Our legacy to our younger generations is abominable. We are leaving them with unaffordable housing costs, the worst impacts of exploding climate change, global conflict and domestic polarization and levels of debt that no prior generation has ever experienced, simply to pay so much in inflation-adjusted dollars for educated skills needed for a vastly more complex job market. Let’s look at inflation corrected buying power, comparing Boomers and the Z Generation. An August 10th ConsumerAffairs.com report provides these key takeaways:
- Gen Z has 86% less purchasing power compared to baby boomers when they were in their 20s. Americans have seen wages increase by 80% since the 1970s. However, the average Consumer Price Index has increased by over 500%.
- Housing prices and rental rates have shot up. Gen Z is paying almost 100% more for homes. Today, the average house is $309,400. In the 1970s it was $24,800, or $185,600 in today’s dollars. Similarly, the median rent is $2,000 per month, in the 1970s it was $800 per month in 2022 dollars.
- College tuition rates have skyrocketed. The average price of tuition at a public university has increased by 310%, while the price of a private four-year college has increased by 245%. Meanwhile, college graduates have increased by 254% since 1970.
- Gas rates are also shooting up. Gas currently costs 57% more than it did in 1970. It’s $4.70 per gallon, compared to $3.00 in 1970, in today’s dollars.
Universities also receive significantly less in state and federal support, increasingly relying on tuition to fund their operations. A decade ago, tuition covered a third of average college operating costs; today it is half. Facing austerity efforts, states implemented the biggest cutbacks as the federal government, particularly under Trump, also pulled back support.
In short, the cost of higher education today has gone up so much more than average family income. Go back a little farther, and the numbers are even more startling. Writing for last August’s Yahoo! Finance, Jordan Rosenfeld explains: “Paying for college is an expensive prospect for many levels of education, but it didn’t use to be that way — over time, college costs have risen quite significantly. College tuition and costs were once affordable, according to Guide2Research.com. In 1963 you paid only about $1,286 per year, at a four-year college (or about $10,555 when adjusted for inflation today). Now, those prices are exponentially higher.
“‘In constant 2018-2019 dollars, the [National Center for Education Statistics] reports average total tuition, fees and room and board for full-time undergraduate students at four-year colleges was $12,811 by 1985,’ said Nicole Hopler, lead marketing manager at Optimal, a higher education research publisher. ‘By the 2018-2019 year, [the cost] was $28,123, an increase of 119.5 percent after adjusting for inflation.’
“And you might be surprised to find out that public colleges and universities have had the steeper increase (by percentage) versus private colleges, she said. Between 2008-2009 and 2018-2019, prices for undergraduate public schools rose by 28%, versus just 19% at private institutions. ‘This is likely due in part to a decrease in public funding,’ Hopler said.” While some countries, like Germany and China, are finding ways to fund higher education other than through tuition, the United States is going in the other direction. As college becomes less affordable, particularly for the highly productive, job-creating STEM fields, we become increasingly reliant on importing those graduates from overseas.
The distortions to our overall economy are staggering. Sure, there are two jobs for every jobseeker today, but take a good look at the marketplace. We still do not have enough doctors and nurses graduating remotely to service our demands. Our other STEM jobs form an ocean of opportunity with a dearth of qualified applicants. We’re worried about mom-and-pop local hires – clearly important – but we should be more worried about filling those top-level STEM jobs that provide the best economic returns for the nation as whole.
Instead, we’ve layered in new levels of long-term student debt – $1.75 trillion (of which $1.62 trillion is federal debt), which exceeds consumer debt – so that the younger generations entering the workforce are slammed with a tsunami of contraction amidst in the most expensive era in American history. And now interest rates are rising; while starting out life with around an average of $40 thousand of debt may seem tolerable, it just may be the straw that breaks the camel’s back.
God help you if you have debt for post-undergrad degrees. Routinely, those earning professional degrees wind up with serious six figure student loans, often requiring decades to repay. While professionals stand to make more money – the standard argument for not forgiving or reducing their debt load – society winds up with huge staffing shortages in needed professions. While the United States responded to the 1957 Soviet era Sputnik satellite launchby investing massively in education at every level, that enthusiasm eventually waned. “Funding for higher education aid was greatly reduced as part of the Reagan administration’s broad cuts to social spending programs. Grant funding and other federal support has also not kept pace with the rising cost of tuition and educational expenses. The maximum Pell Grant, for instance, covered approximately three-quarters of in-state public tuition at its peak in the 1970s. By 1988, it covered less than half. Today, maxing out at $6,895, it covers less than one-third.
“In 1992, policymakers lifted the cap on Parent PLUS loans, allowing parents to borrow up to the full cost of attendance on behalf of their children. These loans are not subsidized, so interest on them begins to accrue from the moment they’re disbursed. They also often have higher interest rates and less favorable repayment terms than those for students, making it even harder for these borrowers to get out of debt.
“And then came the Great Recession: Between 2009 and 2019, student debt ballooned from about $772 billion to $1.6 trillion… During his 2020 campaign, President Joe Biden pledged to cancel at least $10,000 of students' individual loan debt, but critics say this would amount to doling out handouts to highly educated elites.” Julia Barajas in the August 4th Los Angeles Times.
We are more concerned with censoring classrooms – the product of an internal struggle over a manufactured “culture war” – than we are ensuring that we have enough STEM-educated workers to solidify our economy against rising global competition. Education should be free for all who want it. Perhaps we can configure our tax code to add higher rates for those who have benefitted from student loans. The system we have now does not serve any of us… or the nation as a whole. As we betray our rising generations, we are also screwing up economic hope.
I’m Peter Dekom, and somewhere along the way, America lost sight of what really matters.
Posts
No comments:
Post a Comment