In the future, you’ll be paid for studying

In the near future, you can expect to receive serious remuneration for time spent in a classroom. But now, it is difficult to imagine that this will be the governing principle one day. The world actually seems to be moving in the opposite direction. Education is constantly becoming more expensive. Even the $1 trillion or more that the U.S. government spends on education every year cannot beat this tendency. So who can cover such expenses and pay you extra to boot? In order to answer the question, let us try to understand the difference between what one’s work time is worth before education and after it.

People with a college degree tend to earn more than those who did not go to college. The cost of an educated person’s hour includes the time spent on education (just as in conveyor production, the price of the goods includes the time of the people working on the line). To simplify, let us say that if a person studies for 5 years and then works for 40, then the hour of someone with a college degree (Xed) is worth as much as the sum of: the price of 1 hour of a person who didn’t go to college (Xnon), plus the price of 5/40 hour of a person who didn’t go to college, plus the price of 5/40 tuition hour (Tuition) — disregarding inflation and considering prices for the same time period:

Xed = Xnon + 5/40*Xnon + 5/40*Tuition

Testing the resulting formula on real-life examples, we will find that an hour of an educated person’s work is, on average, paid even higher. Our formula, in fact, shows the minimum under which people would lose the motivation for going to college, because it would be more cost-efficient to start working immediately.

In 2013 median annual earnings for young adults with a bachelor’s degree were $48,500, compared with $23,900 for those without a high school credential, and $30,000 for those with a high school credential. via U.S. Department of Education, National Center for Education Statistics. 2015

When a person invests an hour into education, they are the beneficiary — not at the time of studies, but in the distant future. Let us imagine this as two separate people. This way when a Today’s Person is receiving a degree, they are working for a Future Person — “future them”, so it would be fair (and beneficial) for that Future Person to reward Today’s Person accordingly. The cost of an uneducated person’s work could be seen as the minimum fair amount for this reward. The maximum limit can be derived from the cost of a college graduate’s work, using our formula:

• considering that the cost of an hour’s studies approaches the cost of an hour of a non-educated person’s work these days (Tuition = Xnon), we get:

Xed = 5/4*Xnon, and Xnon = 4/5*Xed

That is to say, the higher limit of the hourly cost of a person getting educated instead of working can be defined as 4/5 of a college graduate’s hourly cost. In addition, we might say that Today’s Person exchanges their hour for 4/5 of Future Person’s hour, or that Future Person uses each of Today’s Person’s hours over 8 hours of work. Another 4/5 of a Future Person’s hourly cost are required to pay for one hour of tuition. As Future Person works for 40 years while needing to pay only for 5, the reward is quite affordable.

But there is no such thing as a time machine. So how do we transfer the Future Person’s money from the future to the present in order to reward today’s student? Very easily. All we need is to have someone who is already educated today and wishes to transfer the hourly cost of their work into the future (say, by 2–3 decades) — in other words, to trade for an equivalent span of an educated person’s time in the future. That is exactly what a person wants when saving part of today’s income for a future pension. Learners Guild and similar projects have already partly applied this by providing living expenses and tuition for people who choose to study programming in exchange for part of future income.

It is also what the student, Today’s Person, wants — to study while having the means for their needs today. No more need for work on the side, and the motivation to get a higher education is realized immediately.

This way two of the most complicated problems of modern economics can be solved — funding of education and the stability of the pension system. We get a solution based on an equivalent exchange; where everyone gets exactly what they want at exactly the time when they want it.

Until recently, technology did not permit such an exchange. For lack of a simple tool, society solved the issue of time-traveling money using a complex system of pension funds and state-governed redistribution. The world’s current quality of life is owed to this system, but it has side effects too: speculative instruments, financial crises, and the state spending balance shifting towards pension costs.

Modern technologies open a path toward a more perfect and just system. Among them and about to play a very important role are distributed ledgers of open and reliable data, like the ones we are working on at Frank. The video of the Institute of the Future demonstrates one of the uses of distributed systems to solve the task we described above using simple formulas.

The time has come for us to stop dreaming of a time machine, and start designing ready solutions for our own future. Join us on this exciting journey.

Frank is building a public facing transparent ledger for ventures that wish to show the outside world how they utilize funds. You can sign up for email updates at frank.money, or chat with us on Twitter, or see our faces on Instagram. If you would like to share you ideas or sign up for a test, please get in touch at be@frank.money