March 29, 2024

Economix Blog: College Is Worth It

We get a lot of questions (complaints, really) about whether college is worth the money, given how much it costs. If our previous reporting on the lower unemployment rates for college grads hasn’t convinced you, maybe this chart from the Federal Reserve Bank of Cleveland will:

DESCRIPTIONSource: Dionissi Aliprantis, Timothy Dunne and Kyle Fee, Federal Reserve Bank of Cleveland.

Not only do college grads earn significantly more than people whose highest educational attainment is a high school diploma, but that wage premium has been steadily increasing, to almost twice as much in 2010.

Article source: http://feeds.nytimes.com/click.phdo?i=6f61b2ec13c3dbef0da650bbc0a9e911

Economix: A Decline in American Entrepreneurship

American workers weren’t the only ones sacrificed by the Great Recession. Start-ups suffered, too.

A new paper from the Federal Reserve Bank of Cleveland tracks various measures of entrepreneurship over the last few years. It found that the number of businesses with employees — one indicator of entrepreneurial activity, like self-employment — took a nosedive.

The chart below shows the number of businesses in the United States, adjusted for population growth.

DESCRIPTIONScott Shane, “The Great Recession’s Effect on Entrepreneurship,” Federal Reserve Bank of Cleveland.

As you can see, the population-adjusted number of businesses began falling even before the recession officially began in December 2007. But once the downturn hit, the number of businesses began falling precipitously.

Some of that decline was because of business failures. But it was primarily tied to the lack of new business formation. The report’s author, Scott Shane, writes:

68,490 more businesses closed in 2009 than in 2007, an 11.6 percent increase in the business closure rate. But in 2009, 115,795 fewer employer businesses were founded than in 2007, a 17.3 percent decline in firm formation.

The financial crisis held back new business formation in many other countries, too, as documented by this paper presented last fall at the Federal Reserve Bank of Atlanta.

Given these findings, it is perhaps no wonder that the job market is still so poor.

Young businesses (not small businesses, despite what politicians may tell you) are the biggest engines of job growth. With so few businesses forming, hiring is staying very depressed. And the main problem in the job market is not layoffs — which are at a record low — but new hiring.

Article source: http://feeds.nytimes.com/click.phdo?i=a3cda0409b0878d08322a0b53f988884