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RWhitcomb-editor 5/13/20 RWhitcomb-editor 5/13/20

Neeta P. Fogg/Paul E. Harrington: What the job implosion means for New England

*Poster from the New Deal, during The Great Depression.*

From The New England Journal of Higher Education, a service of The New England Board of Higher Education (nebhe.org)

Friday, May 8, saw the release of the most disastrous monthly jobs report in American history. In its monthly Employment Situation released last Friday, the U.S. Bureau of Labor Statistics reported:

Payroll employment levels declined by 20.5 million between mid-March when the COVID-19 lockdowns began in earnest and mid-April—a decline that is more than two orders of magnitude greater than any previous monthly job loss in the U.S.
The number of officially unemployed persons rose to a staggering 23.1 million in the mid-April measure, a three-fold increase from 7.1 million unemployed persons in mid-March.
The number of Americans participating in the labor market fell by 6.4 million over the month, and the number of persons out of the labor force who said they wanted a job, but had quit looking, doubled over the month.
About 5 million more workers were forced to work part-time schedules involuntary by mid-April; a doubling of individuals working part-time involuntarily.
Average weekly earnings for private-sector workers rose from $977 to $1,026, attributable to a greater share of higher-wage workers among those who remain employed, as increasing numbers of low-wage and part-time workers have become unemployed, bearing the brunt of this downturn.
The proportion of individuals in the labor force who face some kind of labor market trouble, such as unemployment, involuntary part-time employment or marginal attachment to the labor force, rose from 8.7% in mid-March to 22.8% by mid-April.

In this piece, we try to examine three issues for higher-education institutions and students in New England. First, what is the magnitude of job losses in New England compared with the rest of the nation. Second, how have the shutdowns affected college graduates compared with those with fewer years of schooling, and what might this mean in the recovery. Third, what has been the impact of these losses on teens and young adults and what might that mean for decisions to continue in school.

New England job losses

The monthly business establishment survey conducted by the U.S. Bureau of Labor Statistics produces a measure of the total employment on business establishment payrolls in the week that includes the 12th of the month. Thus, the reported monthly employment measures are a snapshot of the number of jobs in the American economy at mid-month. The 20.5 million jobs lost between mid-March and mid-April, therefore, does not include the losses that occurred after the reference week of the business establishment survey; in the last two weeks of April and the beginning of May.

The lockdown began in mid-March and initial unemployment insurance (UI) claims over the next four weeks, through mid-April, totaled 21.8 million, suggesting a near 1:1 ratio of lost payroll jobs (20.5 million) and new UI claims filed (21.8 million). This is not surprising as individuals eligible for UI benefits must be laid off from a payroll job, and the payroll employment counts are benchmarked each year to state unemployment tax filings that count each tax payment on a social security account as a job. So, there is an inverse proportionate connection between trends in UI claims and payroll employment. During the three-week period between mid-April and the week ending May 2, an additional 11.4 million new UI claims were filed, suggesting that over that period, the country lost an additional 11.4 million jobs, bringing total job losses nationwide to about 33 million (seasonally adjusted) by the beginning of May.

In New England, the number of initial UI claims over the first seven weeks of the lockdown totaled 1.567 million (not seasonally adjusted). Total payroll employment in New England at the beginning of the lockdown was 7.52 million. The surge in initial UI claims and the inverse proportionate connection between UI claims and employment imply that payroll employment levels in the region declined by about 21% since the lockdown began; not far from the implied national employment decline of 20% of the pre-lockdown level of employment.

Most states in New England have similar implied levels of job losses measured with new UI claims as a share of pre-lockdown employment that are within a few percentage points of 20%. The exception is Rhode Island where more than 154,000 new UI claims were filed in the seven-week lockdown period, implying a 31% employment decline in the Ocean State.

These massive implied job losses mean dramatic declines in household incomes resulting in sharp reductions in the level of private consumption and investment. The demand for postsecondary education services is also expected to decline with these income losses. At the national level, the gross domestic product, a measure reflective of national income, in the second quarter of 2020 is expected to decline by a stunning and unprecedented annualized rate of more than one-third, according to research at the Federal Reserve Bank of Atlanta. Surveys of college-bound seniors about enrollment choices for the fall universally reflect worries about family income, according to polls of students conducted by the Art and Science Group, LLC, in March and April 2020.

College graduate employment

Every major industry in the U.S. posted substantial employment losses between mid-March and mid-April. However, job losses were especially concentrated in industries that employed workers with lower levels of educational attainment. Industries with large shares of professional technical and managerial occupations (“college labor market occupations”) had proportionally smaller employment declines.

Nationally, industries with large shares of employment in college labor market occupations, collectively lost about 3.7 million jobs between mid-March and mid-April, representing 6% of their pre-lockdown employment level. Industries that employ much higher shares of production, clerical and service workers saw their employment levels fall by about 16.4 million or 21% of their pre-lockdown employment level. These lower-skill and lower-wage industries accounted for about 80% of the overall employment decline in the U.S. between mid-March and Mid-April. Indeed, the leisure and hospitality industry saw employment decline by about 7.7 million, representing a 47% loss in one month. Eating and drinking establishments, hotels and amusement businesses sustained 40% of the nation’s total employment loss last month.

The disparate impacts of the lockdown across industries has meant that the employment declines among college graduates, although very large, have been much less severe than among people with fewer years of schooling. Employment among adult high school dropouts and graduates fell by 21% and 18%, respectively; a pace of loss that was 2.5 to 3 times greater than the 7% employment decline experienced by college graduates.

The structure of April unemployment rates by educational attainment is reflective of the relative insulation that college graduates have had to the economic effects of the lockdown. The unemployment rate of adult college graduates of 8.4% was equal to just half that of all adult labor force participants in the U.S. This inequality in unemployment rates is likely to persist for some time as the work activities of college graduates seem to allow more geographic and temporal flexibility, primarily through telecommunications systems, than do the work requirements of those employed outside of the college labor market.

Shrinking options for teens and young adults

The labor market for teens (16-19) and young adults (20-24) has collapsed in the past month. While employment levels fell by 13% for adults aged 25 or older, employment among younger people declined at more than double this pace. Employment among teens fell by nearly 1.6 million or 31% over the month, while employment among young adults declined by 3.4 million; a one-quarter reduction.

The employment rate of teens (share of teens with a job) plunged from 30% in mid-March to 21% in mid-April. The employment rates among young adults didn’t fare much better; declining from 64% to 48% between mid-March and mid-April.

Very large employment declines are typical of most labor market downturns, but the magnitude of these losses means that the option of work as a substitute for school has become much less viable for young people.

This also means that the foregone wages from working instead of going to school have fallen dramatically, implying that students will be giving up very little if they decide to go to school. The opportunity cost of college enrollment has been reduced to video chats in mom’s basement instead of employment and earnings.

Recovery in the teen and young adult labor market is likely to occur not months but years into the future. Unprecedented numbers of idle adult workers are anxious to get back to work, while young people remain at the bottom of the hiring queue. Therefore, until the large numbers of unemployed and underemployed adults, who are ahead in the hiring line-up, can get back to work, the employment outlook for teens and young adults remains especially poor.

We realize that this is a truly grim picture of the job market in New England and the nation. Those who believe that the economy should remain closed for an indefinite period—until we find a vaccine or even to the extreme of waiting until we eradicate the novel coronavirus—must understand the grim consequences of the choice to remain closed and the utter havoc it is unleashing on millions of households in New England and the U.S., as well as the irreparable harm that will be done to many of the businesses and institutions that employ them. We do not envy those who are charged with making difficult decisions about reopening, but the discussion above reveals some of extraordinary labor market costs associated with the shutdown strategy. College leadership around the region has begun to recognize this as indicated by a willingness in the last few weeks to undertake efforts to open more fully in the fall.

Decisions about reopening cannot be made solely on the widely varying measures of coronavirus spread. Many real, but unenumerated personal and social costs as well as explicit and implicit economic costs must be considered in the balance. Of particular importance is the unequal distribution of these economic and social costs that is, thus far, heavily weighted toward lower-income, poorly educated and racial and ethnic minority individuals and households.

Originally, when Dr. Anthony Fauci called for a 14-day shutdown in mid-March, the race against COVID-19 looked like a sprint with the reopening of the economy occurring all at once. The expectation was a V-shaped recovery from the coronavirus: a sharp decline and an equally sharp rebound. However, it has become increasingly clear that the race against the coronavirus is more akin to a marathon, and the economic activity at this point looks more like a modified letter L; with a sharp decline followed by a slow recovery.

We expect reopening of the economy to occur gradually and in fits and starts. As we learn more about the coronavirus, business and governments will adopt more refined policy responses to any additional coronavirus threats that occur during the reopening process. We expect reopening across most states to be designed to prioritize strict mitigation strategies to protect the elderly and at-risk populations and maintain many of the social-distancing efforts in play today. Businesses and government will develop and implement many creative measures to protect workers and consumers as they strive to establish a new normal of life-sustaining social and economic activity.

Neeta Fogg is research professor at the Center for Labor Markets and Policy at Drexel University. Paul Harrington is director of the center.

RWhitcomb-editor 4/28/20 RWhitcomb-editor 4/28/20

Neeta P. Fogg/Paul E. Harrington: Taking a ‘gap year' can be disastrous

From The New England Journal of Higher Education, a service of The England Board of Higher Education (nebhe.org)

BOSTON

The COVID-19 pandemic has caused elected officials to shut down large segments of the U.S. economy, within 30 days of President Trump’s National Emergency Proclamation in mid-March, putting more than 26 million American payroll workers out of work and shuttering countless small businesses, thereby shutting down the self-employment option upon which workers frequently rely in times of economic trouble.

The initial shutdown is already having substantial secondary effects in sectors of the economy that have not been closed by state officials. The college labor market —largely composed of employment in professional, technical and managerial occupations—was mostly insulated from the early effects of the shutdown. One exception was healthcare, which experienced substantial employment losses as delivery of non-essential healthcare services was sharply curtailed is now shedding workers at an accelerated pace as employer revenues decline precipitously.

Putting the world’s largest economy into a sort of induced coma means two important things for higher education consumers. First, family incomes and wealth are declining, and this results in reduced consumption, including reduced enrollment in higher education programs. Second, a cloud of uncertainty remains around the virus, and this uncertainty results in a more conservative approach to family finances led by increased savings and reduced consumption, including college consumption.

During the Great Recession of 2008-09, undergraduate and graduate enrollment rates skyrocketed as students sought shelter from the very weak labor market conditions of mass employment losses and rising unemployment among college graduates. However, it appears unlikely that this sort of enrollment surge will occur in this unprecedented economic decline, particularly as options for a “full-college experience” (stereotyped as an 18-year-old going off to a campus with all its social, sports, travel and cultural amenities) seem to be narrowing, by state mandate

Rethinking college decisions

Declining income and wealth and rising uncertainty mean that families are rethinking their college-enrollment decisions. Indeed, several new surveys suggest that among the prospective freshman class, a lot of consideration is being given to alternative ways to reduce spending on higher education, without giving up on it altogether.

Surveys of college-bound seniors find that substantial shares of students who were intent on starting at their first-choice four-year college are thinking about lower cost four-year college options. One recent survey by the Arts and Science Group estimates that about two-thirds of graduating seniors are considering some type of alternative to their first-choice option, with about 20 percent reporting that such a change is likely. Similarly, shifting from a four-year residential college to a two-year community college is now on the radar for many college-bound seniors who would not have considered a community college prior to the pandemic. A third option for students is to delay enrollment for a year until family income has had time to recover and the uncertainty about future possibilities is reduced as the pandemic abates over time.

The first two adjustments may be sensible for some families but does that third scenario, taking a so-called “gap year” make sense?

We believe that taking a gap year is not a good option. Delaying college for most college-bound seniors is disastrous. Delayed enrollment sharply reduces the likelihood of earning a degree.

Our large-scale longitudinal research of a cohort of 9th graders in Philadelphia found that after controlling for demographic and socioeconomic traits as well as in-school behavioral traits and measures of academic performance, delaying college enrollment after high school and subsequently enrolling in a community college reduced the likelihood of earning a college award (including certificates) by a massive 39 percentage points, compared to their counterparts who had enrolled in a four-year private college immediately after high school graduation. Among those who delay and then enroll in a four-year public college the completion rate is reduced by 20 percentage points. (This study tracked students for seven years after the expected date of high school graduation. Only a handful of students in the study remained enrolled at the end of the period. Because these students had not dropped out and were continuing their study, we counted them as completers in our study, although they had not yet earned an award.)

Other researchers have also found substantial negative effects on college completion associated with the gap year.

If students don’t earn a degree, the investment returns to their college education are essentially zero. Almost all the employment and earnings advantages to higher education are associated with an academic award of a degree or a certificate.

Despite the image created by the popular press about the benefits of a gap year between high school and college, the typical delayed-enrollment student is not the stereotypical high-income bon vivant touring the continent. Rather, delayed-enrollment students are about six time more likely to come from families in the bottom 20 percent than the top 20 percent of the nation’s socioeconomic distribution, according to research by Sara Goldrick-Rab and Seong Won Han. This suggests that delay in college enrollment is much more likely to be associated with less ability to pay than perhaps has been assumed in the past.

Income and wealth changes

The prevailing income and wealth developments in the U.S. will have an adverse impact on the college-going decisions of high school seniors. The closing of much of the nation’s college housing facilities and lingering uncertainty about their fall opening means that the “college experience” of living away from home and leading the idealized life of a resident undergraduate has become more distant to many newly minted high school graduates preparing to start their next phase of life.

Much of the “college experience” that many students desire is not an investment in higher education insofar that the campus experience doesn’t contribute much to post-graduation success. It is really just another form of consumption. (Indeed, when economists measure the cost of higher education, room and board costs are not included, as they are part of normal consumption of the individual. However, it is useful to note that the cost of forgone earnings as student allocate their time to schooling is included in economic measures of college costs.) College investment comes in the form of course-taking and study that leads to growth in the knowledge, skills and abilities of students that are valued in the labor market and yield large and sustained employment and earnings advantages.

The opportunity cost of a gap year is very high. The proficiency and human capital gap between those who enroll and those who do not will widen. The cost is essentially a lost year of investment, during a time in life when human capital investment should be at its greatest. Students who take a gap year will find it very difficult to secure paid work. The labor market is awash with massive numbers of job-seekers and this will continue as economic re-opening begins in a phased and cautious manner. New high school graduates, not especially welcome in the labor market in the best of times, will struggle to find employment. Even for students with strong financial resources, the opportunity to engage in the sort of gap year experiences such as cultural or environmental travel will likely be greatly diminished. A gap year for many young people will just mean an extension of the lockdown; in this instance, it will mean being locked out of work and school.

School and work are the two primary ways in which individuals build their stock of human capital. Students who opt for a gap year will find themselves left behind as their peers continue their education and develop their productive capacities. College-bound seniors are right to think carefully about adjusting to the COVID-19 environment, but one adjustment that is almost guaranteed to lead to financial failure is that of doing nothing—the gap year.

Neeta P. Fogg is research professor at the Center for Labor Markets and Policy at Drexel University, in Philadelphia; Paul E. Harrington, formerly of Northeastern University, is director of the center.

Robert Whitcomb 5/21/19 Robert Whitcomb 5/21/19

Neeta Fogg/Paul Harrington/Ishwar Khatiwada: Measuring the GEAR UP program for R.I. students

From The New England Journal of Higher Education, a service of The New England Board of Higher Education (nebhe.org)

‘The federally financed GEAR UP (Gaining Early Awareness and Readiness for Undergraduate Program) was organized two decades ago with the purpose of increasing high school completion and college enrollment among low-income students. The College Crusade of Rhode Island’s GEAR UP program was designed as a long-term effort to buttress student success by providing various kinds of educational and social service supports beginning in the sixth grade and continuing through high school completion.

Back in 2015, the authors completed the first study in the nation that measured the net impact study of a GEAR UP program. That study track a cohort of entering sixth-graders who participated in the College Crusade GEAR UP program relative to a comparison group selected with the rigorous Propensity Score Matching (PSM) method that creates a comparison group with traits equivalent to the participant group at the time of sixth grade entry into the program. This baseline equivalency at the time of program entry means that differences in outcomes that occur between the participant and matched comparison groups are attributable to participation in the GEAR UP program.

That longitudinal impact study found substantial and statistically significant gains for a single cohort of GEAR UP program participants relative to the comparison group on the likelihood of completing high school on time and immediately enrolling in college in the fall following high school completion, providing evidence that the College Crusade of Rhode Island was able to substantially improve these two important educational outcomes of GEAR UP participants.

While high school completion and college enrollment have remained high priorities for the nation’s education system, in recent years, much greater attention has been focused on college retention and completion. This raises the question about the lasting effects of participation in the College Crusade’s GEAR UP program. Do the gains that the program provided in the sixth through 12th grades persist for participants once enrolled in college? At the time that these cohorts of students were participating in the College Crusade GEAR UP program, participants who were enrolled in college did not receive any systematic support from the College Crusade. This created the opportunity for us to examine whether the sizable impacts of GEAR UP participation in middle school and high school persist beyond high school completion and immediate college enrollment or do they fade out after entry into college.

Enough time has now elapsed for three cohorts of College Crusade GEAR UP participants to have completed their first year of college, providing an opportunity to measure the impact of participation in the College Crusade GEAR UP program beyond initial college enrollment.

The effects of participation in the College Crusade GEAR UP program are cumulative; that is, we found that the program was able to increase the likelihood of on-time grade attainment for participants relative to the matched comparison group for each year after initial enrollment in the sixth grade. The cumulative effects of these positive outcomes in each successive year for participants relative to comparison group students become quite sizable as students progress from middle school to college.

The chart below illustrates the divergent educational pathways of College Crusade participants and their matched comparison group counterparts. Beginning in the eighth grade, a gap emerges between participants and comparison group students in the likelihood of staying on track; and the size of this gap continues to grow in each successive grade/year. By the time of high school graduation, the gap had grown to 9.3 percentage points in favor of GEAR UP participants; 77% of the three cohorts of participating students had graduated from high school on time compared with just 67% of their counterparts in the matched comparison group. During the fall term following their expected on-time high school graduation, 56% of the three sixth grade participant cohorts had enrolled in college, compared with 42% of the three 6th grade comparison group cohorts.

Eight years after the beginning of sixth grade when these three cohorts of participants had enrolled in the College Crusade GEAR UP program, 40% had returned to college after the freshman year, relative to 30% among their matched comparison group counterparts.

This means that the cumulative impact of the College Crusade’s GEAR UP program was to increase the relative likelihood of a low-income sixth grader in Rhode Island to progress through middle and high school and complete a year of college by 35%.

The Pathway from Sixth Grade to One Year of College Retention, Combined Sixth Grade Cohorts, 2007-08, 2008-09 and 2009-10

These findings reveal that the College Crusade’s GEAR UP program had a cumulative effect that reached beyond its formal goals of high school completion and college enrollment. The cumulative gains for participants relative to the comparison group increased each year though high school graduation and college entry. Beyond that, despite no formal GEAR UP services for participants once enrolled in college, the gains to their earlier participation in the program continued. No evidence of a fade out of the substantial positive effects of GEAR UP participation is found one year after participants had exited the program.

The first year results are promising, but the kinds of obstacles to degree attainment that low-income college students confront are associated with complex academic, social and financial issues that are somewhat different from the barriers that these students face in completing high school and initially enrolling in college Will these cumulative one-year college retention gains persist through college completion with no fade out effects? Stay tuned.

Neeta Fogg is research professor at the Center for Labor Markets and Policy at Drexel University. Paul Harrington is director of the center. Ishwar Khatiwada is an economist there.

Neeta Fogg is research professor at the Center for Labor Markets and Policy at Drexel University. Paul Harrington is director of the center. Ishwar Khatiwada is an economist there.