July 2, 2015

Teen employment rate continues to decline

by Grace

Teen summer employment has been in steady decline since the 1970s.

20150701.COCDecliningTeenEmployment

To understand what’s happened to the Great American Summer Job, we looked at the average employment rate for 16- to 19-year-olds for June, July and August (teen employment typically peaks in July of each year). Since 1948, which is as far back as the data go, through subsequent decades, teen summer employment followed a fairly regular pattern: rising during economic good times and falling during and after recessions, but generally fluctuating between 46% (the low, in 1963) and 58% (the peak, in 1978).

That pattern began to change after the 1990-91 recession, when the teen summer employment rate barely rebounded. Teen summer employment again fell sharply after the 2001 recession and again failed to rebound, and fell even more sharply during and after the Great Recession of 2007-09. After bottoming out in 2010 and 2011 at 29.6%, the teen summer employment rate has barely budged – it was 31.6% last summer.

For younger teens, the summer-jobs picture is especially bleak. Last year’s summer employment rate for 16- to 17-year-olds was 20%, less than half its level as recently as 2000. For 18- and 19-year-olds, the summer employment rate last year was 43.6%, still well below the 62.6% average rate in the summer of 2000.

Why the decline?

… Researchers have advanced multiple explanations for why fewer young people are finding jobs: fewer low-skill, entry-level jobs than in decades past; more schools restarting before Labor Day; more students enrolled in high school or college over the summer; more teens doing unpaid community service work as part of their graduation requirements or to burnish their college applications; and more students taking unpaid internships, which the Bureau of Labor Statistics does not consider being employed.

———

Drew DeSilver, “The fading of the teen summer job”, Pew Research, June 23, 2015.

June 23, 2015

Should you default on your student loans?

by Grace

Lee Siegel, New York writer and recipient of three Ivy League degrees, was roundly castigated after he proudly explained  “Why I Defaulted on My Student Loans”.

Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society.

I chose life. That is to say, I defaulted on my student loans.

As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example.

Besides generating revulsion at Siegel’s oozing sense of entitlement, his column stirred criticism of the New York Times for “dispatching criminally negligent financial advice”.

Ron Leiber pointed out the flaws in Seigel’s explanation of how to circumvent the negative repercussions from a student loan default.

First, he tells people to get as many credit cards as they can before they stop repaying their student loans. This way, presumably, you will have plenty of credit available once your credit report is ruined and you can’t get new cards. But card issuers are constantly checking the credit of existing cardholders to look for distress signals. If they see any, they may lower your limits or close your accounts….

The second piece of advice Mr. Siegel has for aspiring defaulters is to establish a good history of paying rent. This can work, as long as you rent from a landlord who never checks your credit or a new one who relies on your old landlord’s good word.

But many landlords do check and won’t be sympathetic, especially in tight markets. Besides, plenty of people don’t want to be tenants forever, given how hard it can be to find rentals in some good school districts. Others want to plant roots and build home equity.

Will those defaulters be able to qualify for a mortgage? A judgment resulting from a default may stay on your credit report for up to 10 years….

Bank of America, one of the biggest home lenders, did not comment on whether people with defaults on their credit record would be able to get mortgages, and a Wells Fargo spokeswoman declined to categorically rule out the possibility that someone could qualify for a loan within the tarnished-credit window.

But Richard M. Bettencourt Jr., the secretary of the National Association of Mortgage Brokers and a lender himself with a company called Mortgage Network in Danvers, Mass., said he had never seen people with student loan defaults on their credit records get a mortgage….

Which brings us to Mr. Siegel’s third piece of advice: Marry well, or at least have a creditworthy partner. Then, that person can be the sole mortgage applicant. Mr. Siegel’s wife bought the home where they live, according to public records.

There are a number of problems with this approach. Some lenders may not allow it, since certain low down-payment loans in community property states require both spouses to apply, according to Wells Fargo. Of course, you’ll need to talk someone into coupling up with you in the first place, after explaining that you’re not so big on financial obligations but that you really, truly intend to honor marital ones.

———

Lee Siegel, “Why I Defaulted on My Student Loans”, New York Times, June 6, 2015.

Ron Lieber, “Taking On Student Debt, and Refusing to Pay”, New York Times, June 15, 2015.

June 1, 2015

A blog hiatus

by Grace

I will be taking a summer break from blogging at Cost of College.

Other priorities are taking my attention away from this blog, so posts will be infrequent over the next few months.  Please continue to check and read this blog, and I can still be reached through my contact page.

As always, thank you for reading and commenting on Cost of College.

May 29, 2015

Is a gap year right for your child?

by Grace

Gap years have become more populare in the U.S.

… Prominent in Europe since the 1960s, the intentional and structured break from formal education before college is becoming increasingly popular in the U.S.

Formally described as a time for “increasing self-awareness, learning about different cultural perspectives, and experimenting with future possible careers”, in many cases a gap year’s most important benefit is simply to help a young person mature and be able to make better decisions about college plans.

While some gap programs cost about as much as a year of college, many other options are more affordable.  Sometimes a gap year is a time to earn extra money for college.  Simply living at home while working is a basic option, perhaps with classes or travel included for personal growth and preparation for college.  Other low-cost options include domestic or international travel along with internships.

Proper planning maximizes opportunities.

Before you design your gap year plan, sit down and really think about what interests you want to explore or what countries spark your interest. Combining an interest (such as learning Spanish) with a low-cost opportunity (such as Au Pairing in Spain) ensures your gap year will be meaningful to you as well as cost-effective.

WWOOF and Help Ex are two resources for matching students with farms, homestays, ranches, lodges, B&Bs, backpackers hostels and other options where volunteers receive room and board in exchange for work.  Dynamy’s program of mentored internships has been personally recommended in one situation I know.

Families are becoming more receptive to gap years, and many believe that it is a good way to lower the chances of college students wasting time and money in college while they try to figure things out.

———

Naila Francis, “Gap years gain popularity as students seek purpose, passion”, The Intelligencer, July 13, 2014.

Julia Rogers, “An Affordable Gap Year”, My College Planning Team, November 6, 2014.

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May 28, 2015

‘Good riddance’ to school days!

by Grace

Joe Queenan holds no nostalgia for his children’s school days.

… From the moment my children left school forever ten years ago, I felt a radiant, ineffable joy suffuse my very being. Far from being depressed or sad, I was elated. There was a simple reason for this: From that point onward, I would never again have to think about the kids and school. Never, ever, ever.

I would never have to go to the middle school office to find out why my child was doing so poorly in math. I would never have to ask the high-school principal why the French teacher didn’t seem to speak much French. I would never have to ask the grade-school principal why he rewrote my daughter’s sixth-grade graduation speech to include more references to his own prodigious sense of humor and caring disposition, and fewer jokes of her own.

I would never have to complain that the school had discontinued the WordMasters competition, the one activity at which my son truly excelled. I would never have to find out if my son was in any way responsible for a classmate damaging his wrist during recess. I would never again have to listen to my child, or anyone else’s, play the cello.

As I look forward to my youngest graduating from high school next month, Queenan’s words strike very close to home.  I feel relieved that my years of awkward questions and uncomfortable conversations with public school bureaucrats are ending.

Of course, it was not all bad.  Some administrators and teachers are memorable as standing head and shoulders above the crowd in offering the very best to their students.  For them I will be forever grateful.  But to the rest, I find myself nodding in agreement to Queenan’s words.

… The ordeal had ended; the 18-year plague had run its course; the bitter cup had passed from my lips. I would never quaff from its putrid contents again. Good riddance.

———

Joe Queenan, “School’s Out Forever”, Wall Street Journal, May 22, 2015.

May 27, 2015

Is a ‘Great Reset’ of our economy inevitable?

by Grace

Are we experiencing an end to the long-term trend of a rising standard of living in our country?  Are we due for a “Great Reset” of our economy, one that is inevitable due to the competing interests of workers and consumers?

Tyler Cowen warns “Don’t Be So Sure the Economy Will Return to Normal” and asks “what exactly are we experiencing?”

One relatively optimistic view is that observed deficiencies — like slow growth in real wages and the overall economy, persistently low interest rates and low levels of labor participation — are merely temporary. In this view, these problems will dwindle after manageable problems like high levels of public or household debt have been reduced.

Another commonly heard view is that we made the mistake of letting the last recession linger too long, allowing some of its features to became entrenched. That analysis suggests that if we correct past policy errors, whatever they may have been, an underlying normality will re-emerge.

There are some nuggets of truth in both of these arguments, but there is a much more disturbing possibility that could turn out to be more accurate: namely, that the recession was a learning experience that we haven’t fully absorbed. From this perspective, the radical and sudden changes of the financial crisis were early indicators of deep fragility and dysfunctionality.

Slowly but surely, we may be responding to these difficult revelations by scaling back our ambitions for the economy — reinforcing negative trends that were already underway. In this troubling view, we have finally begun to discover some unpleasant truths. Borrowing a phrase from the University of Toronto economist Richard Florida, it’s possible that we are experiencing a “Great Reset.”

A reset is hard for us to see because changes “seem to be gradual and slow”.  And new government policies meant to steer the economy “are no more than changes at the margin”.

Are millennials bearing the brunt of this reset?

Amid much talk about income inequality and an increasingly two-tier economy, it appears that a “heavy burden of adjustment in the overall labor market is being borne by the young”

… Wages for the typical graduate of a four-year college have dropped more than 7 percent since 2000, and the labor force participation rate of the young has been falling. One consequence is that young people are living at home longer and receiving more aid from their parents. They also seem to be less interested in buying their own homes.

Megan McArdle explains that we brought the “Great Reset” on ourselves, with our desire for rising, stable wages that conflicts with cheap services and goods.

The average American is at the heart of this story — as the victim and as the perpetrator. We suffer as employees because we exert influence as consumers.

Is a reset inevitable?

… The reset may not be fair. It will certainly not be easy. But it may be necessary.

———

Tyler Cowen, “Don’t Be So Sure the Economy Will Return to Normal”, New York Times, May 15, 2015.

Megan McArdle, “U.S. Workers Brought the ‘Great Reset’ on Themselves”, Bloomberg, May 19, 2015.

May 26, 2015

Has the underemployment rate topped out?

by Grace

Has the trend of rising underemployment rates for new college graduates finally turned a corner?

20150521.COCCollegeGradUnderemploymentChart1

While unemployment rates improved over the last few years, underemployment rates have only started to drop more recently.

The unemployment rate for recent college graduates began to fall in 2011, and it has continued to do so—with a hiatus during 2013—ever since. However, aside from a brief dip in early 2011, the underemployment rate continued to climb well into 2014, rising to a level of more than 46 percent. This divergence between falling unemployment and rising underemployment between mid-2011 and mid-2014 suggests that more college graduates were finding jobs during this time, just not necessarily good ones. The steady growth of non-college jobs, coupled with the relatively soft demand for college graduates during this three-year period, appears to have forced many recent college graduates to take jobs not commensurate with their education. More recently, though, the tide has turned. With the demand for college graduates rising at a solid clip since last summer, underemployment has also finally started to come down. Since last June, the underemployment rate for recent college graduates has fallen by about two percentage points, to 44.6 percent.

The underemployment rate is still historically high.

While these trends are no doubt good news for recent college graduates, it is important to keep the gains in perspective. As we have shown before in this post and this article, the underemployment rate for recent college graduates remains quite high by historical standards. At 44.6 percent, we estimate that nearly half of this group is working in jobs that typically do not require a college degree—a rate that is much higher than when underemployment hit a trough of around 38 percent in 2000. And while the demand for college graduates appears to be picking up, significant labor market slack remains, so continued strong growth in the demand for college graduates may well be necessary to make a more serious dent in the underemployment rate.

The Washington Post has an optimistic view.

Why the era of college grads working at restaurants and cafes is coming to an end

For now, I’ll wait and see.

———

Jaison R. Abel and Richard Deitz, “The Class of 2015 Might Have a Little Better Luck Finding a Good Job”, Liberty Street Economics, May 15, 2015.

May 25, 2015

Half of college graduates expect continued financial support from parents

by Grace

Parents of college grads have lower expectations for their adult children’s ability to support themselves.

… Some 36% of parents say they expected to support their children financially for more than two years, up from just 18% last year, and only 2.8% of parents expect their kids to have a full-time job after college and only one-quarter see them having any kind of job in their chosen field when they graduate….

Their kids are even more pessimistic.

About half of students expect to be supported financially by their parents for up to two years after graduation, according to a new survey of 500 students and 500 parents released Tuesday by Upromise, the savings division of Sallie Mae, the student lender….

Agreement about the “new normal”.

Both students and their parents are more accepting of the new normal, says Erin Condon, president of Upromise by Sallie Mae. “We were pleasantly surprised that parents and students were very aligned in their expectations,” she says. “One could argue that this generation is entitled or spoiled, but you could always argue that they are financially responsible and not biting off more than they can chew by making effort to get off on the right foot to make sure that long-term success is there.”

Related:  “Baby Boomers’ kids are doing worse than their parents”

———

Quentin Fottrell, “Half of college graduates expect to be supported by their families”, MarketWatch, May 19, 2015.

May 22, 2015

New York Governor Cuomo pushes tax credits for private schools

by Grace

New York Governor Cuomo has proposed a “Parental Choice in Education Act”, a $150 million tax credit benefiting private schools.

… The Act provides for $150 million in education tax credits annually that will provide:

  1. Tax credits to low-income families who send their children to nonpublic schools,
  2. Scholarships to low- and middle-income students to attend either a public school outside of their district or a nonpublic school,
  3. Incentives to public schools for enhanced educational programming (like after school programs); and,
  4. Tax credits to public school teachers for the purchase of supplies.

It’s no surprise that teacher unions oppose these proposals, while religious leaders support them.  The outlook is uncertain for passage, and the outcome may give a clue about the strength of the school choice movement in New York.

May 21, 2015

A college degree is often just a screening tool for employers

by Grace

The sole value of a college degree may be in how it “positions you better in the job market” even if you learned very little from your time in school.

All that the favorable job statistics for college graduates tell us is that having a degree positions you better in the job market compared with people who do not have those credentials….

A college degree is a credential used for screening out job applicants.

… Many employers who need workers for jobs that require only basic abilities and a decent attitude now screen out people who don’t have college degrees. Companies looking to hire for positions such as sales supervisor and rental car agent, for instance, often state that they’ll only consider applicants who’ve graduated from college. What they studied or how well they did is largely beside the point.

How much college graduates learned is often beside the point.  

The individual who studies, say, chemical engineering and thereby acquires the essential background for a career in that field probably gets a splendid return on the time and money spent on college. But on the other hand, the individual who leaves high school with weak skills and scant interest in academic work, enrolls in school with low standards (perhaps a “party school”), chooses an easy major and breezes along to a degree four or five years later is likely to end up working in a low-skill job that an intelligent high schooler could do. That person, even though employed, is getting a negligible return—possibly even negative—on his college investment.

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George Leef, ‘Jobs data cannot prove that college is a “good investment”‘, The John William Pope Center, February 25, 2015.

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