, educated women will get a break from their family and friends over their dating life. He hopes that everyone realizes that yes, there really aren't enough good men out there.
There’s a great new song by the Young Giants called Amerika. It expresses the cynicism a lot of people have about the American Dream. At one point the lyrics say, “It’s a rich kid’s game and it’ll go up with a throw." I can’t say if the game will go up with a throw (or even what that means), but the American Dream is definitely a rich kid’s game.
Last year, Zillow analyzed Federal Reserve data and found that 28% of people 23-34 had their education partially or completely funded by their parents. An even luckier 3% had both their house down payment and college education funded by their parents. Those people will be able to build wealth far quicker than those who needed to finance school with loans.
When this data was released, many bloggers and journalist predicted this would create massive wealth inequality between those with student loans and those without, with the lucky 3% who didn’t need to make a down payment benefitting the most.
Is this true? Does financial assistance for tuition and home purchases make that big of a difference with building wealth?
I decided to look into this because I wanted a dollar amount on the short-term and long-term impact these differences make. It turns out it's difficult to predict. People don't live the same lives and their saving habits, work ethic, and talent are as big of factors as student debt and family background are.
So to make it easier to compare, I decided to show the difference between three people with three identical incomes and lifestyles:
Jane, who has $40k in student loans and no help with a down payment
Tom, who doesn’t have student loans and no help with a down payment
Buck, who doesn’t have student loans and received help with his down payment
In this scenario, all three people earn a healthy midwest salary of $40,000 a year. After taxes and 401k contributions, all three would earn approximately $2,499 a month.
All three want to own a home valued at $132,000, which is the median home price in Missouri. Buck's parents gave him enough to put 20% down, while Jane and Tom will only put the minimum 3.5% down to catch up.
Jane spends half of her money on rent, student loans, and saving money for a down payment. She can only save $281 a month, while her student loans cost $411 a month and rent cost $658. It would take her 16 months to save enough for the minimum down payment on a home (3.5%) the same value as Buck’s.
Tom's budget is not as bad. He can actually save more money than he spends on rent every month. He can save $691 a month. It would take him a mere 6 months to save enough for the minimum down payment on a home valued the same as Buck’s.
Buck has it made. He actually saves a little less cash a month than Tom, but he can immediately spend that money on a vacation, a new Playstation 4, or invest it to make more money in the stock market. That money isn’t obligated to go anywhere.
You might be thinking that this isn’t that big of a deal. Jane will pay off her loans in ten years and still be able to buy a house in a shorter time. You’re right. If they were only concerned with spending their money on whatever, it is only a short-term difference.
People who read my ebook or my blog know that I view things differently. The economics major in me thinks about opportunity cost, or what potential investment returns I lose out when comparing future budgets.
What if Jane, Tom, and Buck were ambitious and prudent financial savers? Let’s say they wanted to invest their extra money in the stock market. What would the difference be?
Here’s a chart comparing the difference at a 5% return of investment:
Here’s a chart comparing the difference at a 8% return on investment:
Tom and Buck leave Jane in the dust. For the first ten years, they're able to take advantage of early compound interest while Jane is unable to save and build wealth outside her home or 401k. In fact, her mortgage and mortgage insurance prevents any further outside savings until she pays off her loans 10 years later.
At 5% ROI, Tom would end up with $300k more than Jane and Buck has $380k more than Jane (and only $80k more than Tom).
At 8% ROI (closer to the S&P 500 historical average), Tom has $700k more than Jane and Buck has a whopping million dollars more than Jane.
It is safe to say that financial assistance with college tuition has a bigger impact than financial assistance with a home downpayment. Higher tuition will undoubtedly lead to more wealth inequality, both in the form of student debt and those who choose not to go at all.
If you need student loans to go to college, don’t let this discourage you. The scenario I ran is comparing the difference in outcomes between college graduates, but doesn’t include the wealth produced by buying a home or your 401k. When you include the value of the home, 401k, and their growth, Jane would be a millionaire. She would still be very well off compared to most Americans.
Also keep in mind that I’m comparing three people with the exact same income and budgets. I don’t include the impact of raises, career choices, healthcare, or spending habits. What if Buck decided to quit working and become a professional crocheter? What if Jane went to school for engineering while Tom went to school for restaurant management? What if Tom was a lazy d-bag who got fired after a few weeks on the job?
Anyone who had a 401k in 2000 or a home in 2008 knows that investment bubbles are scary. You hardly see them coming and even if you were the more rational person during the periods of irrational optimism, you are still affected. A lot of people will draw comparisons between what they saw then and what they see now in an attempt to predict the next bubble. Some speculate that college degrees, and more specifically, college degrees funded by student loans, are the next great investment bubble. Are they right?
Despite our reputation, I think millennials will be known as the generation that learned to make the tough compromises. We went out into the world as it was crumbling. The Great Recession was the closest thing we will ever see to a depression and its effects still linger. We find ourselves with higher student debt, fewer job opportunities, and less than ideal living choices. In order to live within our means, we make tough compromises.