Beware: The Dangers of Multilevel Marketing Schemes For College Graduates

Should Pyramid Schemes be fully illegal?


College is an arduous but rewarding journey for young adults. For most, walking across the stage and being handed the diploma they’ve spent almost four years working towards will be a highlight of their lives. However, for some, graduation is only half the battle.

Once they’ve left the nest of academia, many will struggle to find employment in their degree field. This and other factors have contributed to younger generations failing to achieve the same levels of financial security as previous generations.

If that wasn’t disheartening enough, many bad actors are willing to take advantage of the eagerness and desperation of recent college grads by offering quick paths to success. While multi-level marketing schemes (sometimes called pyramid schemes) are not new, they have seen their wheels greased in recent years due to a combination of a variety of elements such as an uncertain economic future and a shift to online work.

It’s Harder for Recent College Grads to Secure a Job

To better understand how MLMs are taking advantage of college graduates, we first need to know why they’re being targeted in the first place. One of the driving components are the challenges college graduates are facing in securing employment. 

An experiment performed by highlights these struggles. In the experiment, four highly qualified degree holders sent out polished resumes to over 300 job applications to multiple potential employers. Of those hundreds of applications, only 12 percent got a response from employers. Even more troubling is that not a single application led to employment.

The experiment identifies a few facets that play a part in the inability of graduates to obtain a job. 

  • High application volume
  • Applications are commonly vetted by algorithms 
  • Professional networks are essential to job hunting and recent grads have smaller professional networks than previous generations
  • The increasing prevalence of phantom listings (jobs listings that will never be filled and only served to collect promising resumes)
  • Misleading job listings that do not actually list all of the prerequisites to employment

When college graduates are unable to obtain worthy employment and work jobs they are overeducated for, they become more desperate for economic advancement, especially with the threat of student loan repayment breathing down their necks.

Degrees aren’t cheap and college graduates are going to want to be able to not only pay for their degree but gain the upward mobility that was promised to them when applying for college in the first place. 

This atmosphere proves fortuitous for predatory schemes such as MLMs. But what are MLMs?

What Even is a Multi-level Marketing Scheme?

MLMs refer to direct sales operations in which individuals ostensibly sell a good or service on behalf of a business or client. On the surface, they act as a sales operation that sells some form of product, whether it’s non-profit memberships, herbal supplements, etc. 

This is usually just the front of the operation as the real money is made through the recruitment of new members. There will usually be some form of “investment” that is collected upon joining the MLM outfit from the prospect. 

Depending on the MLM, the person responsible for recruiting the new prospect will receive some form of compensation. However, these fees and compensation are siphoned upward as each proceeding senior member of a network of recruits will receive a portion of the initial investment fee as well.

This means that MLMs profit by getting as many new members to buy into the scheme as possible. This is also how MLMs received their “pyramid scheme” namesake as the upward flow of money does in fact resemble a pyramid, with a smaller number of individuals receiving a cut of the proceeds at every stage. These new members are called the recruiters’ “downlines.”

For example, a member who has recruited four members, who in turn recruited four of their own members, will receive income from all 20 members beneath them. The problem is that members who do not have a large network of recruits beneath them will have very little income and will be expected to effectively push whatever products the MLM is trying to sell for what is often purely commission-based income.

While this may sound like a scam (it is), it’s not inherently illegal and most MLMs are unfortunately legal entities. 

Ok But How Do MLMs Prey on College Grads Specifically?

MLMs typically decorate their websites and social media pages with opulent imagery, alluding to the wealth that could be attained with success through the operation. From photos of skybox views and lavish dinners, MLMs want to dangle the lifestyle that only one percent or less of the operation enjoys enticing new recruits to join. 

MLMs have recently begun advertising their positions on professional job networks such as LinkedIn and Indeed, often under the guise of marketing, event planning, advertising and public relations jobs. The listings will be worded vaguely enough to not give away what the actual position is like but will be convincing enough for job seekers who are pumping out applications.

For college grads frustrated with the inability to secure employment, hearing back from a potential employer will likely cause elation. MLMs use job postings like this to increase their lead generation, which is the process of cultivating consumers for their business model. They will rarely discriminate in their “hiring” process and will usually reach out to any application to set up an interview. 

This is all in the hopes that they can hook at least one person into the scheme. 

Thankfully, college grads can look out for a few red flags to help ensure they aren’t falling victim to an MLM at worst or wasting their time on a worthless interview at best.

  • An unclear business model: When looking over the job application, if the posting talks too much about how important it is to build a team, it could be a sign that this job is more about recruiting new members than performing any kind of actual job duties. Recruiters will often focus on making the job sound exciting than elaborating on what you will actually be doing.
  • Few or no qualifications to join: MLMs will usually promise the role as being a great entry-level opportunity and will often lack any concrete requisites for the role.
  • Expensive, ongoing training: MLMs require initial “investments” and these often come in the form of fees for “training.” Typically, this training is dragged out to siphon as much entry cost as possible from the recruit. A legitimate job is usually not going to require any payments from new hires.
  • Asking for money for your own inventory: This is one of the easiest red flags to spot. While working on commission is very common in direct sales, most organizations do not require employees to pay upfront for their own inventory. 
  • Love bombing: MLMs are known for their cult-like manipulation practices. One of the ways this manifests is constant praise of the recruit to boost their ego. Doing so allows MLM recruiters to prey upon the potential recruit’s feelings as if they are underperforming in life. “You have a degree, you should be doing better than you are” is a common sentiment used to entice new members.

Knowing that MLMs are taking advantage of economic instability amid a recession can be extremely disheartening for recent college grads looking to take hold of their lives and gain upward mobility. 

But knowing what to look for can help protect you from getting looped into one of these unethical operations. Look for the red flags and look out for any ambiguity in the job description, especially regarding salary and what the company does. Go with your gut and share your knowledge of MLMs with your peers to prevent them from falling victim as well.

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