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BBA Economic Digest: Failing Some


Is College a Good Investment?

A college degree, even with the debt that comes with it, is worth it, according to conventional thinking. Those with a bachelor’s degree on average earn over $1 million more than high school graduates make during their working lives, according to a 2014 report by the Federal Reserve.

But borrowing heavily for college can mean decades of debt payments. Putting the college-income premium in perspective is important to determine if borrowing for education is actually a good investment.

The Federal Reserve Bank of St. Louis Review recently published a paper that looks not just at income but also net worth. “Our results suggest that college and postgraduate education may be failing some recent graduates as a financial investment,” the authors write.

They find the wealth premium is significantly lower than previous generations of graduates and “statistically indistinguishable from zero” for people of color. So why are recent graduates not faring as well financially?

For one, older generations benefited from rising home prices, which boosted their net worth. They also didn’t overload on debt.

“The explosion of consumer debt beginning in the early 1980s has been remarkable,” the authors write.

There is Another Way

Looking at net worth rather than income, the Federal Reserve Bank of St. Louis concluded that the wealth premium for college graduates today "is significantly lower than previous generations of graduates and 'statistically indistinguishable from zero' for people of color."

There is, of course, another way. I'm talking about trade school -- vocational education -- the cost of which is a fraction to that of a traditional college/university. ($33,000 compared to $127,000 per the National Center for Educational Statistics.)

The truth is that learning a trade can be a lucrative career choice, with some jobs paying more than $100,000 a year. A recent survey commissioned by Metal Supermarkets found that 56 percent of young people do not consider enrolling in trade school. Most (66 percent) said they did not know enough about trade schools.

This is where parents, educators and, yes, even economic developers need to step in, especially in communities that place a high value in business attraction. Having a robust pipeline of talent schooled in the trades can distinguish a community from the competition.

An Important Economic Story

One of the biggest economic stories of the past decade is the fact that life expectancy is this country has declined for three years in a row. The United States is the only developed country in the world where this has happened.

The ills claiming the lives of Americans between the ages of 25 and 64 vary widely by geography, gender and ethnicity. But a study published in November in the Journal of the American Medical Association.

JAMA suggests that the nation’s lifespan reversal is being driven by diseases linked to economic privation, a healthcare system with glaring gaps and blind spots, and profound psychological distress. A separate study, also published by JAMA in December, found that opioid deaths were about 85 percent higher among people of prime working age in counties where automotive assembly plants had closed five years earlier, compared with counties where such factories remained open.

Both studies underscore the role that economic despair may play in eroding public health. It's a subject economic developers should discuss with health care professionals.

Know Your Farm

Economic developers should consider borrowing a page from those in real estate, who commonly consider a geographic area where they concentrate their efforts as their "farm."

It's important to learn as much as possible about your farm and the amenities that it holds. It means developing a thorough knowledge base about schools, workforce, housing, recreational facilities, shopping, places of worship, public facilities, transportation infrastructure and access to major arteries.

You, in fact, must become the go-to expert about your location, services offered, and key contacts within the community. Economic developers typically have their farm defined for them.

Developing in-depth knowledge about your farm will form the basis for all subsequent marketing that you engage in. My advice: First and foremost, know your farm.

The Kingfish Do

It's a story that has played out all across this great land. Maybe it has happened in your town ...

When the crowds came, they were small at first. And the people laughed because the little fat man who wanted to become the next mayor always began with some awfully funny jokes.

But then he railed and rumbled and nearly foamed from the mouth when he spoke of the carpetbaggers -- the so-called economic developers -- who were "not looking after the little folks like you and me."

The people nodded. The little fat man knew. He lost his job when the Acme plant closed. And so the little fat man became mayor. "I'm gonna take good care of you," he declared.

The town economic developer told his staff, "We're going to have to show the little fat man what we have done."

And so the day came, and the economic developer sat in the mayor's office with a binder showing how the business retention and expansion program worked, how new jobs were being created.

"That's a mighty pretty book and mighty pretty words you speak, Mr. Carpetbagger," the little fat man said. "But you don't know nothing about economic development. But I do. The Kingfish do. Now get your ass out of here. You're fired."

And so the economic developer found himself in a new town. The mayor there understood. But next year there would be a new election. And there was this tall thin man ...

What We're Reading

What Atlanta Can Teach Tech About Cultivating Black Talent Wired

Smoke from Underground The Baffler

How Mormons Built the Next Silicon Valley While No One Was Looking Marker

The medications that change who we are BBC Future

60 hours on burning Kangaroo Island National Geographic

The Story Elizabeth Warren Isn’t Telling The Atlantic

A Lesson From History

A study released last month entitled "Immigration, Science and Innovation: Lessons from Quotas in the 1920s," concluded that racial quotas on immigration from southern and eastern Europe in the 1920s left the United States with about 1,200 fewer scientists than if the quotas had never existed.

Some economists warn that the current administration’s big cuts in legal immigration will endanger the long-run health of the U.S. economy. The latest data indicate that immigration to the U.S. fell 70 percent last year to only 200,000 people — the lowest level in more than a decade.

The importance of foreign talent to a country's innovative capabilities was underlined by a recent letter signed by 40 heads of U.S. business schools, which makes the case for a more liberal immigration policy that allows greater mobility of talent.

"We do not believe the U.S. has the high-skill talent it needs, nor does it have the capacity to train enough people with those skills," they write. "Without a substantial change in our approach, this deficit of skills in key fields will hinder economic growth."

I think it is noteworthy to point out immigrants and their children have founded 45 percent of the U.S. Fortune 500 companies.

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