I know there are doubters that are getting louder… but at the end of the day lifetime earnings add up. Below is the differential in wages by educational attainment among those employed. It’s not only the wage differential in itself that matters, but you have to also consider the significantly lower unemployment rates for those with more education that compounds these numbers. Also some recent commentary from the Cleveland Fed is pretty clear that the premia for higher education is not going away anytime soon.
The central bank is still up to its regular shenanigans. Here’s the proof:
Now, however, is the first time in more than half a century that the average American is both earning less and worth less than four years earlier, at least after inflation is factored in. [Emphasis added.]
Inflation is a sure way to transfer wealth from the poor to wealthy. It is a sure way to enslave all but the upper class.
How inflation works is pretty simple: the central bank prints new money, expanding the currency base. The question that the central bank has to answer, though, is: to whom does the newly printed currency go? The answer is simple: the newly printed money goes to the friends of the central bank. Now, because market participants are often ignorant and irrational, the market does not respond to the inflation right away. It takes a while for the new money to circulate.
Thus, prices remain relatively low at the onset of each round of inflation, so that those who first receive the newly printed money are able to buy at prices that do not yet reflect the money expansion. This causes the initial recipients of the inflated currency to demand more, thus raising the price level of goods throughout the economy. There is a trickle-down effect from there, as sellers are the second-level recipients of inflated currency, then producers, and ultimately services. Thus, the politically-connected wealthy are able to essentially steal resources by the virtue of having the inflated currency first, and buying more assets at lower prices.
Incidentally, this is why Mayer Rothschild said (via Hawaiian Libertarian) “Give me control of a nation’s money and I care not who makes the laws.” This is the truth. Whoever controls the currency will have the adulation and brown-nosery of the wealthy, as they all desire to suckle at the teat of inflation. Many of these men are corrupt, and will do what is necessary to curry favor from those who control the currency. There then develops an elite club of leaders who constantly work together to enrich one another by controlling the currency. This comes at the expense of the poor and middle class, who lack the connections to profit from defrauding the currency of its value.
This is why those in powerful hate men like Ron Paul. Because Ron Paul opposes not just the Federal Reserve Bank of America, but of the entire concept of central banks, the men in power will hate him because he opposes the very foundation of their power. Ultimately, the greatest defense of liberty is a free currency. A free currency helps to keep men honest, and helps to prevent evil men from subtly defrauding other men out of their property, which is why those who are truly in power would love nothing more than to see Ron Paul and his followers dead.
In closing, simply note that the banks have given rather liberally to both Obama and Romney. They are not so generous to Ron Paul. This is because the banksters understand that there really is no difference between Romney and Obama: both will allow the banksters to loot the people via the central bank. Both will preserve the status quo of fraud and deceit. Both will continue to allow the ruling elite to chip away at citizens’ wealth through the lever of inflation.
So what are the best bets when buying student debt? Technical schools. Students pay the least for their education with the potential to make good money after graduation in only a couple of years.
By that arithmetic, technical colleges come out on top, Mr. [Daniel] Ades said. “We’re in a skills based economy and what we need is more computer programmers, more [nurses],” he said. “It’s less glamorous but it’s what we need.”
Meanwhile the nation’s law schools continue to over-supply the nation with lawyers. Law students are borrowing an average of $68,827 at state schools and $106,249 a private schools only to add to the glut of barristers.
In what must undoubtedly be a shock to humanities majors, people who are actually know how to do useful things are in position to make money after they graduate. Imagine that.
Of course nurses and programmers are going to be in a position to make good money, mostly because people want to not be sick, maim, or injured, and they also like to be able to use electronic gadgets. Hence the reason why students who graduate from technical schools with degrees in nursing and programming are in a better position to be employed than, say, an English major. As fascinating as Faulkner undoubtedly is, being able to expound upon his work at length is not something many consumers really want to pay for.
As such, it should no surprise that people who learn actual, useful skills in college are in a better to make money than those who majored in something that is considerably less practical.
In 2009, the median weekly earnings of workers with bachelor’s degrees were $1,137. This amount is 1.8 times the average amount earned by those with only a high school diploma, and 2.5 times the earnings of high school dropouts (link).
Many economists have claimed that as recovery begins in the current economic cycle that the rebound will be lifeless.
However several economists and indices argue that many times deeper than average recessions are followed by a significant economic rebounds.
As this current earnings seasons begins, Intel agrees. On Tuesday the technology leader boosted its formal guidance for revenue in this quarter by $1B beyond consensus estimates. The strong third quarter prediction follows a 12 percent jump in second-quarter sales from Q1 results. It was Intel’s largest quarterly sequential increase in sales since 1988.
“It was a superb quarter for them.” said Patrick Wang, a New York-based analyst at Wedbush Morgan Securities. “Intel’s results reflect the stabilizing environment.”
Intel’s stock was up significantly in after hours trading. US stock futures also jumped late Tuesday and trading in Asian markets rallied strongly early Wednesday morning.
With initial unemployment claims at their lowest level since January, investors positioning capital for commercial real estate buys, and firms like Alcoa and Intel shattering earnings and revenue estimates, it appears that this recovery could be anything but lusterless.
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“What are the applied implications of our findings? In the work area we suggest that a balance between hours of work, social time and leisure will produce the highest well-being, whereas even work that is enjoyable will produce less well-being if carried out for too many hours. Conversely, it would be an error to assume that people would be happiest if all their time were spent in pleasurable leisure activities. … At the policy level an implication is that too many work hours, without sufficient free time or vacation, will prove less rewarding for most people” (Diener, Weiting Ng and Will Tov, 2008, ‘Balance in life and declining marginal utility of diverse resources’, Applied Research Quality Life).
This quote is from the conclusions of an article which assesses how average happiness levels differ with differing amounts of time spent in various ways (free time, with family and friends, and commuting) as well as with income levels. The findings seem to confirm the predictions of standard economic thinking in this area i.e. as our consumption of any good (including non-market goods such as leisure) rises the marginal utility of adding an additional unit of the good tends to decline.
What does the article tell us about marginal utility? The part of the study that seems most informative uses data from the Gallup World Poll, a representative sample of people almost covering about 95 percent of the world. As its main measure of happiness the study uses affect balance, which measures relative experience of positive feelings (enjoyment, and smiling and laughing) and negative feelings (depression, anger, sadness and worry) for the previous day.
The results suggest that the marginal utility of “free time” and “time with family and friends” is quite high for the first few hours of each activity (in the time category zero to four hours) and then declines to around zero. The marginal utility of additional income rises steeply for incomes up to around $US 40, 000 and then increases moderately, if at all. (The ladder of life indicator shows a similar pattern, but with the marginal utility of income remaining positive at high income levels).
How much additional income would a person need to earn to compensate for the loss of utility associated with the sacrifice of an hour of free time or an hour with family or friends. My rough calculation suggests that the hourly rate of pay required would be around $28 for a person with an income of around $20, 000 per year. (The loss in utility for sacrifice of an hour of leisure equals 0.075. Income on the preceding day would have needed to rise by $28 in order to raise utility by 0.075.)
For people with higher incomes, the hourly wage rate needed to compensate for the loss of an hour of leisure time would be very much higher. At first sight it might appear that with incomes in excess of around $60,000 the hourly rate of pay required to compensate for sacrifice of an hour of leisure would be huge. We need to remember, however, that some of the people earning this additional income might be saving it to spend at times of their lives when their earning capacity is diminished and the marginal utility of additional income is much higher. There are also some people who enjoy their work so much that they would not require any compensation for sacrificing an hour of free time. More research is required before we will have a good understanding of why people make the choices they make between income and leisure.
The quote at the beginning of this article suggests that the choice that individuals make between income and leisure is a government policy issue. Why should it be? The weight of evidence suggests that when governments attempt to regulate how people live their lives they tend to make people more miserable rather than happier. As I see it, the main benefit of research of this kind is that the findings may help individuals to improve their own well-being and that of their families by enabling them to make better choices.
From the gloomster Nouriel Roubini on Apr 23, 2009:
“Today we present some of the main conclusions of the recently released update to the RGE 2009 Global Economic Outlook: The global economy is in the middle of a synchronized contraction that will push global growth into negative territory in 2009 for the first time in decades. This will be the worst financial crisis since the Great Depression and the worst global economic downturn in decades. Global trade volumes face their sharpest contractions of the postwar era – trade is expected to contract 12% in 2009 due to the severe and prolonged global demand slump, excess capacity across supply chains and the continued crunch in trade finance.”
Mr Roubini, please have a seat. The data simply does not support your old, tired, gloomy claims.
1. US. Exports are rebounding sharply. You may have been able to claim that trade was collapsing in the final months of last year as consumers everywhere shut their pocketbooks, but the international wheels of commerce now seem to be spinning well again. The US economy is not collapsing. Export data point to stabilization.
2. The is no “continued crunch in trade finance.” Whether you look at the TED spread, or the Libor/OIS spread they are well below the peak of late October ‘08.
3. There is now a significantly growing list of tangibles that have bounced from their year-end lows. What is probably most notable is that capital goods orders are now up. We are not caught up in your “negative-feedback loop” that will eventually turn into a depression.
4. What is most notable from the past two weeks are bank earnings. Although many like Roubini choose to focus on small increases in allowances for bad debt over the next 1-2 years, what many failed to note was the incredible earnings based on extension of credit by banks in Q1. For instance Wells Fargo took advantage of the drop in interest rates to issue more than $100 billion of mortgages in Q1 alone. Revenues almost doubled to $21 billion, including Wachovia’s contribution, and helped the company overcome $3.3 billion of charges from unpaid loans. The allowance for credit losses totaled $23 billion. If those new loan origination rates continue for Wells, that’s $400B in new loans for 2009 against the $23B reserved for potential losses in 2009 and 2010. Looks pretty bullish to me. In fact, not all banks increased loss allowances.
So Roubini, please sit down. Things may not be completely back to normal. But there is no doubt that conditions aren’t as dire as you continue to claim.
This year, unemployment rates among young people in the United States have been increasing to levels not seen since the early 1990s. Youth unemployment rates are usually a good indicator of the overall state of an economy, since young people typically face the greatest difficulties in finding employment in times of recession and, lacking experience, are often the first to be laid off by employers who need to cut back on labor costs. They may also lose out on job opportunities when more experienced older workers decide to defer retirement or return to the labor market, a common phenomenon in the current economic downturn.
The national unemployment rate for all workers in the U.S. has been steadily increasing over recent months, reaching 6.1% in September, according to the Bureau of Labor Statistics. For 16 to 19 year-olds, however, the reported rate of unemployment is more than three times that for all workers, at 19.1% in September. Among ethnic and racial minorities youth unemployment rates are even higher, for example reaching 24.8% in July 2008 for African Americans aged between 16 and 24. The tight employment market is having a harsh impact not only on those looking for permanent, full-time employment, but on students seeking summer jobs, perhaps to help finance their education – it has recently been reported that it was harder to find jobs in summer 2008 than at any other time since the 1940s.
Previous studies have documented the serious knock-on effects that youth unemployment has on the individuals affected as well as the economy as a whole. For example, using data from the National Longitudinal Survey of Youth, researchers at the Employment Policies Institute found that early unemployment was associated with lower future earnings as well as repeated spells of unemployment; this was attributed to the delays in the accumulation of employment experience and training while unemployed. The demoralizing effects of prolonged unemployment may also have adverse psychological effects on young people, including depression or low confidence which may further decrease their future likelihood of gaining employment.
For the economy and society as a whole, high unemployment rates among youth also have potentially serious consequences. Unemployment is a factor contributing to social exclusion and disruptive behavior such as crime and drug-taking, which not only increase social unrest but also the overall costs of health, law enforcement and other public services. At the same time, overall economic growth may be hampered by the under-use of a large group of recently-educated people who could potentially make a major contribution not only to overall productivity but to innovation and technological development.
So what can the government do to increase employment rates among young people in the United States, and thus maximize their contribution to the economy?
The Role of Education
International research unfortunately suggests that there are few viable ways of making a difference in the short-term, in the absence of an improved economy and more dynamic labor market. For example, a pan-European study by researchers at the European Central Bank found that direct interventions such as preferential hiring policies and greater wage flexibility have relatively little impact on improving job prospects for young people when markets are generally slow. However, the higher rates of youth employment in countries with apprenticeship systems suggests that the development of education and training programs linked specifically to labor market needs may be a promising longer-term option; there is also evidence from the literature that entrepreneurship and work-related training targeted at particular groups can help to increase employment rates. More generally, it can be hoped that policies intended to increase the academic attainment levels of all students in the United States, notably the No Child Left Behind Act, will help to improve the job prospects of young people in the longer-term, and thus maximize the contribution of this group to economic growth.
DeFreitas, G. (Ed.) (2008). Young Workers in the Global Economy: Job Challenges in North America, Europe and Japan. Cheltenham, UK: Edward Elgar Publishers.
Gomez-Salvador, R. & Leiner-Killinger, N. (2008). An Analysis of Youth Unemployment in the Euro Area. European Central Bank Occasional Paper Series No. 89, June 2008.
International Labour Office (2000). Employing Youth: Promoting employment-intensive growth. Geneva.
Kalwiji, A.S. (2004). Unemployment Experiences of Young Men: on the Road to Stable Employment? Oxford Bulletin of Economics and Statistics 66, 2, p. 205.
Mroz, T.A. & Savage, T.H. (2001). The Long-Term Effects of Youth Unemployment. Employment Policies Institute. Retrieved from http://www.epionline.org/studies/mroz_10-2001.pdf
Sum, A., McLaughlin, J., Khatiwada, I. & Palma, S. The Continued Collapse of the Nation’s Teen Job Market and the Dismal Outlook for the 2008 Summer Labor Market for Teens: Does Anybody Care? Boston, Massachusetts: Center for Labor Market Studies. Retrieved from http://www.clms.neu.edu/publication/documents/The_Continued_Collapse_of_the_Nations_Teen_Job_Market.pdf.
Bureau of Labor Statistics (2008). Labor Force Statistics from the Current Population Survey. U.S. Department of Labor. Available online at http://www.bls.gov/cps/.