Last week a friend of ours was looking over some application forms for college when she looked up and said, “We’ve had a ‘Tech Bubble’; we’ve had a ‘Housing Bubble’—the next bubble will be the student loan bubble.”
She’s thinking of going back to school and finishing the art degree she never quite got back in the 1970s. Along with sticker shock at tuition prices, she’s been both astonished and horrified at the nonchalance with which colleges assume she will be taking out thousands of dollars in student loans. It’s simply expected.
These loans are expected because, today, books alone cost more than tuition did when she started college in 1972. Parking fees alone at several area colleges equal what I paid in tuition when I started college in 1957. (My youngest son’s high school even charges for parking this year.)
College after college says, you get so much in direct scholarships (over the years this friend has maintained a 3.96 GPA), so much in work study, and the other ten, or fifteen or even twenty thousand a year will come in the form of loans.
This morning I had occasion to visit a local college campus. I overheard some students talking—very casually—about the thousands of dollars they had accumulated in loans. (This was at a relatively inexpensive state college.) I joined the conversation.
I mentioned my son who has gone back to graduate school. When he started three years ago, his job prospects looked very bright. Now, as he finishes his course, those prospects have dried up. There isn’t a job in his field this side of the Arab oil states—if there’s one there.
He’s slated to be done in June. He owes thousands—which, three years ago, he assumed he could nicely pay back with the job he was expecting. Six months after his last class, job or no job, the clock runs out and he must start paying back those loans—with substantial interest.
His best option seems to be to take out another loan, return to school in the fall, and put off the evil day of repayment for another year. I mentioned this situation to the students I was chatting with. “Yes,” one of them said, “my brother is in his seventh years at the University of Michigan.
“He’s caught In the same bind.” The only problem with his temporary solution of taking more classes to avoid repayment is that this just accumulates more debt. When the clock does run out, he will have far more to repay than he ever planned on.
Just like in the real estate boom days, people took out big mortgages imagining that raises would come automatically and paying off the mortgage would be easy. When the bottom dropped out, that assumption proved to be grievously faulty.
How many kids are in the same bind my son is—or the brother of the student I talked to this morning? What happens if many of them stay in school for another year, racking up more debt, and then NEVER find the expected, high paying job with which to repay.
What happens when they need to buy transportation, pay high rent and start supporting themselves—all after servicing that huge student loan debt? What happens if enough of them simply cannot do it?
What do the banks do that cannot collect on all of these lovely student loans they so willingly (just like mortgages) pushed on tens of thousands of kids all over the country? Do we have another debt/credit crunch? Who bails out this one?
My acquaintance may or may not be proven correct—but it is certainly something worth watching out for over the next few years.
It’s nothing I hear them worrying—or even talking—about in Washington or on the financial pages. But they were telling us before the last two bubbles popped that something fundamental had changed in the market. It hadn’t then—has it now?
Showing posts with label jobs. Show all posts
Showing posts with label jobs. Show all posts
Saturday, April 10, 2010
Saturday, April 3, 2010
Where Have All The Jobs Gone? Redux
The stock market is doing well; banks are profitable; companies are paying back the government what it loaned them; consumer confidence is up; there is upward pressure on home prices; some suggest jobs are getting easier to find.
All I have is anecdotal evidence from one small area in West Michigan. Maybe it’s real; maybe it’s a blip; maybe it’s an aberration—I can’t say. But it sticks in my mind.
A neighbor of mine is foreman for a defense contractor in the area. A year ago I asked him how his plant was doing, and he told me that they had five years of contracts lined up. After all, there’s a war on isn’t there? Not to worry.
He has several family members working in his plant—they’re all hard workers. One of them is a son who just bought a new home and has a new baby. This Christmas my neighbor had to lay everybody at the plant off for two weeks because it was so slow.
Last week, he had to lay off 40 workers. Included among the casualties was his own son. His guts hurt; he even shed private tears—but he had no choice. Some of the survivors are now working three and four day weeks. The guys who were laid off were told not to expect to come back, certainly not for a year or more.
This morning my wife stopped at the local community college. She’s thinking about taking some art courses there. She sat down to talk to an old friend who works there. Another, mutual friend, who worked there isn’t there anymore.
What happened? On orders from the capital the college was told to tell anyone near retirement to take it and go—or face having their benefits slashed. The college must reduce its workforce by 83 additional people by next fall. This lady knows her benefits will be cut, but she’s divorced and cannot afford to retire right now.
Five art and theater full time faculty members have retired in the past few years. So far they have been replaced by one full time instructor—and lots of low paid, benefit-less adjuncts. College tuition has climbed from $35 a credit hour to $150 in the past dozen years.
I overheard the principal at one of the high schools I substitute teach in responding to a faculty member’s question (“What are we going to do?”) with, “We’re going to privatize, privatize and privatize.” Already the bus drivers, custodians and subs have been privatized. So, who or what is next?
It saves bushels of money to privatize people. Lower, or no, benefits. Less pay. No company paid retirement plan—they can buy into 401K’s on their very low pay. Another member of a high school administration put it to me bluntly, “Next year we’re going to have to lay off teachers”. Have you ever taught in a room with 35 kids? Ha.
Incidentally, substitute teachers are still working at 20th century wages—there are so many people desperate to work as subs that there is no need to raise the pay. Oh yes, and there are a lot fewer conferences scheduled that require subs—fewer jobs, more workers.
I took my car in to get my oil changed today. The establishment, decades old—and located in an affluent neighborhood—had only one customer. Me. I commented on how slow things were, and the proprietor said, “I’ve had a lot of days like this.”
He told me the story of a friend of his who owns a business. Last year the man laid off 80 people. This year—minus all those workers and their benefits—he is making more money than ever before. He has no plans to hire anybody.
I’ve just totaled up a lot of people who have less money to shop in a society that depends on consumer consumption to maintain the economy. That can’t be good. Is this the only place that is happening? I somehow doubt it.
All I have is anecdotal evidence from one small area in West Michigan. Maybe it’s real; maybe it’s a blip; maybe it’s an aberration—I can’t say. But it sticks in my mind.
A neighbor of mine is foreman for a defense contractor in the area. A year ago I asked him how his plant was doing, and he told me that they had five years of contracts lined up. After all, there’s a war on isn’t there? Not to worry.
He has several family members working in his plant—they’re all hard workers. One of them is a son who just bought a new home and has a new baby. This Christmas my neighbor had to lay everybody at the plant off for two weeks because it was so slow.
Last week, he had to lay off 40 workers. Included among the casualties was his own son. His guts hurt; he even shed private tears—but he had no choice. Some of the survivors are now working three and four day weeks. The guys who were laid off were told not to expect to come back, certainly not for a year or more.
This morning my wife stopped at the local community college. She’s thinking about taking some art courses there. She sat down to talk to an old friend who works there. Another, mutual friend, who worked there isn’t there anymore.
What happened? On orders from the capital the college was told to tell anyone near retirement to take it and go—or face having their benefits slashed. The college must reduce its workforce by 83 additional people by next fall. This lady knows her benefits will be cut, but she’s divorced and cannot afford to retire right now.
Five art and theater full time faculty members have retired in the past few years. So far they have been replaced by one full time instructor—and lots of low paid, benefit-less adjuncts. College tuition has climbed from $35 a credit hour to $150 in the past dozen years.
I overheard the principal at one of the high schools I substitute teach in responding to a faculty member’s question (“What are we going to do?”) with, “We’re going to privatize, privatize and privatize.” Already the bus drivers, custodians and subs have been privatized. So, who or what is next?
It saves bushels of money to privatize people. Lower, or no, benefits. Less pay. No company paid retirement plan—they can buy into 401K’s on their very low pay. Another member of a high school administration put it to me bluntly, “Next year we’re going to have to lay off teachers”. Have you ever taught in a room with 35 kids? Ha.
Incidentally, substitute teachers are still working at 20th century wages—there are so many people desperate to work as subs that there is no need to raise the pay. Oh yes, and there are a lot fewer conferences scheduled that require subs—fewer jobs, more workers.
I took my car in to get my oil changed today. The establishment, decades old—and located in an affluent neighborhood—had only one customer. Me. I commented on how slow things were, and the proprietor said, “I’ve had a lot of days like this.”
He told me the story of a friend of his who owns a business. Last year the man laid off 80 people. This year—minus all those workers and their benefits—he is making more money than ever before. He has no plans to hire anybody.
I’ve just totaled up a lot of people who have less money to shop in a society that depends on consumer consumption to maintain the economy. That can’t be good. Is this the only place that is happening? I somehow doubt it.
Thursday, February 18, 2010
Job Loss--No One's In Charge
In the hue and cry over lost jobs—especially those that have departed for foreign parts—one very real problem is being overlooked. It’s a problem that the United States faced before, and it took us the better part of a century to get a handle on it the first time.
True, a lot of the difficulty with jobs going overseas and major corporate misbehavior is greed, desire to avoid taxes political ineptitude, etc. But there is a significant factor that is merely a consequence of continued growth, almost an evolutionary thing.
Let’s look at the first time we faced this situation. Back when the Constitution was written, in 1787, the United States had almost no industry whatsoever. The largest business in the country may well have been no bigger than a general store or an independent hardware store.
It never crossed anyone’s mind that there might EVER be a need for federal interference with or regulation of a business behavior. About all the Constitution says about regulating business is that no state may charge tariffs or tolls on goods from another state. Any regulation of business itself was left to the state it was in. That worked for a few years.
Then Jefferson embargoed goods from France and England, and we were forced to build our own factories. Shortly after that someone invented something called a railroad and it became possible to ship goods from a business in one state to outlets in a dozen others.
The railroads themselves quickly became too big for any one state to control. How could the state of Indiana, for instance, exercise effective control over the behavior of a railroad that originated in New York and ran through it to Illinois? It couldn’t.
American business entered a period of more than half-a-century in which literally no one exercised any control over its behavior. (Nelson Rockefeller was once asked if his grandfather, Standard Oil magnate John D. Rockefeller, ever broke any laws.
Nelson, himself a governor and a Vice President, thought for a moment. “No,” he said, “grampa didn’t BREAK any laws—but they sure made a lot of laws BECAUSE of him.” John D. enforced his oil monopoly with, among other things, sticks of dynamite applied none to gingerly to a competitor’s stocks of crude oil.
“Commodore” Vanderbilt created his monopoly over ferry boats in New York harbor by dynamiting any competitor who wouldn’t sell out to him. He pretty much ran his railroads the same way, making the famous comment, “My God, John, you don’t think you can run a railroad according to laws of the State of New York, do you?” He didn’t bother.
Banker Pierpont Morgan could contemptuously dismiss a presidential complaint by suggesting, “You send your man (the Secretary of Treasury) to see my man (his personal secretary), and they can work it out.” He saw a president as merely an equal, if that.)
It took decades of creating commissions (like that Interstate Commerce Commission—which for years was completely powerless), passing laws, and finally stocking the Supreme Court with men who thought it might be okay for the Federal Government to exercise some control over business and banking. It was a long, bitter political fight.
Finally, it took the collapse of the markets in 1929, and a loss of half the national product over the next four years, to give Washington real powers of regulation over business coast to coast. But business has continued to grow. Now it doesn’t just run through Indiana unregulated, it spans foreign continents with no state or national power having the jurisdiction to make it behave.
It can send jobs where it likes, where they are cheapest; it can move its plants to places that have the lowest tax rates—across oceans. Once again, we have “railroads”, “banks” and “oil monopolies” too big and too wide spread for any one governmental entity to control them.
No one tax code applies, no set of regulations. They can be a law unto themselves.
So how do we get them back under control? The United Nations? A single World Government? An absolutely appalling thought. But come up with another one that works. Until then, just hope some Commodore Vanderbilt isn’t mad at the ferry you happen to be riding. At the very least, he might ship your job to China.
True, a lot of the difficulty with jobs going overseas and major corporate misbehavior is greed, desire to avoid taxes political ineptitude, etc. But there is a significant factor that is merely a consequence of continued growth, almost an evolutionary thing.
Let’s look at the first time we faced this situation. Back when the Constitution was written, in 1787, the United States had almost no industry whatsoever. The largest business in the country may well have been no bigger than a general store or an independent hardware store.
It never crossed anyone’s mind that there might EVER be a need for federal interference with or regulation of a business behavior. About all the Constitution says about regulating business is that no state may charge tariffs or tolls on goods from another state. Any regulation of business itself was left to the state it was in. That worked for a few years.
Then Jefferson embargoed goods from France and England, and we were forced to build our own factories. Shortly after that someone invented something called a railroad and it became possible to ship goods from a business in one state to outlets in a dozen others.
The railroads themselves quickly became too big for any one state to control. How could the state of Indiana, for instance, exercise effective control over the behavior of a railroad that originated in New York and ran through it to Illinois? It couldn’t.
American business entered a period of more than half-a-century in which literally no one exercised any control over its behavior. (Nelson Rockefeller was once asked if his grandfather, Standard Oil magnate John D. Rockefeller, ever broke any laws.
Nelson, himself a governor and a Vice President, thought for a moment. “No,” he said, “grampa didn’t BREAK any laws—but they sure made a lot of laws BECAUSE of him.” John D. enforced his oil monopoly with, among other things, sticks of dynamite applied none to gingerly to a competitor’s stocks of crude oil.
“Commodore” Vanderbilt created his monopoly over ferry boats in New York harbor by dynamiting any competitor who wouldn’t sell out to him. He pretty much ran his railroads the same way, making the famous comment, “My God, John, you don’t think you can run a railroad according to laws of the State of New York, do you?” He didn’t bother.
Banker Pierpont Morgan could contemptuously dismiss a presidential complaint by suggesting, “You send your man (the Secretary of Treasury) to see my man (his personal secretary), and they can work it out.” He saw a president as merely an equal, if that.)
It took decades of creating commissions (like that Interstate Commerce Commission—which for years was completely powerless), passing laws, and finally stocking the Supreme Court with men who thought it might be okay for the Federal Government to exercise some control over business and banking. It was a long, bitter political fight.
Finally, it took the collapse of the markets in 1929, and a loss of half the national product over the next four years, to give Washington real powers of regulation over business coast to coast. But business has continued to grow. Now it doesn’t just run through Indiana unregulated, it spans foreign continents with no state or national power having the jurisdiction to make it behave.
It can send jobs where it likes, where they are cheapest; it can move its plants to places that have the lowest tax rates—across oceans. Once again, we have “railroads”, “banks” and “oil monopolies” too big and too wide spread for any one governmental entity to control them.
No one tax code applies, no set of regulations. They can be a law unto themselves.
So how do we get them back under control? The United Nations? A single World Government? An absolutely appalling thought. But come up with another one that works. Until then, just hope some Commodore Vanderbilt isn’t mad at the ferry you happen to be riding. At the very least, he might ship your job to China.
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