College enrollment has dropped off by three million in the last decade, with a drop-off of one million due in the last several years as a direct side effect of the Covid-19 pandemic. This phenomenon clearly does not bode well for the future of the United States’ economy and workforce, with students who attend low-income schools and come from low-income families being the most affected. These changes are disproportionately affecting students from low-income schools and families, the very people who need higher education the most, and are erasing much of the work done in the last decade to help close the income and race gap between students, colleges, and socioeconomic backgrounds.
Enrollment in trade schools is skyrocketing.
Recently, trade schools have seen a 40% bump in enrollment across the board. Many students are enticed by the fact that trade schools are affordable and offer a quick turnaround, with students paying $16,000 or less for their program, and their training taking a year or less to complete. Beyond that, those who complete trade school is all but guaranteed a job on graduation day. Their earning potential is often two or even three times higher than the initial cost of attending the program. As many have found, the same cannot always be said about those who pursue a college education.
While the average cost of college at an in-state and public institution hovers at around $28,775 per year (according to Forbes) and takes an average of four years to complete means that trade students have a cheaper educational cost, (between $16,000 to $33,000 for the entire program, or about equal to just one year of a public college tuition) can get work in their field more quickly, and can usually make more than their educational costs in their first year on the job. Tradespeople make an average of $54,000 fresh out of trade school, which rivals the role average college student’s first salary of $55,000. It’s no wonder so many people are choosing to forgo a formal education for trade school!
The almost insurmountable cost of college combined with ever-growing inflation and a lengthy list of requirements just to get a post-college job, all for a low salary and with students having hefty loans to pay back, also play a key role in the downturn in the popularity of college.
The implication of fewer college-educated people, however, means that over time, the United States as a whole could face an economic downturn, as it gives rise to many more blue-collar workers. This can irrevocably alter the makeup of the workforce. Despite current unemployment rates being among the lowest they’ve ever been, the American people are already starting to see a shift in the labor market.
Already, we see a strain in the labor market when 25% of skilled workers in the U.S. exited the workforce following the Covid-19 pandemic. The economy has become so highly specialized that if the U.S. were to keep up the trend of losing college-educated workers, there could irreversible damage to the United States’ economy, deepening the ever-growing divide between the middle class and the working class, further reducing the ability to affect the global economy, knocking the United States out of the classification of a “global superpower.” To make matters worse, much of the United States labor pool is outsourced, and we are seeing the rise of artificial intelligence and robotics taking over many jobs, especially minimum wage jobs. While none of these factors alone vastly affect the U.S. labor market, this is only the tip of the iceberg.
So what can employers do when the makeup of the workforce starts to shift?
Employers could shift the focus on the years of experience rather than the type of education the potential employees have, as well as offering more extensive on-the-job training, which is already commonplace in some industries. Even for those with a college education, the requirements for entry-level jobs seldom match the salary, with many employers requiring a four-year degree, two or more years of experience, and fluency in different programs which vary from company to company. Employers, if possible, need to offer higher salaries with fewer requirements, as many young people are finding the pursuit of college, plus the various other requirements just to be considered for a barely above minimum wage job, while they’re drowning in student debt fruitless, so they forgo college altogether.
A post-pandemic society looks vastly different, and employers must adapt to keep up.
Fred Romano
January 20, 2011 at 1:30 pm
Great post Russel! I agree with you that the agent fee model will take over the brokerage industry. I am considering adopting this fee structure to recruit agents here in the CT market. I think it may work well in combination with our Flat Fee “Full Service” alternate business model (still in the development stages).
John Kalinowski
January 20, 2011 at 2:54 pm
Hi Russell! It’s hard to say where it’s going in the Cleveland area. The largest in our MLS is Howard Hanna with 2000+ agents, and they continue to be a 50/50 split type of company, with some agents getting better splits based on production, etc. They seem to be stuck with lots of low to no-producing agents and a few super-producers who likely have sweetheart deals. Keller Williams and ReMax have taken most of their mid to better-producers. They have lots of offices and I would imagine a lot of overhead to cover.
The next largest is now Keller Williams with 800+ and they too are a split company with various programs, typically 70/30 or some similar variation that’s capped, plus other monthly fees charged to the agent. ReMax has fallen to third with 600+ agents. The funny thing about ReMax is that they have largely gone away from the 100% type of setup in our market. Depending who you talk to, they are typically either 95% plus some sort of monthly desk fee, usually around $1,000/month, or they have gone to some variation of a fee/split arrangement. One agent I spoke with had a 60/40 so it sounds like they’re going back to the old model since some just can’t make a profit under the high-split model, and the agents aren’t selling enough to cover a monthly fee.
ReMax was the first serious contender to do the 100% concept in our area, but it hasn’t worked for all of them. My old ReMax went under last year and the owners were indited for supposedly stealing the Children’s Miracle Network money. They grew too fast, built out three expensive offices, and couldn’t cover the overhead. Another three-office ReMax is apparently in trouble now and being taken over by a different ReMax, so I really don’t know if the 100% concept is working here. Our average sale price is way lower than Phoenix, at less than $150k and our average commission is lower too. Man, I should move!
I do agree with your statement that future brokerages will either have to provide more services or be stuck competing on commission splits. We’re in the more services category. Our splits are lower (we list them right on our site) but we do a lot for our agents, including free custom yard signs and websites, and we take their listing photos. The flip side is we charge no fees at all, just the splits. We don’t have retail offices, which keeps our overhead low, and of course it’s not the right setup for everyone, but we’re starting to grow so we’ll see how it goes in 2011.
The part I can’t figure is if anyone’s actually making any money in our market any more. Our sales are down so much, along with average prices and commission, that when I do back-of-napkin calculations I often can’t figure out how most of the big brokers are even paying their rent. It will be interesting to see how things shake out in the next couple years.
Ruthmarie Hicks
January 20, 2011 at 7:28 pm
I’m at Keller – which makes me an oddball. Most agents are mired in the world of 50:50 PLUS a franchise fee until a “Certain level” of production is met – that most will never come close to meeting.
The brokerages talk a good game of misinformation. “You have to pay Keller $35k before you see any money!” Ah…..no…..It’s $35k to the office before you CAP. “They don’t give you leads!” Neither do they. Some of these brokerages have a really sweet deal where they put everything up on their site and if the 50:50 agent is lucky enough to get a referral – they want another 35%. Its extortionary but agents are putting up with it. The area has been very resistant to new models.
Ken Brand
January 20, 2011 at 7:57 pm
It’s fascinating history. Taking the time to pause and ponder how things have evolved over the decades is super smart, thanks for sharing your take with us.
When I look back, I see it as you do. I also agree with your take :
“In the future, any broker will have to either provide real, meaningful help and support to their agents or they will be in a commission price war (which they will lose) with a small army of one of the many low cost, low service (really really low service) new era brokerage firms.”
What’s in it for me, where is my true value and I have plenty of choice, is the way our culture operates these days, and it effects all business and services (including what each of us as real estate agents offers). Expectations are higher than EVER; anyone and any tribe that offers value as defined by their target clients will thrive. Crappy low-low fee + 100% will die, and so will crappy commission split brokerages who promise platinum support and services and deliver Paper Mache. Doesn’t matter which model you believe in or who you are, you better shine brighter, or bye-bye.
Thanks for sharing.
JIm Gatos
January 20, 2011 at 11:29 pm
“In the future, any broker will have to either provide real, meaningful help and support to their agents or they will be in a commission price war (which they will lose) with a small army of one of the many low cost, low service (really really low service) new era brokerage firms.”
THAT’S exactly why I’m at Keller Williams Realty! They’re the ONLY company I’ve ever seen or been part of that TRULY provide any value at all, in the form of advice, education, and smart, sensible tools! Keller Williams Realty is the first national franchise company I know of that offers a complete, full blown CRM solution with electronic digital signature capability, on a national scale, through a new addition; “Eedge”!
In another article you wrote Keller Williams Realty was on of the highest “agent centric:” companies you knew of. I totally agree.
Russell Shaw
January 22, 2011 at 5:39 pm
I meant NO slight – of any kind – towards KW. Never have, never will. I have always seen them as the most agent centric national company to have ever existed.
My point wasn’t to slight any company or business model but to point out that the 100% concept IS the future, regardless of the brand. It hasn’t happened everywhere yet and it might take another 20 years (Realtors can be really really slow on some stuff:-) but it will happen.
JIm Gatos
January 22, 2011 at 9:43 pm
Never said you did.. I was AGREEING with your post.. according to your own words, I was trying to convey that KW IS in fact, one of the real estate companies that is “in the future”, today.. In my opinion, they GIVE value for the fees they charge their agents.. Putting your listings on the internet and relocation services are no longer great motivators or strong enough reasons for many good agents to be or stay with their old fashioned agencies. 100% and variants is the way of the future. So sorry my comment obviously came across the wrong way..
BawldGuy
January 23, 2011 at 3:46 pm
Wonder where all those smallish indie brokers are, howling about how they’re gonna bring down goliath? 🙂
Listings + Integrity + Consistent RESULTS always win.
You write too seldom, Russell.
John Kalinowski
January 23, 2011 at 4:42 pm
@Bawlguy – Kind of surprised to see you make such a back-handed comment toward the small brokerages. Don’t you write for one of those indie’s blogs? Funny that you should use the word “howling” since that’s what the blog you write for is built around. Why attack the little guy just because they are aggressive and want to go after the Goliaths? Just don’t get it. Every big brokerage started at one point as a small independent, and eventually did conquer the big guys. Remax and Keller Williams weren’t always giants. They started small, with big dreams, and thankfully didn’t listen to guys like you who put them down for wanting to take on the world!
BawldGuy
January 23, 2011 at 5:21 pm
Hey John — First of all, you’re not even comparing apples and oranges, you’re comparing football and scotch. 🙂 Not sure where to start.
1) “Don’t you write for one of those indie’s blogs?” Yes, in fact I do. What does that fact of life even mean? Nothing as it relates to my comment. It’s what I write that matters.
2) “Funny that you should use the word “howling” since that’s what the blog you write for is built around.” Really? My blog talks of real estate investment strategies, and RE inv topics exclusively, with the rare as hen’s teeth exception of sports or something personal. I NEVER talk about brokerage models, even indirectly. “Howl?” Hardly, though every now and again I’ll go on a rant about something. My blog is built around knowledge, expertise, experience, and solid content. With all that, howling simply isn’t accurate, by anyone’s objective measure.
3) “Why attack the little guy just because they are aggressive and want to go after the Goliaths? Just don’t get it.” No kiddin’ you don’t get it. 🙂 I’m not attacking ‘the little guy’, cuz after all, as you so correctly pointed out, I are one. I was alluding to those little indies who’ve been yappin’ like a bunch of genetically challenged poodles about how they, AS SMALL INDIES, were gonna drive BigBox brokerages outa business. They were supposedly gonna make that happen by way of their superior model. It hasn’t happened, and as Russell writes, it won’t any time soon. My comment was in no way a generic attack on small indies.
4) “They started small, with big dreams, and thankfully didn’t listen to guys like you who put them down for wanting to take on the world!” Are you being intentionally obtuse? I LOVE small indies. What I can’t stomach are the ones who, in their self-made universe of superiority, declare the ultimate demise of the huge brokerages will come due to their ‘cutting edge’ efforts. As Russell points out so well, the scoreboard isn’t reflecting well upon their boasts.
For Heaven’s sake man, Dad was the biggest volume per agent brokerage in San Diego County for just over half of the 1960’s till he retired. He started out as a one-horse, single office company in a blue collar part of town. Why on earth, with that heritage, would I be biased against small indies who wanna become huge indies? The answer, obviously, is that I wouldn’t. I love those success stories.
Read my words, as I’m a firm believer in the axiom, ‘words mean things’. I write what I mean, and I mean what I write. I expressly directed my words to those indies who have and still are ‘howling’ about how they’re gonna be the ones providing the mortal wound to their BigBox competitors.
So, when you read my words, you shouldn’t be surprised, unless that is, you wish to add your own interpretation to what I wrote.
John Kalinowski
January 23, 2011 at 6:34 pm
Never mind Bawldguy, you missed my point, or I didn’t explain it properly. Time now to watch Pittsburgh lose. I hope!
BawldGuy
January 23, 2011 at 6:39 pm
John — that may be mutually true. I’m laughin’, as I’m in the Steelers’ corner. 🙂
stephanie crawford
February 2, 2011 at 1:08 am
My local boutique brokerage offers the best services around IMHO. Professional Photography for every listing, Automated Showing/Feedback center, free color printing, in-house flyer design, free website with IDX, Realtor.com enhancements, listing syndication, regular training, MS Exchange Server with smartphone connect, free tech support, and more. For this I keep 80% and pay about $145 a month in desk/tech/MLS fees. I can’t imagine doing business without these services.
Joshua Jarvis - GA Realtor
December 7, 2011 at 8:50 am
Reading this for the first time at the end of 2011 and the statement about a few high-service support brokerages vs the no service brokerages seems to be accurate. It's funny though, I don't see top producing agents (outside a few REO agents) at these no-service company.
One word: Leadership.
There's not much leadership or the the things that go with it at these no-service companies (I had my license at one for 2 years).
Great discussion from what looked a like a promotional article for John Hall.