Tag Archives: recession

State of economy for less-educated young people compounds growing Opportunity Gap

Pell City 2007 HS graduation; Flick/kwsanders

Pell City 2007 HS graduation; Flick/kwsanders

While parts of the economy have rebounded since the Great Recession of 2008, the effects have been much worse for the poor, and especially the less-educated young Americans, and those not fortunate enough to graduate from college.

Since 2008, the housing market has started to bounce back.

The stock market, for those fortunate enough to have net savings rather than a negative net worth has more than recovered its recessionary losses (pictured is the S&P500 index).

Recovery in S&P500 since 2009 recession

The economy has created 6.15 million jobs from March 2010 through April 2013 (based on provisional numbers for March/April 2013), enough to lower unemployment but only through many people giving up on finding jobs.  The  percentage of Americans employed in the population hasn’t budged over the last 3.5 years and remains fixed at between 58% and 59%. Larry Summers thinks that the numbers of long-term unemployed is the biggest problem facing this country and is at historically unprecedented in the period since the Great Recession of the 1920s and 1930s.

Put this together with the data that David Leonardt released (“The Idled Young Americans“) showing that the impact has disproportionately fallen on young folks.  Moreover, levels of employment among 16-24 year olds, even as recent as May 2013 remain stubbornly at 45%, at levels not seen in the US since the early 1960s.

Our own research on the fact that children born to less educated families are facing a growing opportunity gap.  American young adults from the bottom socioeconomic quarter are graduating from high school or dropping out with less of the hard academic skills or soft non-cognitive skills necessary for life success.  [We find significantly growing gaps between children from the top third or quarter of socioeconomic families and the bottom third or quarter on measures as diverse as involvement in extra-curriculars, involvement in sports, K-12 test scores, obesity, social trust, involvement with religion, social connectedness, volunteering, college attendance, and college completion.]

And the intersection of these two trends — consequences of the current lackluster economy being borne by the young adults and the growing opportunity gap — means that these gaps are borne disproportionately by less educated young adults.

For example, if one looks at employment to population ratios for 25-34 year olds in 2012, it was only 69.8% for those with a high-school degree (but no college), whereas it was 84.4% for those with 4-year college degrees or more.  Another way of putting this is that only 16% of college-educated 25-34 year olds were out of the labor market versus 30% of those with only a high school degree.

And if that were not enough, there is growing body of literature suggesting that experiences of unemployment or involuntarily being terminated from jobs create long-term scarring effects both on the lifetime earnings of these young people, but also their civic and social connectedness throughout their lives.  [See for example Davis/von Wachter or Gregg/Tominey or Brand/Burgard.]

[There is also unpublished data on this scarring effect in: Laurence, James, and Chaeyoon Lim. “The Long-Term and Deepening Scars of Job  Displacement on Civic Participation over the Life-course: A Cross-National Comparative  Study between the UK and the US.”]

We are brewing a recipe for long-term adverse consequences for these young Americans, especially the less educated ones, and our government ought to be POUND-wise, even if it is “PENNY-foolish” in the eyes of others and invest in jobs for these young 16-25 year olds to avoid the much longer long-term adverse effects.

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Robert Putnam on economic mobility and Great Recession

Flickr photo by bupowski

Robert Putnam was on the NewsHour yesterday in a story by Paul Solman on how inequality and decreasing economic mobility are affecting Americans even as the economy modestly recovers out of the Great Recession.

Excerpt:

PAUL SOLMAN: So, the American dream — your kids will do better than you — neither you nor your kids think that that`s the case?

COOKIE SHEERS: No, we all feel stuck in a rut. You feel like you can`t move, you can’t grow, like you’re just at that edge of water where you can come up for air every few minutes, but never long enough to feel that you have accomplished something. You always have to go back down.

BOBBY HICKS: Like she says, I feel like, once I feel like I have reached that part where my nostrils can come out the top, life comes back and just steps right on my face and says: You know what? It’s not time for you to come up for air yet.

PAUL SOLMAN: The numbers support the stories. Economic inequality in America, widening steadily since 1980, grew during the financial crisis, with the top 5 percent of Americans owning 65 percent of national wealth by mid-2009, up from 62 percent two years before. The losers were the bottom 80 percent, whose share of wealth fell during the crisis. Nearly half had negative net worth by mid-2009….But, at least historically, there was always the very real hope of moving up, at least across generations.

ROBERT PUTNAM, Harvard University: That isn’t true anymore….So, one of our competitive advantages as a — as a society, which used to be that we were very mobile, and we were constantly getting new infusions of talent and so on at the top, and — and that people down near the bottom had a hope that, if they didn’t do well, their kids could do well in the past in America.

That a poor kid could grow up in a tenement, go off to city college, do well, and himself end up in the next generation pretty well-off, that’s what’s becoming less likely in America. And I think that undermines a crucial part of the American myth or the American dream or the American social contract.

PAUL SOLMAN: Adds economist Sam Bowles:

SAMUEL BOWLES, Santa Fe Institute: America is distinct in the extent to which inequality is inherited from generation to generation. The kids of rich parents have a strong tendency to be rich, and the kids of poor parents are very, very likely to be poor. That’s one of the things which I think Americans find most shocking. That’s a huge discrepancy from what we think of as the land of opportunity.

Even a college-education, the key ingredient in economic mobility, doesn’t seem to immunize Americans from these economic problems:

DENISE BARRANT: In our family, everybody is college-educated. Most of us have masters’. Myself, I’m unemployed. My brother is unemployed. People used to think it was a guarantee. It is not. To invest $200,000- plus in an education, with no guarantee that you have a job, is scary.

PAUL SOLMAN: As for Bobby Hicks’ job, it’s inequality, he says, that makes it possible.

BOBBY HICKS: In the security industry, you know, there is a demand for jobs, because the rich want to protect their assets.

PAUL SOLMAN: But those jobs are low-pay and low-prestige, despite the high stakes.

BOBBY HICKS: A pressure release valve for the domestic water in the building broke. And there was water flooding, and this was on the sixth floor. If their servers got wet, it would have wiped out the entire East Coast for this one particular company — and Bob, $9 an hour, to the rescue. Make the call, count on you, all right? But, if I screwed up, you’re gone.

Listen to NewsHour segment by Paul Solman “Many Americans Feel ‘Stuck in a Rut’ as Economy Improves but Inequality Grows” (3/24/11).

Note: the story is factually incorrect in claiming that Robert Putnam helped run Harvard’s Inequality Program.  He has never done that and Bruce Western runs Harvard’s Inequality Project currently, but Harvard’s Kennedy School Saguaro Seminar which Putnam leads has been undertaking a 4-5 year investigation of a growing youth social class gap.