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Building Millennials’ Financial Health Via Financial Capability

July 17, 2015 Comments off

Building Millennials’ Financial Health Via Financial Capability (PDF)
Source: University of Kansas School of Social Welfare

Today’s young adults, referred to as Millennials born between the early 1980’s and 2000’s, are coming of age in an economy unlike any other. 1 The macroeconomic conditions of the Great Recession from approximately 2007 to 2011 systematically undermined Millennials’ financial health by limiting employment opportunities, stagnating income growth, reducing net worth, and increasing reliance on debt. Millennials entered a labor market with limited opportunities and saw higher unemployment rates than the rest of the population.2 Fewer Millennials entered the labor market than young adults from any preceding generation and their unemployment rate was roughly 15 to 17 percent at the height of the recession—5 to 7 percentage points higher than the average unemployment rate for the rest of the population. They also experienced diminishing returns for participating in the labor market, earning 6 percent less per paycheck than in previous years.

Fewer employment opportunities and reduced paychecks translated into less money to save and invest. The average Millennial has about $1,000 in savings,4 suggesting that many may struggle to afford necessary expenses in the face of unemployment and to become financially independent.5 Millennials also delayed investing in homes and those who did invest experienced substantial wealth losses that were driven by declining home equity. 6 These losses are reflected in the value of Millennials’ accumulated net worth compared to that of previous generations.7 Millennials’ net worth is valued at $10,000, which is 41 percent less than the values of net worth held by Baby Boomers and Generation X’ers two decades ago.8

Using Your House for Income in Retirement

July 17, 2015 Comments off

Using Your House for Income in Retirement
Source: Center for Retirement Research at Boston College

Using Your House reviews the two most common ways to use your house to boost your income in retirement – downsizing and a reverse mortgage – with clear examples, a discussion of the pros and cons of each approach, and links to tools on the web where you can get estimates of what downsizing or a reverse mortgage can do for you.

Safe & Sustainable Recycling: Protecting Workers who Protect the Planet

July 16, 2015 Comments off

Safe & Sustainable Recycling: Protecting Workers who Protect the Planet
Source: GAIA, Partnership for Working Families, and National Council for Occupational Safety and Health

Recycling is the right thing to do, but we need to make it safe for recycling workers. Recycling is a key approach for waste reduction and climate action that is used by cities across the U.S. with enormous environmental and economic benefits. But a new report finds that the actual work of sorting recycling can be unnecessarily hazardous to workers’ health and safety. Seventeen recycling workers died on the job between 2011-2013, and recycling workers are more than twice as likely to be injured on the job than the average U.S. worker. These high injury and fatality rates are a result of unsafe working conditions including exposure to hazardous items on the sort line, like hypodermic needles, toxic chemicals, and animal carcasses, and working around heavy machinery. By ensuring health and safety compliance across the industry, cities can protect workers who protect our planet.

Sources of Increasing Differential Mortality Among the Aged by Socioeconomic Status

July 16, 2015 Comments off

Sources of Increasing Differential Mortality Among the Aged by Socioeconomic Status
Source: Center for Retirement Research at Boston College

This paper uses data from the Health and Retirement Study (HRS) to explore the extent and causes of widening differences in life expectancy by socioeconomic status (SES) for older persons. We construct alternative measures of SES using educational attainment and average (career) earnings in the prime working ages of 41-50. We also use information on causes of death, health status and various behavioral indicators (smoking, drinking, and obesity) that are believed to be predictors of premature death in an effort to explain the causes of the growing disparities in life expectancy between people of high and low SES.

The paper finds that:

  • There is strong statistical evidence in the HRS of a growing inequality of mortality risk by SES among more recent birth cohorts compared with cohorts born before 1930.
  • Both educational attainment and career earnings as constructed from Social Security records are equally useful indicators of SES, although the distinction in mortality risk by education is greatest for those with and without a college degree.
  • There has been a significant decline in the risk of dying from cancer or heart conditions for older Americans in the top half of the income distribution, but we find no such reduction of mortality risk in the bottom half of the distribution.
  • The inclusion of the behavioral variables and health status result in substantial improvement in the predictions of mortality, but they do not identify the sources of the increase in differential mortality.

Still a Better Bang for the Buck: Update on the Economic Efficiencies of Pensions

July 16, 2015 Comments off

Still a Better Bang for the Buck: Update on the Economic Efficiencies of Pensions
Source: National Institute on Retirement Security

New research finds that pension plans are a far more cost-efficient means of providing retirement income as compared to individual defined contribution accounts.

The study calculates that the economic efficiencies embedded in defined benefit (DB) pensions enable these retirement plans to deliver the same retirement income at a 48% lower cost than 401(k)-type defined contribution (DC) accounts.

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances

July 15, 2015 Comments off

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances (PDF)
Source: Federal Reserve Board

We use the Federal Reserve’s 2007, 2009 re-interview of 2007 respondents, and 2010 Surveys of Consumer Finances (SCFs) to examine the experiences of small businesses owned and actively managed by households during these turbulent years. This is the first paper to use these SCFs to study small businesses even though the surveys contain extensive data on a broad cross-section of firms and their owners. We find that the vast majority of small businesses were severely affected by the financial crisis and the Great Recession, including facing tight credit constraints. We document numerous and often complex interdependencies between the finances of small businesses and their owner-manager households, including a more complicated role of housing assets than has been reported previously. We find that workers who lost their job responded in part by starting their own small business, and that factors correlated with the survival of a small business differed greatly depending upon whether the firm was established or new. Our results strongly reinforce the importance of relationship finance to small businesses, and the primary role of commercial banks in such relationships. We find that both cross-section and panel data are needed to understand the complex issues associated with the creation, survival and failure of small businesses.

The Income-Achievement Gap and Adult Outcome Inequality

July 14, 2015 Comments off

The Income-Achievement Gap and Adult Outcome Inequality (PDF)
Source: Federal Reserve Board

This paper discusses various methods for assessing group differences in academic achievement using only the ordinal content of achievement test scores. Researchers and policymakers frequently draw conclusions about achievement differences between various populations using methods that rely on the cardinal comparability of test scores. This paper shows that such methods can lead to erroneous conclusions in an important application: measuring changes over time in the achievement gap between youth from high- and low-income households. Commonly-employed, cardinal methods suggest that this “income-achievement gap” did not change between the National Longitudinal Surveys of Youth (NLSY) 1979 and 1997 surveys. In contrast, ordinal methods show that this gap narrowed substantially for reading achievement and may have narrowed for math achievement as well. In fact, any weighting scheme that places more value on higher test scores must conclude that the reading income-achievement gap decreased between these two surveys. The situation for math achievement is more complex, but low-income students in the middle and high deciles of the low-income math achievement distribution unambiguously gained relative to their high-income peers. Furthermore, an anchoring exercise suggests that the narrowing of the income-achievement gap corresponds to an economically significant convergence in lifetime labor wealth and school completion rates for youth from high- and low-income backgrounds.

See also: Achievement Gap Estimates and Deviations from Cardinal Comparability (PDF)

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