Young Workers’ Hopes Confront Reality

Part time vs full time chartAs the post-recession job market continues to improve, so has young adults’ optimism about their future opportunities, a Federal Reserve Board survey shows.

What’s poignant about this youthful optimism is that a changing labor market is making it increasingly difficult for young adults to get their careers off to the right start.

Surely, they sense this. Nearly two-thirds of adults between ages 18 and 30 told the Federal Reserve in a 2015 survey featured in a recent webinar that their schedules in “permanent” jobs were changing daily, weekly, or monthly. They strongly prefer future job stability over higher pay, despite the trendy flexibility of the “gig” economy, Uber driving, and freelancing.

“Permanent employment is not the same as stable employment,” Amy Blair, the Aspen Institute research director for the economic opportunities program, said during the webinar.   “Without a stable floor, it’s difficult for a person to invest in himself or herself to build a career.”

The U.S. Bureau of Labor Statistics (BLS) has identified 30 jobs it predicts will have the fastest growth, generating 5 million jobs by 2024.  Most of the top 10 are characterized by part-time, low-paying, or seasonal work that can make it difficult to put together a full-time schedule, Blair said. Many are the types of jobs that also lack health benefits, 401(k)s, and paid-time off.

The BLS’ top 10 are: …Learn More

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A Modest Victory in Financial Education

With so many Americans in the dark about how to prepare for retirement, educating them about why it’s critical to save seems an obvious way to tackle this problem. But very few solid studies prove that financial education actually works.

This field research should be counted as a positive result for a modest, low-cost financial education program.

Carly Urban at Montana State found that tellers and other low-level employees working at 45 randomly selected credit unions around the country clearly made progress after spending just 10 hours in an online financial education program. The information-based program required the workers to do some reading and walked them through specific examples and scenarios they might face.

Their improvements weren’t limited to increasing their knowledge of finances and retirement saving either. They also saved more, Urban said while presenting her findings at a webinar sponsored by the Center for Financial Security at the University of Wisconsin.

In the fall of 2009, the credit union employees completed the online education on the basics of everything from financial planning and investment risk to saving for college and working with a financial adviser. They were allowed to choose how much time to spend on each of 10 modules, and their employers let them take the courses at work – rather than use up valuable free time. …Learn More

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Retirement, Saving and Your Taxes

Just one in four of the low-income workers eligible for the federal tax credit for retirement saving are even aware that it exists.

The IRS, as I said in a previous blog, practically “gives money away” through its Saver’s Tax Credit, which returns as much as half of the amount saved to the tax filer. The credit was designed to encourage the nation’s lowest-paid workers, who largely don’t save.

Yet a survey last year by the Transamerica Center for Retirement Studies found that people who are not eligible for the credit know more about it than people who are eligible. There was a pervasive lack of awareness in three groups in particular: workers earning under $50,000, women, and people with no more than a high school education.

We’re getting into the thick of the tax season, so we’ve assembled a list of our previous tax-oriented blogs – the first article explains the saver’s credit. The blogs, listed below, explore a variety of issues to consider when you’re doing your taxes: …Learn More

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Unpaid Water Bills Open Door to Advice

Nearly half of the low-income residents in some sections of Louisville are delinquent on their city water bills. In Newark, water customers’ unpaid balances have been known to reach $4,000.

The shutoff and reactivation fees that some cities charge when they stop a customer’s water service create another problem in places like Houston: they add to the unpaid balances of customers who are already struggling financially. Cities are also becoming more aggressive about collecting on their debts, hiring third-party collection firms.

Researchers and the National League of Cities tried an alternative in the form of an ambitious pilot program involving five city water departments: Houston; Louisville, Kentucky; Newark, New Jersey; Savannah, Georgia; and St. Petersburg, Florida. Driving the program was the recognition that unpaid water bills are an indication of deep financial distress. So the cities, which are loathe to turn off this essential service, embraced a broader vision: providing financial counseling to empower families with delinquent water bills to better manage their situations.

While every city’s pilot program was slightly different, Ohio State researcher Stephanie Moulton said they had two things in common: an agreement to restructure residents’ unpaid water bills to make them affordable, and at least one private session with a financial counselor or coach already working for the city or a local non-profit. Some cities added other services, such as screening for public benefits if a job loss had caused a resident to fall behind on the water bill.

Houston, for example, trained and certified six customer service representatives in its Department of Public Works to act as financial coaches, said Bonnie Ashcroft, a departmental section chief. The counselors who coached clients on their household finances also advised them on how to reduce their water bills.

It’s not possible to do a rigorous analysis of the pilot’s overall effectiveness, because each city’s water department is unique. But individual analyses of each city found three that showed marked improvements in their water payments, Moulton said. These successes were presented in a recent webinar. …

In Houston, customers’ unpaid account balances declined, on average, from $544 to $374. Unpaid account balances in Newark went from $969 to $605. The frequency of payments in these cities also increased, Moulton said. Learn More

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Financial Stress Rings in the New Year

Having dug ourselves out of the worst financial crisis since the Depression, the nation entered 2017 amid rising wages and record-low unemployment.  Yet three out of four adults report being “financially stressed.”

And no wonder: half of the 2,000 adults in the December survey by the National Endowment for Financial Education (NEFE) said they are living paycheck to paycheck.

Americans’ specific financial issues are routinely documented in this blog and run the gamut from cash-flow shortages to poor retirement prospects.

The primary sources of financial stress identified in the NEFE survey were not enough savings and too much debt.  This was consistent with a second finding in which respondents said that solving these issues would also provide the most “financial relief.” Here are the other findings: …
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Millennial Couple Squares Away Finances

The Knapkes hiking last May in the Rocky Mountains.

Heather and Tyson Knapke were like a lot of young couples starting out: they were in debt.

One household expense on their credit cards loomed larger than all the others: at least $1,000 every month for groceries and dining out. Some weeks, the Denver-area couple could be found at their various favorite restaurants Thursday night straight through Sunday night.

The food budget “was astronomical, and I had no idea,” Heather said.

Their lives changed dramatically after realizing about 2 1/2 years ago that their finances were spinning out of control. How this couple transformed their debt-laden household into one that is free of credit card and college debts and has a tidy emergency fund, with retirement saving now well under way, could be a blueprint for other Millennials in the new year.

Here is the order in which the Knapke’s accomplished this: reduce expenses, impose a budget, pay down debt, and start saving for retirement.

“I’m trying to get ahold of my finances early – earlier than most people – so compound interest works in my favor so I’m set when I’m older. That’s the goal,” said Tyson, who is 32.

How did the couple get into trouble in the first place? Before marrying, Heather, a 33-year-old hairdresser, had learned a few things about controlling expenses as she purchased shampoos and hair dyes for her clients. Her personal finances were, as a result, in decent shape. Then she fell in love with a man in debt. Tyson had graduated from the University of Colorado with a communications degree, $16,000 in student loans, and another $9,000 distributed among three credit cards. …
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Bypassing College for a Professional Job

Apprenticeship programs in the United States are largely found in just a few unionized skilled trades: construction worker, plumber, electrician.

But a recent panel made up of British and American employers and other experts made the case that U.S. employers in myriad professional fields – health care, social care, information technology, law, medical exercise therapy, lab technician, teaching assistantship, nursing, and finance – would benefit from thinking more creatively about providing apprenticeship training.

Apprenticeship programs are much more common among U.K. and other European employers. Microsoft Corp. is a big exception here: its U.S. program, modeled on what the company does in Europe, will graduate 1,000 apprentices next year, said Bill Kamela, Microsoft’s policy counsel for U.S. government affairs. Apprentices “have incredible intangible skills, and they’re incredible learners,” he said.

These programs seem more relevant than ever in the wake of U.S. and European elections shaped in part by blue-collar voters dissatisfied with their economic circumstances, said Tom Bewick, founder of New Work Training Ltd. in London, which arranges employer apprenticeships. Bewick moderated the November panel for the Urban Institute in Washington.

“Our working and middle classes are in revolt against stagnating wages, a lack of affordable housing and distant institutional structures that come across as elitist,” he said. Apprenticeships aren’t a “silver bullet, but they are surely one of the practical responses to this set of challenges.” …
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