The Ruse of the Unemployment Numbers

March 1, 2015 Leave a comment

US UnemploymentHungry? Imagine being served your multi-course dinner by a Ph. D. in Pharmacology, or getting your burrito delivered by an experienced human resources professional. Both of these scenarios are very real. Both of these individuals, one a friend, the other an acquaintance, lost jobs due to economic downturns at their respective organizations and both have taken jobs, simply to pay the bills, while they seek out new opportunities in their chosen professions.

Both of these individuals are examples of many that have succumbed to a massive, but hidden, problem called underemployment. Watching falling unemployment numbers now being reported below 6%, down from nearly 10% four years earlier is, in many ways, simply misleading.

I believe it was Mark Twain who quipped, “statistics are like an alienist; they can work for either side.” The ‘official’ unemployment rate (technically called U3) is a simple and broad measurement that divides the number of people who are not working, want to work, and have been actively applying for jobs by the sum of the people working and those loosely defined as unemployed. In doing so, today, you get a number that’s just below 6% as stated above. While many seem to accept this as THE measurement of employment health, this is merely one measurement though; The unemployment rate can be calculated using a variety of differently ‘useful’ parameters and the U3 rate leaves out many that should be included as they are in the U6 statistic (see below).

With the Fed preparing to raise interest rates as soon as they believe the labor market is strong enough, determining that strength is difficult. But one fact everyone should be able to reasonably agree on is that the ‘official’ unemployment rate does not even attempt, and can’t really, measure the actual strength or health of the labor market exemplified by the openly known fact that Fed Chair Janet Yellen looks at a “dashboard” of at least nine labor market indicators!

Thus, lots of people who are unemployed by many reasonable definitions may not count as such, depending on the metrics used, in the official government statistic. In fact, using the government’s own definition, workers who are discouraged or marginally attached to the labor market do not count in the official unemployment rate. There are different, broader, unemployment measures available, but they do not get the headlines.

In fact, of the over 90 million Americans 16 years old or older that are not working, hence not part of the equation, fall into several categories: retirees, stay-at-home parents, students, and those who would prefer working but have given up on finding a job. Policy makers have been reduced to making educated guesses about the relative size of each subgroup of those not working because the capture of the actual numbers is speculative at best, and then their potential to reenter the labor market as conditions improve remains in question too.

Despite the significant decrease in the official U.S. Bureau of Labor Statistics (BLS) unemployment rate, the ‘real’ unemployment rate is most likely over double that approaching near 13%. This number, which is a better portrait of the nation’s REAL economic health, reflects the government’s U-6 report, which accounts for the full unemployment picture, and this includes those that are marginally attached (describes individuals not currently in the labor force who wanted and were available for work)to the labor force, plus those “employed part time for economic reasons.” In July, this marginally attached group accounted for 2.2 million people. To put that in perspective, there are currently 16 states in the U.S. with populations smaller than 2.2 million. Another number, large in and of itself is the 741,000 discouraged workers – workers not currently looking for work because they believe no jobs are available for them. These are included within the list of marginally attached people. Another 7.5 million were not considered unemployed because they were employed part-time for economic reasons. Those people are also called involuntary part-time workers – working part-time because their hours were cut back or because they were unable to secure a full-time job.

Unemployment is really a measure of labor market disequilibrium; it measures the mismatch between employers’ demand for labor of various types and workers’ willingness and ability to supply that labor. Unemployment that is “too high” or “too low” in aggregate, or in specific job categories, is really about these mismatches, not the overall health of the labor market.

Author-Box

Filed under Musings on the Job Search Tagged with , , , , , , , , , , , , , , , , , ,

What happens if I do not re-pay my student loan?

July 31, 2014 9 Comments

student-loan-debtStudent Loans for college can be one of the most significant debts one may ever incur, both in a good way, and potentially bad.  They are necessary for many to attain their educational goals and aspirations, but on the back end, once done with school, they are waiting and, if not managed properly, can haunt people for life.

By some estimates, nearly one in three student loan borrowers in the US that are in repayment are actually behind on their payments.  Six months after graduation student loans come due and the first payment request will come to the door.  Many students I’ve worked with in the past were not even aware that, if graduating in a traditional form, in May, November meant loan payments were to be waiting and the lender expecting a nice response! 

While some take it on as a responsibility and manage their debt accordingly, others tend to put a blind-eye to the subject and that is a dangerous approach especially when dealing with the federally funded loans.  Let me explain.  Any loan is an agreement, a contract, that gives one money now, in the present, with agreed terms that you repay it back over time with interest.  The interest (and penalties) being where the loan providers make their monies so when repayment doesn’t happen according to the terms signed on for, the lenders tend to take it seriously.

Ignoring your debt only makes it worse in a general sense.  While some loans can be ‘negotiated’ away or walked away from with minimal (relatively) negative effect, when it comes to student loans in particular, there is truth in the adage that if ignored it will only get worse. Student loans don’t just go away, and the consequences of making no attempt to pay or resolve them can be severe.

Sometimes one even ‘ignores’ their loan by accident.  For example, many students I’ve worked with have been under the misconception that by deferring loans, say attending grad school for example, that the loans just sit there doing nothing.  While partially true, ‘doing nothing’ in that there is no immediate expected re-payment, when they come due after the deferral time frame, what’s now waiting in addition to the loan, is all the new accrued interest that HAS been racking up on the meter while the deferral time has ticked away.  The loan doesn’t just sit there inert, interest is adding up and added on to the original tally, so while your payments may have been deferred for a year or two, the interest has grown and is tacked on and your debt has ballooned more.

So, what DOES happen if student loans are ignored and/or mismanaged?

1) the debt will simply grow.  Predictably, account-ably, the maths increase and one gets deeper in debt.  Interest will continue to accrue and be added on as payment balances, that seem so daunting now, will only get even larger.  Additionally, loans that go into collection will incur additional penalties that can increase costs up to a significant percentage (State law, depending on where, may limit collection costs).

2) Credit scores will suffer and especially bad at a time when trying to build this number.  Late payments will appear on your credit reports and your credit scores will go down.  Negative information may be reported for up to seven years, and for many graduates their credit scores are more important than their college GPA’s when it comes to real life.  Need an apartment?  Many landlords are checking credit scores to measure potential tenants.  Need a car?  Credit scores are used to determine your risk and loan interest rate.  Want a job?  Many employers, more as time goes on, are checking credit scores as a way to determine how well one manages responsibility.

3) You will eventually go into default.  Federal loans generally can be considered to be in default when a payment has not been made for a period of 270 days.  Once in default, the government has “extraordinary powers” to collect (see below).

4) Private student loans are a bit different, though. The definition of “default” depends on the contract, and may include simply missing one payment or the death of a co-borrower. Private loan lenders don’t have the same collection powers as the federal government but they can sue the borrower, and if they are successful, then use whatever means available under state law to collect the judgment.

5) Expecting a tax refund?  If you’re lucky enough to have a job, you may have to kiss your tax refund goodbye.  If a federal student loan and in default, the federal government can intercept part or all of you tax refund.  Married filing jointly?  Yep, good guess!  A spouse’s portion of the refund may be at risk too, and they may have to file an injured spouse claim to recover it after the fact (although private student loan lenders cannot claim tax refunds).

6) Wages may, and most likely will, be garnished.  Normally, a creditor must successfully sue you in court in order to garnish your wages, and even if they are successful, there may be state limits on whether and how much income can be taken.  But if you are in default with a federal student loan, the government may garnish up to 15% of one’s paycheck.  While you may be able to challenge the garnishment under certain circumstances, but in the meantime, do you really want your employer to know you are in serious trouble with your loans and financial management?

7) Any co-borrowers/signers are in trouble too.  Anyone who co-signed a student loan is on the hook for 100% for the balance.  It doesn’t matter if it is a relative, friend, stranger; anyone that puts their name on the loan contract is then liable for whatever is left/accrued on the loan.  Simple.

8) One can be sued.  Lawsuits are less common with federal loans than with private ones. (After all, why would the government sue when it has so many other ways to collect?) But a lawsuit is always a possibility especially if you ignore your student loans.  If/when sued, it is advised to seek the help of an attorney experienced in student loan law to raise a defense against the lawsuit and come to some agreed resolution.

Essentially, one in default will be haunted by this debt for life.  It may sound blunt, but it’s the reality and better the devil you know.  There is no statute of limitations on federal loans, which means there is no limit on how long you can be sued and it simply does not go away.  State statute of limitations do apply to private student loans, however, limiting the amount of time they have to sue to collect.  But it doesn’t stop them from trying to collect — and if one doesn’t know their rights it may go on indefinitely.

But What if You Can’t Afford to Pay?

For starters, get your free annual credit reports to see where things stand.  Personally, I like and use CreditKarma.com.  It’s free, secure and easy and will give constant monitoring and one will have a clear understanding of how debt is affecting credit.  There’s also the National Student Loan Database to track down your loans.

For federal loans, you can get back on track with a reasonable and affordable payment plan.  Programs available for federal loans such as Income-based Repayment (IBR) that allow some borrowers to qualify for a lower monthly payment based on income, and then discharge the remaining balance after a certain number of years of repayment may be an option.

For private loans, talk with an attorney who understands how to discharge certain private student loans in bankruptcy.  It can be tough to qualify and it’s getting more difficult, but not impossible. If that’s not an option, you may be able to try to negotiate a settlement?

While it’s never a good idea to ignore loans, there are times when a borrower simply cannot afford his or her loan payments. Fact of life but if ever in said situation, remember to prioritize.  Federal loans are more important than private ones.  Ignoring any debt/loans can be painful and have negative consequences to your lively-hood, but doing so at the federal level is life-long.

Author-Box

Filed under Musings on the Job Search Tagged with , , , , , , , , , , , ,

What’s Missing in the College Experience? Part 4 of 4

April 16, 2014 Leave a comment

Choosing a major can be stressful!

Choosing a major can be stressful!

Part 4 of “What’s Missing in the College Experience” – Where is your major leading you?

“Many people end up doing work completely unrelated to their major in college, but it still helps to know for what careers that major might matter when selecting a major or concentration. Students who really know the possible career paths with an undergraduate degree are few and far between at the time of major selection. Many students choose their majors in their sophomore year before they have much work experience at all. There would be many benefits to students if there was a consultant at the school keeping track of where their major may lead, career-wise, and what those careers meant in terms of average activities. Not only would students be making a more informed decision, but it would jump start the process of searching oneself to figure out what they really want to do before the big crunch at the end of senior year.” (Eli Lisseck ’13)

While I was at Mount Holyoke College as the Director of Recruiting and Employer Relations, I had the opportunity or working with many great partner recruiting organizations and some really wonderful students looking to make their mark in the world. One woman, in particular, that really ‘got it’ was a student that was interviewed and hired by, I believe, Paine Webber.

She was a history or psychology major, I can’t remember for sure, but the point being she was hired on by a pre-eminent financial institution after graduation in the liberal arts. Upon being installed on a team, one of her also recently graduated co-workers, had come out of a more formal business program as opposed to her degree in the liberal arts. Upon hearing of her ‘history’ or ‘psych’ major, he turned to her in a meeting and brazenly said, “what are you doing here?” Without missing a beat, she responded by saying, “to do the things you cannot!” A brilliant retort and was coming from someone that could articulate her liberal arts experience and how it would be a good translation to that financial working environment.

But for many, that transition and translation is not so easy.  College is a major expense in one’s lifetime but students who don’t follow their hearts by delving into subjects they’re most passionate about will ultimately hurt their chances of a successful—and satisfying—career in the long term, many college officials say.

For college students, declaring a major can be a stressful moment in one’s academic career. What do I major in? What should I choose? Now I have to live with this? These are some of the questions that plague thousands of newly minted college students each year, looking ahead, producing beads of sweat and who have nightmares of doing the ‘diploma walk’ only to head off the stage after graduation directly into an unemployment line.

For many, they view it as though they essentially are to say, ‘this is now what I am to do for life…’ While true to some degree, no pun intended, a major is really nothing more than saying I am specializing in an area of interest and taking the classes to support such. For someone who already has a career destination in mind; say they want to build bridges as an engineer or be a surgeon, they are lucky in that they are on a defined path and their declaration of major is more of a natural means to an end. The more difficult task is when one doesn’t necessarily have a set outcome in mind; no set path or destination, and choosing or declaring a major can be a pretty stressful addition as one feels they are essentially locking in by having to ‘choose their future.’

The good news is that, as stated above, a major is a focus and what, for many, is missing in their college experience, is a real, comprehensive understanding as to how that major is, or can be, translated to the working world and charting off on a career in the future. This is especially true when majoring in the liberal arts or humanities where the outcome can be a much more abstract path as is not necessarily a linear translation to a job or career.

Much of what happens in the classroom, and its success, is in how one, upon graduation, understands the subtlety, nuance and range of skills that are now to be articulated in a way that explains its relevance to a potential employer.

Most majors are elastic in that employers rarely ‘need’ a specific degree majored in, but instead a set of skills (both hard & soft), experiences and the ability to put them into motion. It is rare that a new hire is showing up at the door with a stand-alone skill. Employers look for a mosaic of such and future college graduates have such, but many do not know they have such and it is in this applied learning, this translation that can be the ‘make or break The college experience is too often limited in making that translation for students and many times the only discussion of such is schlepped over to the off-in-the-corner, stand-alone career services to make those connections evident.

This is a huge missed opportunity in that while these dedicated offices of careers and career transition do what they can, without the full ‘eco-system’ buy-in of the campus at large, the talk of transition from academics to career is usually too limited or late in coming and is missing a great opportunity to be as effective as it could be.

Much of what should or could be done during the college experience is a synthesizing of one’s academic studies at every corner of the respective campus, in a way that fully cross-pollinates, so that students have four years of not only academic intake, but four-years of transitional understanding of their academic history, both looking back and looking ahead? The college experience should, and can, be an artful balance of synthesizing interests, skills, personality strengths and acquired knowledge while at the same time acquiring tangible experience outside of the classroom.

In a perfect world, in the first four semesters, when wrapping up the sophomore year, if possible, this synergistic learning would make for a much better understanding of one’s choosing a major and how it ultimately can be a better blueprint for the transition to career and life after college.

Author-Box

Filed under Musings on the Job Search Tagged with , , , , , , , , , , , , , , , , , , ,

What’s Missing in the College Experience? Part 1 of 4

April 8, 2014 Leave a comment

"Help! Interest? Vested? Taxes? Huh...?"

“Help! Interest? Vested? Taxes? Huh…?”

Recently, while meeting with our intern, Eli Lisseck ’13, we were discussing his transition from four undergraduate years at Oberlin to the present, where he is now actively engaged in his job search.  I asked him, now that there is some time in the rear-view mirror, to look back and reflect on his four-years of quality education and its application to his reality today.  In this 4-part article, examining, what he thought, shortcomings to the college experience and my personal observations having worked in such for 20 years, we discuss these areas and talk about what educational institutions could do better in preparing students for transition to independence and adulthood.

When asked, he said; “one thing pertaining to the job search that I have observed changing recently is that it never ends. With communications technology rapidly advancing, even people currently at a great position always have the antennae tuned in for new opportunities, just in case. The relatively new culture of rapid job switching and constant job searching puts even more weight on crucial job search skills, and relevant life skills related, than has existed in the past.  There are a few crucial actions to consider, and steps to take, that I wish I had learned a couple of years earlier than I did.  None of these things are particularly difficult to begin doing, but practice certainly helps tremendously.  I hope that thinking ahead will give students about to graduate a head start compared to recent graduates such as myself who have had to pick these skills up as they became relevant, rather than being prepared.  What follows is a list of four ideas, in no particular order, that I feel would benefit students if they were incorporated into undergraduate learning processes.”

Part 1 of ‘What’s Missing in the College Experience’ – General Financial Acumen

“After paying incredibly high tuition for four years, a student should at least have an idea of how to succeed outside of school. Students are first and foremost trained to continue inside the academic world, but many students will not be academics forever. Colleges want successful alumni, and students want to live on their own, so it seems like some required class about finances is pertinent. It doesn’t have to be complicated, just the ins and outs of filing a tax return and how to budget oneself when planning around employment.  An astounding number of recent graduates will forget to budget for healthcare, utilities, tax withholding, and the like when considering their potential income, and struggle later because of it.” (Eli Lisseck ’13)

As supporting anecdotal ‘evidence,’ in an endearing sort of way, one student I had, who accepted a job offer and moved to NYC, related her experience to me that was both funny and inexplicable at the same time.  She was a graduating senior, and a savvy one at that, from Mount Holyoke College and was majored in Economics.

She got her apartment and had that secured at least.  On moving day, she was handed the key by the land-lord and started to move in all her belongings. Walking in she flipped the switch in the entry hall and the light did not come on.  So she flipped it several times.  Nothing.  After setting her stuff down and out of the way, figuring it to be a dead bulb she went and got a light bulb from another spot in the apartment and switched it out and flipped the switch again.  Nothing. Enterprisingly, she then went out and bought a box of light bulbs and came back and started to swap them with the ‘dead’ bulb thinking this should be an easy fix.  Nothing, as expected to an outsider at least.

The reality was that she, in her life-time, every time upon flipping a switch, something was to happen!  She had no concept that one had to start an account with the utility company and it had never occurred to her to inquire as it had been a constant presence, like the very air that she breathed, in her life.  Again, for her entire existence on this planet, something happened when she flipped a switch so who knew?

Much of her story highlights the fact that graduates, or soon-to-be, ‘don’t know what they don’t know’ until it’s either presented or experienced first-hand, with the latter sometimes being too late. This is very apropos to the plight of many college graduates today as they seemingly have no concept of the issues of personal finance and related terms and topics such as; taxes, gross and net pay and what the differences are?  No understanding of the litany of potential benefits that employers may offer in a job and how each of these can play out? Investments and the power of compounding.  The majority have no idea what ‘compounding’ even means?  The fact that a landlord might want first, last month AND a security deposit before they can even set foot in an apartment? What the term ‘vesting’ means? And this is many times Economics’ majors, yet.  How about the fact that credit cards are not ‘free money’ and need to be paid back, with interest yet? What’s interest and why are they allowed to collect that? Remember all those student loans?  Well in November of the graduating year, the note holders show up at the door wanting it to be repaid. Oops, forgot to budget for that!  That renter’s insurance is a necessity when they move out on their own, thinking that the building ‘must be insured, so my belongings must be too…?’

There is an incredible lack of financial understanding and it can have large ripple effects on their navigation of life post-college. For many years I’ve taught workshops and presentations on personal finance, budgeting and understanding benefits offered by employers, etc…  These workshops have always been, historically, well attended and feedback almost universally of appreciation and thanks.  For many, these presentations are kind of deer-in-the-headlights sort of endeavors as students would sit there bewildered, perhaps having a new appreciation for what their parents have navigated to get their sons or daughters to this point in their education.  Some of the more common observations I’ve had are that students have no understanding of the language and machinations of how money & finance works on either the micro or macro scale.

Sadly, this series of workshops on finance that I have done for the colleges, were never a mandated part of anyone’s curriculum and it should be.  It was simply a need that I had witnessed so put it up on offer.  There is no reason or excuse that a student leaving college has no concept of personal finance, taxes, benefits, how to balance a checkbook even.  It really would be a simple addition, if not an all-out mandate, to one’s four-year experience. In fact, the cost-benefit of such is a huge consideration in that graduating students, future alumni/ae, can look back and say that they were ‘better prepared.’  No matter as to one’s major; if it be Economics or Dance, once departing the hallowed halls, they need to be able to understand how it all relates to function in the world they choose to live.  What’s critical, in my view, is that each student leaves college with an understanding of personal finance and how it relates to their transition to the working world.

Author-Box 

Filed under Musings on the Job Search Tagged with , , , , , , , , , , , , , , ,