Posts Tagged "education"

The Economics of Being Black in the U.S.

Unemployment DisparitiesThe COVID-19 recession demonstrates an axiom of economics. Black unemployment always exceeds the rate for whites, the spikes are higher in recessions, and, in a recovery, employment recovers more slowly.

A record number of Black Americans were employed in 2019. But when the economy seized up in the spring, their unemployment rate soared to 17 percent, before floating down to a still-high 12.1 percent in September.  Meanwhile, the white unemployment rate dropped in half, to 7 percent.

The much higher peaks in the unemployment rate for Blacks than whites and the slower recovery are baked into the economy.

This phenomenon occurred during the “jobless recovery” from the 2001 downturn. When the economy had finally restored all of the jobs lost in that recession, the Black jobless rate remained stubbornly higher.

And after the 2008-2009 recession, as the University of California, Berkeley’s Labor Center accurately predicted at the time, Black unemployment hovered at “catastrophic levels” longer than the white rate did.  This disparity is now the issue in the COVID-19 recession.

Geoffrey Sanzenbacher, a Boston College economist who writes a blog about inequality, gives three interrelated reasons for Black workers’ higher unemployment rates.

First, “The U.S. still has a tremendous amount of education inequality, and the unemployment rate is always higher for people with less education,” he wrote in an email. Despite the big strides by Black men and women to obtain college degrees, roughly 30 percent have degrees, compared with more than 40 percent of whites, he said.

Second, Black workers without degrees are vulnerable because they are more likely to earn an hourly wage. An hourly paycheck means that a company can cut costs by simply reducing or eliminating a worker’s hours. “It’s much easier to lay off hourly workers, whose employment is more flexible by nature, than salaried workers,” Sanzenbacher said. …Learn More

Drawing of Arthritis

Same Arthritis. But Some Feel More Pain

The X-rays look very similar for two 60-year-old women with arthritic knees.

But the less-educated woman has more severe pain than the person who graduated college.

A new study of men and women finds that the degree of knee-joint deterioration visible in an X-ray isn’t the primary reason one person experiences more knee pain than someone else. Instead, the overwhelming reason is knee strain caused by obesity and the toll taken by physically demanding jobs – both of which are more common among less-educated workers.

The researchers focused on knee arthritis, because musculoskeletal pain is one of the leading causes of Social Security benefit payments to people who develop a disability and can no longer work.

Understanding what’s behind the pain differences is important, because the need for workers in certain jobs requiring physical strength – home health aides, janitors, and construction workers are examples – is expected to increase in the future.

Given this growing demand and predictions of a continued rise in obesity, the researchers conclude that “pain is expected to contribute to an increase” over time in the percentage of the population who will be impaired by their pain.

The people in the study fell into three educational groups: a high school degree or less; some college; or a four-year college degree. The researchers also had information about their occupations, as well as several data sources that gauge the severity of their knee pain, including the ability to do things like walking a quarter of a mile.

Knee arthritis worsens with age. However, a surge in reports of severe knee pain came about a decade earlier for people with no more than a high school degree than the surge for college graduates. …Learn More

Art of Dice that spell out the word "fees"

Oddly, the Educated Pay Higher Fees

It’s smart to invest retirement savings in mutual funds that charge very low fees for one simple reason: the worker keeps more of his money and hands over less to Wall Street.

But in a study of people in their 50s and 60s who have retired or otherwise left federal employment, the people with the most education and the best scores on a standardized test were more likely to make what seems to be the wrong decision. Rather than keep their retirement funds in the government’s Thrift Savings Plan (TSP), which has extremely low fees, they transferred the money to much higher-fee IRAs operated by financial companies.

The $500 billion TSP – the world’s largest defined contribution retirement plan – is inexpensive in large part because it invests only in index mutual funds, which automatically track a variety of stock and bond market indexes and avoid the need to pay money managers to pick the investments. The annual fees for TSP’s index funds – known as expense ratios – are under 0.04 percent of the investor’s assets.

But over a 10-year period, about one fourth of the former federal employees rolled over the money saved during their careers into IRAs that typically had much higher expense ratios: 0.57 percent. On top of that, IRAs often charge additional fees for investment advice, pushing the potential total annual fees to well in excess of 1.5 percent. It’s possible that investing in an IRA could generate enough returns to make the extra fees worthwhile, but research has shown this is not the norm.

What explains the rollover decision? More educated people tend to have larger retirement account balances, raising the possibility that they were either seeking out financial advice or were targeted by advisors’ sales pitches. However, even among people with similar balances, those with more education were still more likely to roll over to IRAs.

It’s possible that they “perceive that they know what they’re doing” and want to take control of their investments “even when higher fees result,” the researchers said. …Learn More

Graduates’ Pay Ranked for 1,650 Colleges

Decisions about which college to attend or degree to pursue are increasingly driven at least in part by this consideration: will I be able to pay back my student loans?

Countless things determine how much someone earns – smarts, rich or poor parents, high school or graduate degree, being in the right place at the right time. But LendEdu’s new ranking of starting salaries for graduates with bachelor’s degrees from some 1,650 U.S. colleges is essential information, especially when debt is the only option to finance college.

A degree is almost always worth the investment. Georgetown University estimates workers with a bachelor’s degree earn $1 million more over their lifetime than high school graduates. Post-secondary degrees have even bigger payoffs.

The salary rankings turned up some useful and quirky findings. LendEdu, a personal finance website for consumers that sells advertising to financial firms, compiled the salary data for the first five years of employment from payscale.com surveys.

  • Ever hear of Harvey Mudd College? The typical recent graduate of this engineering school 40 miles west of Los Angeles earns a bit more ($85,600) than an MIT graduate ($83,600). Harvey Mudd is Silicon Valley’s No. 2 feeder school.
  • Graduates overestimate what a degree is worth. The typical college student expects to earn $60,000 but earns only $48,400 in the work world. …

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Parents’ Education Key to Child’s Security

“Seven Up,” a famous British documentary series, interviewed 7-year-old schoolchildren in 1964 and filmed them every seven years after that.

Over the documentary’s 49-year span, viewers watched the children’s lives take shape. A boy at an upper-crust boarding school goes to college and on to teach math at a prestigious private school. A girl educated in a working-class school in London’s East End is just able to make ends meet as an adult. A young equestrian from a wealthy family raises her own privileged children. A boy in an orphanage becomes a bricklayer.

These personal profiles at the heart of “Seven Up” reverberate in a recent, unrelated, academic study that has reached a similar conclusion: parents’ investment in educating their children is the ticket to financial security as an adult.

The researchers estimated that people with the college-educated fathers earned nearly $400,000 more over their lifetimes (at today’s pound-dollar exchange rate) than the people from less-educated families. They analyzed periodic surveys of 9,436 people in England, Scotland, and Wales between ages 7 and 55. …Learn More

Video: How to Talk about College Costs

As the outlines of the student loan crisis were coming into focus, this blog featured a video of new college graduates dazed and bewildered by the size of their monthly loan payments and the intrusion on their lifestyles.

Beth Kobliner, a personal finance speaker and journalist, has a surefire antidote: talk to your teenager early and often so they know what they’ll be getting into if they borrow money for college.

She explains how to do this successfully in a new series of helpful, breezy videos.

She recommends that parents make the early conversations light and easygoing. Have the modest goal of encouraging your freshman in high school to start thinking about college broadly. Ask about his or her aspirations, interests, and the choice of Ivy League or state university.

Your teenager should know, Kobliner says, that they will “make about the same salary either way – turns out it’s more about the kid than the name of the college.”

As high school graduation gets closer, talk in more depth about paying for college. “The most important question often gets overlooked at first: Can we afford it?” she said. I would add that the question often comes too late – after the college applicant has already received their acceptance letters and expectations are set.

In addition to the how-to videos, another set of videos feature four conversations about college between real parents and their children. In one of them (above), a mother doesn’t tell her child not to go into debt for college. But she does explain the bad choices she herself made and that she regrets she is still paying off her student loans.

Many teenagers don’t want to talk about anything with their parents – period – but the videos provide tips for overcoming teen resistance and starting the critical conversation about the cost of college. …Learn More

US

US Increasingly Polarized – by Geography

Rich or poor, old or young, white or black, red or blue – our differences cut many ways.

But a new divide has opened up, one based on geography. Stark new evidence shows that well-paid, highly educated people have moved to high-cost coastal cities over the past decade, while lower-income, less educated people have moved out.

American cities are “grow[ing] increasingly dissimilar along socioeconomic dimensions,” said Issi Romem, a fellow at the Terner Center for Housing Innovation at the University of California and economist for BuildZoom, a California website focused on development.

Gentrification is nothing new. But Romem’s analysis of U.S. intercity migration shows that gentrification occurs not just within city neighborhoods but also between cities. San Francisco is the most extreme example of what he calls “income sorting.” He estimates that the population moving into the Bay Area earns $13,000 more, on average, than the population that is moving out. People relocating to Seattle and Washington earn about $3,800 more than the people who leave.

A similar phenomenon is occurring in New York, Los Angeles, San Diego, and Boston, where restrictions on development, coupled with the strong demand for the limited housing stock, are pushing up house prices and driving people out, including renters who can no longer afford the steep increases in rents.

These movements exacerbate society’s already high level of inequality. As cities or regions of the country become less integrated in terms of their residents’ incomes, fewer low- and middle-income groups will enjoy the particular benefits to them of living in the midst of those who are better off.

Upward mobility is one such benefit. A famous study found that lower-income people are more likely to move up the income ladder, relative to their parents, if they live in coastal cities with higher education levels, better primary schools, and more family stability. Other research shows they will also live longer if they reside in cities with more socioeconomic diversity. …Learn More