College, Trade School, or Work

January 21, 2005

A person working full time as a receptionist in the summer at age 18 has to choose whether to go to college in the fall and what course to major in. She currently makes $25,000 a year. She is interested in two different careers that need further education, business administration and cosmetology. The student basically has the following options: 
1. Go to college and graduate in four years in business with a B.S. degree.
2. Go to cosmetology school and graduate in one year with a certificate.
3. Go part-time to college and part-time to cosmetology and graduate in six years with a B.S. in business and a certificate in cosmetology.
4. Not go to college and keep working as a entry-level white-collar worker.
The factors that affect her choice might be annual or lifetime income, personal satisfaction with work, risk of failure or other risks, and costs. The following paragraphs describe these factors in relation to the four options.
1) If she goes to college, income the first four years in college will be nothing. After graduating with a B.S., she might make $50K per year to start plus likely yearly increases. Also, she can always expect to be employed. Personally, she might like to compete and be a risk-taker. She will feel good about being a college graduate and having a high-value job. This option also gets satisfaction because of higher income and prestige. Of course, there is a risk of not graduating or graduating with a low average. Things can change within the four years. Also, maybe she overestimated her ability. She must pay for school for four years, and this is more expensive than cosmetology school.
2) If she goes to cosmetology school, she spends one year in school to obtain a cosmetology certificate. After one year of no income, after graduating she will start with $30K a year. Income might only stay steady, because of sometimes no or little work (because there are many cosmetologists and perhaps older cosmetologists do not get as much customers). Also, a cosmetologist has expenses that go up and down. She might get self-satisfaction because she can express artistic skill and be creative. Perhaps she likes to look good and be attractive also. The risk might be smaller than business because she spends less time in school and the course is easier. The chance she can get this degree is bigger. One year of cosmetology school costs little.
3) If she goes to college and cosmetology school, she will spend six years in school and during those six years there will be no income and six years of expense. She can expect to always have work because of having two degrees. She can make $50K yearly, plus yearly raises, just like having a B.S. only. For satisfaction, this option might be good if she likes school and likes to gain knowledge. Also, if she is bored with one job, she can already work in another type of job. The time spent in school is longer and so of course there is more risk of not getting one or both degrees. The cost is a lot more, because of paying for two schools. .
4) If she stays being a receptionist, she does not waste any money in school and keeps earning. She can make $25,000 a year. This option is good if she does not like school, does not like responsibility, and does not want challenging work. The work is easy. The risk of being a white collar worker is she might always only make minimum wage and can become unemployed anytime. There is no cost of school.
This problem is of critical importance to almost every young person. Currently in America there are many open jobs for clerks, receptionsits, and the like. They can earn money immediately and have an easy job. Bur rationally they must consider their future more carefully. They must have tools to help them evaluate their prospects properly, taking account of the risks, rewards, and expected outcomes.
One tool that may be useful is a decision tree. Often, after an initial decision, alternative situations occur for each of the possible alternatives available for the initial decision. If a person makes a graph of these possibiloities a tree-like structure appears.
The root of the tree is the initial situation. The main branches are the alterantive choices from the initial situation. Each of the alternates also has branches from it.
The decision tree takes account of the risks, rewards, and expected outcomes. Each branch has a value (reward) if that branch is taken. Each branch has a probability (risk) that that branch will occur. (The total probability for all branches at any decision point is 100%.) For each decision point, each branch has an expected outcome. The expected outcome is the sum of the probability of an alternative times the value of that alternative.
A decision at each decision point should be the alternative with the highest expected outcome. From the branches of the tree, a person can work backward to find the best alternative at the root of the tree. 
Use of decision tree allows only one variable at a time for the expected outcome. If an answer requires a decsion based on several variables, a person can apply the procedure to each variable and then subjectively weight the variables. Or a person can choose another method that takes into account multiple variables.
To simplify the decision faced here, she can ignore satisfaction, lifetime income, and cost for now. She can use just one variable, annual income, to start the decision-making process for the receptionist. Alternative one can make $50,000 a year if she graduates and $25,000 if not (she can still be a receptionist). Alternative two can make $30,000 a year if she graduates and $25,000 if not. Alternative three can make $50,000 a year if she graduates college, $30,000 if cosmetology, and $25,000 if neither. Alternative four can make $25,000 a year (unchanging and certain). Each option has a risk, she might graduate or not, as shown on the decision tree graph, which also shows the expected outcomes.
Conclusion: She will expect the least overall value, expressed as annual salary, if she stays being a receptionist. Next best is trying cosmetology school. Second best is trying both cosmetology school and college. The career path through college is the best choice based on expected annual salary. She should try to graduate from college based on this analysis.