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Posts from the ‘Higher Education’ Category

Bridging the Gap Between Academia and the Workplace

aier-in-the-winter

Education literature suggests that the nature of a student’s participation in workplace activities has a major impact on the knowledge that student acquires.

At AIER, we believe the classroom walls should be both transparent and permeable to the rigors and requirements of the workplace. Therefore, classroom learning needs to support an internship experience and vice versa, facilitating the integration of new college graduates into the labor force.

Two years ago, we held a pilot program for our applied economic research internship program. This past fall, we continued this program in conjunction with two academic institutions, the University of Sioux Falls and Missouri University of Science and Technology. We brought economists from AIER into the classroom, and brought the university professors and their students into the workplace. This exchange of staff occurred figuratively, of course. The course was “remote” and our interaction occurred across several meetings over WebEx and frequent communication using e-mail.

During the semester, 20 students worked in four teams on a project about employment trends in various industries, and the relationship of those trends to the business cycles. Students were supervised by research fellow Patrick Coate and me.

During the January 2017 intersession, 12 out of 20 students will be coming to AIER’s campus in western Massachusetts to continue their immersion in economic research. These students are from the University of Sioux Falls.

This kind of collaborative arrangement between academic institutions and practitioners represents an innovative approach to bridge the gap between undergraduate economic education and the professional world. It engages students in topical economic research and walks them through the research process, substantiating the theoretical base they had established in prior courses. This exposure helps undergraduates broaden their knowledge, and gain marketable skills and practical experience. This helps them become more successful participants in the global workforce.

This program supports AIER’s mission, raises our national profile as an innovator, and cultivates the connections for future collaborative engagements. If you want your class to be a part of this program next year, please contact me.

Picture: AIER in winter. Photo by Bruce Gore.

What Do Economists Do Outside Academia?

Natalia SmirnovaAmerican Institute for Economic Research organized a panel during the 2014 annual conference of the Eastern Economic Association (EEA) to address this question: what do economists do outside of academia? Six panelists (listed below) came together from various professional backgrounds to show newly minted economists that there is life for economists beyond academia.

Representatives of the World Bank, SAS Corporation, banking industry and small consulting practices, as well as AIER shared insights on work assignments, office environments, and interview processes. Attendees were interested in strategies to find positions outside academia, the availability of special training and recruitment programs, and work-family balance. The experience showed me the importance of discussing the intricacies of out-of-grad school job search strategies, career advancement opportunities, and salary level ranges with graduates as they try to navigate the economists’ job market.

Mentoring and advising young people in the early stages of their careers is crucial to help them see that an economics degree can do more than contribute to theory-building. At AIER, we hope to help re-envision PhD programs so that they can adapt to the societal needs of the 21st century. In the meantime, we are focusing on of the practical training of high-school, college, and university students by providing academic year and summer internships, fellowship practicums, workshops, and lectures. We believe that our efforts are supporting and encouraging those of our students who are heading into both academic and non-academic careers.

Panelists:

  1. Howard Freeman, Managing Principal, Smithridge Advisors,
    “Value of an Economist within a Financial Firm”
  2. Natalia V. Smirnova, American Institute for Economic Research (AIER), pictured above,
    “Economics Think-Tanks: Much More Research, No Teaching”
  3. Carl Weinberg, Chief Economist, High Frequency Economics,
    “Beyond the Ivory Tower: Public Service to Private Consulting”
  4. Shahrokh Fardoust, President & CEO, International Economic Consultants, LLC; Director of Strategy and Operations (retired), World Bank,
    “Career Opportunities in International Organizations: The Case of the World Bank”
  5. Kenneth Sanford, SAS Institute,
    “From Economists to Data Scientists: How our Discipline Can Participate in the Growth of Analytics”
  6. John R. Moreau, Consumer Product Manager with UMB Bank in Kansas City, MO
    “Career Opportunities in Quantitative Analysis”

Getting Rid of Student Loans

Natalia Presenting on Student LoansAs average student loans increase to $29,000, many students are faced with a serious debt burden upon graduation. Tuition rates continue to hike, and incomes are shrinking. While it is of course better to avoid debt altogether, AIER has spent time strategizing how to best face it head on after accruing it. Dr. Natalia Smirnova and I shared two of these strategies last week to Williams College students:

  1. Advocate to your service lenders, and
  2. Know that a little extra money goes a long way in reducing student debt.

Here is the presentation.

We started the presentation to students, directors of student organizations, and a member of the financial aid office by demystifying loan amortization. This is the process by which students pay off debt in regular installments over a period of time. Currently, the average payment duration for a government student loan is 10 years, amortized to 120 payments (or one payment a month for 120 months).

Once we broke down the math, we showed students that adding just $20 a month extra to your payment would reduce the duration of a $20,000 loan from 10 years to 7 and a half.

The students did the same exercise on their own. They first told us what graduate degrees they wanted. Using some average debt burden price tags, the students then brainstormed how they could negotiate with their service lenders and put away some extra money each month toward their payments.

Average Student Debt Burdens by Graduate Degree

Graduate Degree Average Debt ($) Calculated Monthly Payment ($)
Medical school 175,000 1,760.17
Business school 100,000 1,005.81
Law school 80,000 804.65
MA degree 30,000 301.74
MSW degree 36,000 362.09
PhD degree 58,000 583.37

One student said she would reach out to her lender to ask about payment forgiveness programs. Another reported he could try to give up eating lunch out every day. And a third even thought that she could substitute teach on the side to earn some extra money.

While student loans are probably not going anywhere, students should learn ahead of time what their debt burden will be. They should understand how to prepare themselves. And perhaps most important, they should have confidence in the fact that the average 10-year payment plan is flexible, negotiable, and can easily be reduced by half with the right saving strategies.

Warm Up the Bus: Getting On Board with the College Scorecard

College AdmissionsThe White House is currently creating a college scorecard that will tie financial aid distribution to the value of a college. The initiative will measure things like total costs, graduation rates, loan default rates, median borrowing, and employment outcomes. Schools that excel will be rewarded with increased financial aid allocation. Those that lag will presumably be required to wear a dunce hat.

The Department of Education plans to “develop these ratings through public hearings around the country to gather input.” In doing so, it hopes to “put a fundamental premium on measuring value and ensure that access for those with disadvantages are encouraged, not discouraged” to attend college.

The measures will be refined over the next four years. But while the measures are slow-moving, the impacts may be quite significant: students at the top-rated colleges could receive larger Pell Grants and more affordable student loans.

This is shaping up to be a battle between higher education and the government (some would say, “Pick your poison”). Many folks in higher ed. are wondering about the practicality of ranking institutions and are worried about a misconstrued methodology. For instance, in response to the proposal, a recent opinion piece on the New York Times asserts:

…the program won’t just shape the choices students make; it will create potentially perverse incentives for the schools themselves. Ratings based on graduate earnings will encourage schools to minimize preparation for lower-paying but socially valuable professions like social work, ministry and preschool education. Ratings based on graduation rates will encourage them to admit fewer students who might be less prepared for college, who graduate in lower numbers.

As the son of a mother that worked in public schools, I appreciate the importance of socially valuable professions. But as an economist (and reformed MBA), I believe that one of the best ways to improve systems is to properly incentivize people to make them better. Could there be some negative backlash from a system that rewards higher graduation rates? Of course. Especially if schools stop admitting Pell Grant students. But it seems like a universally honorable goal to graduate students at a higher rate.

I get it, people are worried about government intervention in anything. Will Rogers once said, “I don’t make jokes.  I just watch the government and report the facts.” Of course, schools that object to the government review can drop out of the competition for Pell-Granted students. Will they get the ratings system right in 2015? Um…probably not.  As a member of an institution that produces a College Destinations Index, I understand that there are many ways to skin a cat. But can they offer incentives for schools to improve on several metrics that a majority would agree are admirable goals? I think it’s a step in the right direction. College administrators of schools that rank poorly in total costs and employment outcomes should be afraid, and that might just spur them to create better opportunities for their students.

[Photo: collegeadmissionsplanner.com]

How Do America’s Rich Feel About the Economy?

The state of the U.S. economy often depends on whom you ask. For example, a new piece in the Washington Post says that, according to the nation’s wealthy people, the economy is doing great.

The Post looks at a survey done by the American Affluence Research Center that asks families in the top 10 percent of net worth their opinions on a number of issues. The recent results show that economic sentiment among these families is at their highest levels since 2007.

From the Washington Post:

It shouldn’t be terribly surprising. The stock market is up 24 percent this year. Unemployment among the educated is at very low levels. It stands to reason that the economy looks to be recovering much better if you’re someone with large investment holdings and a high-level job than if you’re scraping by at a lower-wage job and not benefiting from a run-up in asset prices.

Economic sentiment might be lower among the 46 million Americans who, according to a piece in the Atlantic, lived below the poverty line in 2012.

That number, which represents 15 percent of the country, might seem insurmountable, but, according to the piece, the fix for poverty in America could be as easy as giving everyone in the country a $3,000 bonus.

From the Atlantic:

In 2012, those 46.5 million impoverished Americans were, collectively, $175 billion dollars below the poverty line. That figure is equivalent to 1.08 percent of the country’s GDP, one-quarter of the country’s $700 billion military budget, and exactly what we spend on Social Security disability benefits. Finding an optimal way to get $175 billion to these 46.5 million people is all that stands in the way of a country with an official poverty rate of zero.

Using the dataset from the latest Census poverty report, I determined that if we cut a $2,920 check to every single American—adults, children, and retirees—we could cut official poverty in half. 

Of course, there is a caveat to this plan: in order to fund the $3,000 payday for the impoverished, the Atlantic piece suggests increasing taxes the country’s wealthiest citizens, which might knock their economic outlook down a peg.

Read the Washington Post story here. 

Read the Atlantic story here.

Financial Literacy Lessons Learned

finlitThis Tuesday, I attended the Massachusetts Financial Education Collaborative Summit at the Boston Federal Reserve Bank. The event gathers interested teachers, non-profits, government representatives, and private sector institutions from across the state to discuss financial literacy initiatives. Here are four lessons I learned about financial education in Massachusetts:

1. Most initiatives are in Boston.

AIER was actually the only organization representing the Berkshire region at this event. While this does not necessarily mean there are no initiatives going on in the Berkshire region towards increasing financial literacy, it does definitely call for an increased need in the Western part of the state.

2. Financial literacy is not the same as economic literacy, but both are necessary.

There has been much written on the state of financial education on the U.S. The New York Times has covered surveys that reveal most Americans are not confident in their knowledge of basic financial concepts, such as inflation, interest, and investments. The MFEC event captured much of this problem. Many of the workshops were aimed at helping students learn to make financial decisions. However, in the public sphere there has been less frequent attention paid to economic literacy. Common core standards point out that economic literacy represents the in-depth conceptual understanding behind financial decision making. Thus, perhaps both types of literacy are important in increasing financial education.

3. While Massachusetts is technically failing, organizations are working hard.

In 2013, Champlain College released its annual national report card on state efforts to improve financial literacy. Most states aren’t doing too well. Massachusetts, in fact, received an “F” in high school financial literacy education. It does not require high schools to have personal finance classes, nor does it require that students take economics.

While the state hasn’t made the grade, organizations within the state are certainly working hard to come up with innovative and interesting ways to teach students about economics and finance before college.

Cape Cod Five Cents Savings Bank, for example, has a Credit for Life fair where students fill out a real budget based on what they want their dream careers to be.

Blue Hills Bank has reached more than 80 schools with its free musical on saving and other concepts catered to elementary students.

4. Technology matters.

Almost every workshop had some nod to the importance of technology. These took many different forms: from video games and computer modules being pitched to students to text polling at the event itself and video presentations. Many authors have written about the new generation “i” (iPod; iBook; iLife), wherein new students need engaging, quick, animated, and technology-laden materials to learn best. It was interesting to hear that new financial literacy initiatives are jumping on board.

[Photo: Chris Drumm/ Flickr]

Is it Time to Fix College Rankings?

credit: commons.wikimedia.orgA post in the Fiscal Times looks at the importance of college rankings and says that, while prospective students are using them as tool to help select the next phase of their education, the idea of “college rankings” needs to be re-evaluated.

Anthony Carnevale, director of Georgetown University’s Center for Education and the Workforce, says in the piece that the current rankings “are completely devoid of economic information” and are “a guide to college consumption … not an investment.”

From the Fiscal Times:

More important than rankings, experts say, is a college’s graduation rate; its job placement rate; and whether a student can reasonably afford to attend. While some of that data has historically been difficult to come by, the demands for such information have become tough for schools to ignore.

The piece goes on to say that reforms like President Obama’s proposed college ratings matrix suggest that prospective students are starting to consider economic factors such as tuition, level of debt upon graduation, and percentage of low-income students who graduate, but that school prestige should not be the deciding factor in how students select colleges.

A related article from the New York Times calls for a review of how colleges are ranked and considered, but Carolyn Hoxby of Stanford University doesn’t believe the government should get into the ranking business.

From the New York Times:

“I do not believe the federal government currently has the capacity to generate a ratings system that will even be neutral,” she said. “I think it’s more likely that it will be harmful to students.”

A truly useful analysis, she suggested, would have two main parts. “One, a lot of information about the outcomes for students … and the ability to control for variations in the student body. Let’s say you looked at Harvard, Yale, Stanford,” she explained. “You’d say they have all these great outcomes. But that doesn’t necessarily mean that’s the value added by those colleges, because their students were terrific” to begin with.

Read the Fiscal Times story here, and the New York Times story here.

What is America Getting in Return on College Spending?

credit: commons.wikimedia.org

A new chart from the Atlantic compares U.S. spending on secondary education with that of 20 other countries, and finds that America might not be getting the most for its money.

From the Atlantic:

We devote more of our economy to postsecondary education than any other developed country (except South Korea, with whom we’re tied), according to a new report by the Georgetown Center on Education and the Workforce. But we’re rated near the bottom of the 20 countries included by college spending “efficiency”—or, degrees earned per percentage point of GDP spent.

The piece goes on to attribute these numbers to “colleges that are functionally dropout factories,” saying that young people who begin degrees that they never finish leave the U.S. with “some of the lowest college completion rates in the developed world.”

Take a look at the chart and their explanation for it here. 

A study from the American Institutes for Research tells a different story regarding the value of associate’s degrees. It finds that students with associate’s degrees generally have more opportunities than those with only a high school diploma, although the return on those degrees varies considerably from state to state .

From AIR:

On average, students with associate’s degrees earn more income than high school graduates and are less likely to be unemployed, even in harsh economic times,” the authors wrote. They noted that “students and taxpayers should know their return on investment and investigate further what can be done to increase it.

See their study here.