description of the economic future of young america

8/14/2019 DESCRIPTION OF THE ECONOMIC FUTURE OF YOUNG AMERICA

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ST

ATE

ECONOMIC

OFYOUNGAMERIC

A

DmosA NETWORK FOR IDEAS & ACTION

Tamara

DRAUT


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About DE

-

mosDmos is a non-partisan public policy research and advocacy organization. Headquartered in New York City, Dmos works with advocates and pol-icymakers around the country in pursuit o our overarching goals: a more equitable economy; a vibrant and inclusive democracy; an empoweredpublic sector that works or the common good; and responsible U.S. engagement in an interdependent world.

Te Economic Opportunity Program addresses the economic insecurity and inequality that characterize American society today. Te programoers resh analysis and bold policy ideas to provide new opportunities or low-income individuals, young adults and nancially-strapped amiliesto achieve economic security.

Dmos was ounded in 2000.

Miles S. Rapoport, President

amara Draut, Director, Economic Opportunity Program

About thE Author

amara Draut is the Director o the Economic Opportunity Program at Dmos, where she has authored numerous reports and conducted ground-breaking research on the economic concerns o young people, the state o the middle class and, in particular, the growth o household debt inAmerica. amaras work on debt has been covered extensively by dozens o newspapers, including Te New York imes, Te Washington Post, Chicagoribune, Te Wall Street Journaland USA oday. amara is a requent television commentator and has appeared on the oday Show, ABC WorldNews onight, CNNs Lou Dobbs onight and Fox News.

amara Draut is also the author oStrapped: Why Americas 20- and 30-Somethings Cant Get Ahead

(Doubleday, 2006 - www.strappedthebook.com).

ACKNoWLEDGEmENts

Much o the data in this report was generated by Jos Garca, Senior Research and Policy Associate at Dmos. In addition to data generated byDmos, this data book utilizes data generated by many other organizations and individuals. Te comprehensive portrait o young America, particu-larly the analysis o jobs and income, would not be possible without the contributions rom the Economic Policy Institutes State o Working Ameri-ca, as well as research rom the Center or Economic and Policy Research. Te analysis o student loan debt was greatly enhanced by the work o theProject on Student Debt and the National Consumer Law Center. While I thank these institutions and the individuals or their work, any mistakesor errors in the analysis are solely my own.

Design and layout by Aaron Brown, with assistance rom Cory Isaacson. im Rusch was an editor o this report.

DmosA NETWORK FOR IDEAS & ACTION


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ECoNomIC stAtE oF YouNG AmErICAtaaa Da

sping 2008


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Stephen B. Heintz, Board ChairRockeeller Brothers Fund

Ben Binswanger

Te Case Foundation

Christine ChenAPIA Vote

Amy Hanauer

Policy Matters Ohio

Sang JiWhite & Case LLC

Van JonesGreen For All

Eric Liu

Author and EducatorClarissa Martinez De Castro

National Council o La Raza

Arnie Miller

Isaacson Miller

Spencer Overton

Te George Washington University School o Law

Wendy Puriefoy

Public Education Network

Miles Rapoport

President, Dmos

Amelia Warren yagiBusiness alent Group

Ruth WoodenPublic Agenda

Charles R. Halpern, Founding Board Chair Emeritus

Visiting Scholar, University o Caliornia Law School, Berkeley

On Leave:

Robert Franklin

Morehouse College

David SkaggsColorado Department o Higher Education

Ernest ollersonMetropolitan ransportation Authority

Aliations are listed or identication purposes only.

As with all Dmos publications, the views expressed in thisreport do not necessarily refect the views o the Dmos

Board o rustees.

bad Diec:

Cpyig

2008 Dmos: A Network or Ideas & Action


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Table of ConTenTs

INtroDuCtIoN 1

Jobs AND INComE 3

Eaning/Ince 4

Pvey rae 7

Eplyen/uneplyen rae 8

Incaceain rae 9

J Qaliy 10

healcae sa 11

DEbt AND sAVINGs 13

sden Lan De 14

Cedi Cad De 18

De bden 20

CoLLEGE ACCEss AND AttAINmENt 22

Cllege C 23

Enllen tend 24

Cplein and Degee Aainen 25

housING 27

Living wi Paen 28

ren C 29

hewneip rae 30

rAIsING A FAmILY 32

La Fce Paicipa in rae 33

Paenal/maeniy Leave 34

Cild Cae: C and uage 35

PoLICY rECommENDAtIoNs 38


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7/521ECONOMIC STATE OF YOUNG AMERICA

inTroduCTionodays 20-somethings are likely to be the rst generation to not be better o than their parents.Evidence o their declining economic opportunity and security abound, rom widespread debt tolower earnings in todays labor market or all but those with advanced degrees. Young people arethe most likely to be uninsured o any age group; not because they think theyre invincible, butbecause our nations employer-based system was designed during a dierent era, or a dierent

generation.As this generation makes its way to adulthood, the levers o opportunity and pillars o economicsecurity that once ueled and dened Americas middle class have weakened or become anti-quated.

Te social contract that emerged ater World War II represented a grand bargain between gov-ernment, business and workers that ushered in unprecedented prosperity. From the GI Bill to themortgage interest tax deduction to employer-sponsored health care, America created a compre-hensive set o policies to drive upward mobility and promote sustainable economic security.

Te world has changed dramatically since the 1970s, with technology and globalization vastlyaltering the nature o work. Global competition has put downward pressure on American wagesand the new jobs created in the service economy pay less than the manuacturing jobs they re-placed. An emphasis on short-term prots has created pressures or businesses to slash costs andtrim employee benets. As each decade has unolded since the 1970s , these trends have made get-ting into the middle class and staying there more dicult or each successive generation. odays20-somethings have the misortune to be coming o age at the very culmination o these changes.Tey are suering the consequences o our ailure to modernize the social contract and adapt tochanging economic and social realities. oday, our workorce development and higher educationstrategies are unsophisticated. Our amily policies are woeully inadequate. And the saety net isantiquated.

Tis data book is designed to provide a comprehensive portrait o todays 20-somethings and

where possible, compare their economic status to that o the previous generation when they werejust starting out. Te book is organized into ve key areas: jobs and income, debt and savings,college access and attainment, housing and raising a amily. We also provide an initial blueprintor policy change. Te work o modernizing our social contract will not happen without a majornational commitment to the endeavor. For our part, Dmos will be working to elevate these issuesand educate policymakers. Most importantly, we will engage young people in the ght to revital-ize the American ideal o upward mobility and economic security, or generations to come.


8/52Demos: A Network for Ideas and Action2


9/52 3ECONOMIC STATE OF YOUNG AMERICA

Jobs and inCoMeTe typical earnings o ull-time workers age 25 to 34 are lower today than they were a generationago, except among women with college degrees. Among young workers without college degrees,the incomes o young women have remained relatively fat, while the incomes o young men havedeclined considerably. Young males with no education beyond high school are earning 29 percentless than they did in 1975, with non-college-educated young Arican-American men experiencing

the steepest drop in incomes and the greatest decline in their labor orce participation.1

Te paycheck decline experienced by this new generation o young workers can partly be ex-plained by the disappearance o manuacturing jobs that oered good wages or workers withoutcollege degrees, and the prolieration o low-wage service sector jobs in their place, with no publicpolicy investments or proessionalizing those jobs or the presence o unions to provide workerswith collective bargaining power. Unions, which helped acilitate upward mobility, particularlyor those outside the proessional ranks, have a largely diminished presence or this generation,rom 26 percent o the private sector workorce in 1974 to just under 8 percent in 2004.

As a result o changes in job quality, young workers are more likely to hold jobs that oer ewringe benets, such as health insurance and pensions. oday, one out o three young adultsa

ull 18.2 million 18- to 34-year-oldsdo not have health insurance, making them the age groupwith the largest percentage uninsured.2

In addition to working in jobs without benets, moving up the wage or career ladder in the neweconomy is more dicult than it was a generation ago. Te well-paying middle-management jobsthat characterized the workorce up to the late 1970s have been eviscerated. Corporate downsiz-ing in the 1980s and 1990s slashed positions in the middle o the wage distribution, and todayoutsourcing threatens to take millions more. Future job growth is projected to be concentratedin lower-wage sectors o the economy, with service-providing industries comprising more thanthree-quarters o all jobs in 2016, with some occupational exceptions such as registered nurses.3Between 2006 and 2016, the top ve occupations adding the most jobs, in order o size, will be:

registered nurses, retail sales persons, customer service representatives, ood preparers and oceclerks.


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Demos: A Network for Ideas and Action4

Falling beind:Ince Yng Peple

In 2006, typical incomes or white young adults were 25 percent higher than or Arican Amer-icans and 30 percent higher than or Latinos. Asian-American young people had the highestannual incomes11 percent higher than whites, 33 percent higher than Arican Americans,and 38 percent higher than Latinos (able 1B).

ypical earnings or young men have declined over the course o a generation, alling 19 per-cent between 1975 and 2005. ypical earnings or young women have increased by nearly 4percent over the same period (able 1A).

able 1A: Median Annual Earnings,25-34 Year Olds (2004 dollars)

Men

1975 2005

$43,416 $35,100

Women

1975 2005

$29,184 $30,300

Source: U.S. Census Bureau, Current Population Survey,March and Annual Social and Economic Supplement,

1975 - 2006

able 1B: Median Annual Income or25-34 Year Olds, 2006

Latino $22,200

African American $23,836White $31,548

Asian $35,653

Note: Latino reers to Hispanic, non-white; Arican Americanreers to Arican American alone; and White reers to White

alone, non-Hispanic.

Source: U.S. Census Bureau, Current Population Survey, 2007Annual Social and Economic Supplement


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5ECONOMIC STATE OF YOUNG AMERICA

Aggregate trends mask signicant chang-es in the incomes o young workers bygender and level o education. Young menwith less than a high school education ex-perienced the largest generational decline,with median earnings 34 percent lowerthan in 1975 (able 1C).

Te second largest decline in earningsoccurred among young men who had nourther education beyond a high schooldiplomadropping 29 percent between1975 and 2005 (Graph 1.1). Median earn-ings or young men with some college de-clined by 21 percent during the same pe-riod (Graph 1.2).

Among young women, median earningsrose only or those with a bachelors de-

gree or higher, increasing nearly 10 per-cent between 1975 and 2005 (able 1C).

Young women without bachelors de-grees have experienced less dramatic de-clines in their earning power compared totheir male counterparts over the courseo a generation. Earnings declined by 13percent or women with less than a highschool diploma and 10 percent or thosewithout education beyond high school(able 1C).

Graph 1.2: Median Annual Earnings,Workers with Some College, 1975-2005

(2004 dollars)

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2005

2004

2003

2002

2001

2000

1995

1990

1985

1980

1975

Men Women

$44,958

$29,789

$35,500

$28,100


1975 - 2006

Graph 1.1: Median Annual Earnings, Work-ers with High School Diploma, 1975-2005

(2004 Dollars)

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2005

2004

2003

2002

2001

2000

1995

1990

1985

1980

1975

Men Women

$41,438

$26,278

$29,600

$23,500


1975 - 2006

Graph1.3:Median Annual Earnings, Work-ers with Bachelors Degree or Higher,

1975-2005 (2004 dollars)

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2005

2004

2003

2002

2001

2000

1995

1990

1985

1980

1975

Men Women

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$49,384

$35,991

$48,400

$39,500


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Demos: A Network for Ideas and Action

able 1C: Median Annual Earnings, by Gender and Education, Workers Age 25-34, 1975-2005 (2004 Dollars)

1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 % change1975-2005

% change1995-2000

% change2001-2005

Males

All 43,416 40,600 39,100 36,700 34,200 37,800 37,600 37,300 36,500 36,300 35,100 -19.1% +10.50% -6.6

Less than high school 35,753 30,700 27,500 25,200 24,100 23,200 23,800 24,000 23,100 23,600 23,500 -34.2% -3.7% -1.2%

High school diploma or equivalent 41,438 38,800 35,200 32,000 29,700 32,300 31,400 31,100 30,900 30,400 29,600 -28.5% +8.8 -5.7%

Some college 44,958 40,800 39,800 37,600 33,000 38,000 37,400 37,300 36,000 36,400 35,500 -21.0% +15.2 -5.1%

Bachelors degree or higher 49,384 46,300 48,200 46,000 46,400 50,900 51,200 51,400 49,600 50,700 48,400 -1.9% +9.7 -5.5%

Females

All 29,184 27,600 29,100 28,900 27,500 30,100 31,200 31,600 31,500 31,000 30,300 +3.8% +9.5% -2.9%

Less than high school 20,439 19,900 19,600 18,200 17,100 18,500 17,900 18,000 19,800 18,700 17,800 -12.9% +8.2% -.5%

High school diploma or equivalent 26,278 25, 500 25,000 23,700 21,800 23,500 24, 200 24,600 24, 400 24,000 23,500 -10.6% +7.8% - 2.9%

Some college 29,789 27,800 28,900 29,000 26,700 27,800 28,100 28,200 28,000 28,800 28,100 -5.7% +4.1% 0.0%

Bachelors degree or higher 35,991 34,100 36,900 38,800 37,300 39,900 40,200 42,000 41,300 40,300 39,500 +9.8% +7.0% -1.7%

Source: U.S. Census Bureau, Current Population Survey, March and Annual Social and Economic Supplement, 1975 - 2006

Incomes rose among young workers o all educational levels between 1995 and 2000, due totight labor markets and strong economic growth. Wage growth was particularly impressive or

young men with some college, whose earnings rose 15 percent. Despite strong gains duringthis period, by 2000, median earnings or young workers were still below their 1975 level orall but those with bachelors degrees or higher (able 1C).

Ater rising between 1995 and 2000, median earnings or young workers ell across all educa-tional levels between 2001 and 2005 with the exception o young women with some college,whose earnings were unchanged (able 1C).


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Pvey: Wide Gap AppeaEaly in Adld

Poverty among young people age 18 to 24 is higher than the national average, with nearly 18percent living below the ocial poverty line. Te poverty rate among 25- to 34-year-olds mir-rors the national rate (able 2A).

Poverty rates among young adults o dierent racial groups mirror the trends among these

groups in the population overallwith large disparities in the poverty rate between whites andpeople o color (able 2A). Te poverty rate o young Arican Americans age 25 to 34 is morethan double that o white young adults, 23 percent to 8.5 percent respectively. Te poverty rateamong young Latinos alls in the middle at 18 percent (able 2A).

able 2A: Percent o Young People Living in Poverty, by Race, 2006

White AfricanAmerican

Latino(any race)

Asian All Races

TotalPopulation

8.2% 24.3% 20.6% 10.3% 12.3%

18 to 24Year Olds

14.6% 27.5% 21.0% 16.6% 17.8%

25 to 34Year Olds

8.5% 23.1% 18.0% 8.7% 12.3%

Source: U.S. Census Bureau, Current Population Survey, 2007 Annual Social and Economic Supplement


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Yng and Jle:hig rae uneplyen Ang Yng Peple Cl

Young Arican-American men have the highest rate o unemployment among young peopleand the lowest percentage o individuals participating in the workorce (able 3A). Te declineo manuacturing jobs, the loss o employment in central cities, as well as persistent discrimi-nation and high levels o incarceration, are all contributing actors to this employment gap.4

Te unemployment rate among Arican-American young peopleboth men and womenismore than double that o whites and nearly double that o the young population overall (able3A).

Between 1979 and 2000, the labor participation rate among non-college-educated young mendeclined or all racial groups, though Arican-American men experienced the steepest de-clines (data not shown). Non-college-educated young women o all races experienced over-all increases in their labor participation, mostly due to growth during the 1990s, with youngwomen o color experiencing the most signicant gains.5

In general, young women have lower levels o employment than men, a refection o continueddierences in labor participation among women and men with children.

able3A: Employment Rate o Young People, 2007

Men Women

(unemployment rate) 20-24 years old 25-34 years old 20-24 years old 25-34 years old

All races 71.7 (8.9) 87.9 (4.7) 65.0 (7.3) 71.0 (4.6)

White 74.8 (7.6) 89.5 (4.1) 67.1 (6.2) 71.6 (3.9)

African American 59.1 (16.9) 78.2 (9.1) 56.8 (13.6) 71.6 (8.1)Latino 79.1 (7.4) 89.9 (4.5) 57.6 (8.5) 61.0 (5.6)

Asian 55.3 (6.9) 86.8 (2.8) 57.5 (4.2) 64.2 (3.7)

Source: Bureau o Labor Statistics, http://www.bls.gov/cps/cpsaat3.pd


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J Qaliy Decline Yng Wke

Based on research by the Center or Eco-nomic and Policy Research, compared toa generation ago, the share o good jobshas declined or all but the oldest workers,despite gains during the mid-1990s (able

4A).

Te percentage o young workers in bad jobs has increased since 1979, grow-ing rom 34.7 percent to 40.8 percent by2004the largest increase in workers withbad jobs o any age group (Graph 4.1).

Te likelihood o being in a good job in-creases with the workers level o educa-tion, and that connection is even strongertoday than a generation ago. For example,

22.5 percent o workers with only a highschool degree were in a good job in 1979,compared to 15.8 percent in 2004 (datanot shown).8

able 4A: Share o Good Jobs and Bad Jobs, 1979-2004

18-34 years old 35-54 years old 55-64 years old

Good Jobs

1979 16.2 34.1 33.1

1983 13.6 32.6 32.9

1989 13.0 32.5 30.7

1993 11.5 30.5 27.9

2000 14.4 31.3 33.0

2004 14.1 31.3 33.0

Bad Jobs1979 34.7 20.3 20.9

1983 38.5 20.4 20.5

1989 40.8 20.9 21.8

1993 43.8 21.1 21.1

2000 40.2 18.0 17.2

2004 40.8 19.0 15.8

Source: John Schmitt, How Good is the Economy at Creating Good Jobs?Center or Economic and Policy Research, October 2005

Dening Good and Bad Jobs

A Good Job:

Pays more than $16 per hour (or $32,000annually)

Oers employer-provided health insur-ance

Oers any type o pension, including de-ned-contribution plans (such as a 401k)

A Bad Job:

Pays less than $16 per hour

Ofers no health insurance or pension plan

Graph 4.1: Share o Good and Bad Jobs orYoung Workers, 1979-2004

0

5

10

15

20

25

30

35

40

45

50

Bad Jobs Good Jobs

200420001993198919831979

34.7

40.8

14.116.2

Source: John Schmitt, How Good is the Economy at CreatingGood Jobs? Center or Economic and Policy Research, able2, October 2005


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uncveed: Yng Adl me Likely be unined and Peninle

In 2006, 31 percent o young adults age 19 to 24 and 27 percent o young adults age 25 to 34were uninsureda rate higher than any other age group.9

Over 18 million young people age 18 to 34 did not have health insurance in 2006.10

Latinos and Arican Americans are both at greater risk o being uninsured than white youngadults: 36 percent o Arican Americans and 52 percent o Latinos age 19 to 29 are uninsured,

compared with 24 percent o whites in that age range (data not shown).11

Young workers, particularly those without college degrees, are much less likely to have healthinsurance rom their employer compared to a generation ago (data not shown). In 1979, 63.3percent o recent high school graduates had employer-provided health insurance, comparedto 33.7 percent in 2004. Among recent college graduates, the percentage dropped rom 77.7percent to 63.5 percent over the same time period.12

Graph 5.1: Distribution o Non-Elderly Uninsured Population,by Age, 2006

Source: Te Uninsured: A Primer, Kaiser FamilyFoundation, October 2007

0-18

20%

55-64

9%

35-54

32%

19-34

39%

Young People

Make Up

39% of the

Uninsured Population


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able 5A: Health Insurance Coverage o Adults, 2006

Private Public Uninsured

Employer Individual Medicaid Other

All Adults under 65 63.2% 5.9% 7.8% 2.8% 20.4%

Age 19-24 45.6 11.1 10.8 1.3 31.2

Age 25-34 58.9 4.3 8.5 1.2 27.1

Age 35-44 67.9 4.6 7.0 1.6 18.9Age 45-54 69.9 5.0 6.7 3.0 15.3

Age 55-64 66.3 6.7 7.4 6.8 12.7

Source: Kaiser Commission on Medicaid and the Uninsured, Health Insurance Coverage in America, 2007, able 1

Young men age 18 to 34 are more likely to be uninsured than young women o the same age, 33percent to 25 percentdue to womens eligibility or public health coverage through Medicaid(data not shown). welve percent o young adult women receive health insurance throughMedicaid, compared to 7 percent o men.13

Pension coverage, which was always less common among non-college-educated young work-ers, ell rom 36 percent in 1979 to 18.8 percent in 2004. College-educated young workers arestill more likely to have coverage, though the percentage declined to less than hal, rom 54.6percent in 1979 to 49.3 percent in 2004 (data not shown).14


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debT and saVinGsDebt has become a generation-dening characteristic or todays young adults. Te problem otenbegins with student loan debt, which aects both community college and 4-year college students.wo-thirds o students borrow money to pay or college, up rom just under hal in 1993, andgraduate rom college with an average student debt o $19,200.15 As tuitions have outpaced amilyincome and ederal student loan limits, more young people are taking out private student loans

to ll the gap. In 2004-2005, students borrowed about $14 billion in private loans, a 734 percentincrease rom a decade earlier.16 Private loans typically carry higher interest rates and less fexiblepayment options than ederal loans. One survey ound the average variable interest rate on privatestudent loans was 11.5 percent and that rates went as high as 19 percent (ederal student loanshave xed rates o 6.8 percent).17

While education debt is oten considered good debt, growing student loan burdens are impact-ing young peoples ability to save and build wealth. Young adult households without student loandebt have more home equity and higher nancial assets than young households with student loandebt.18

Te debt problem doesnt end with student loans. odays 20- and 30-somethings are relying more

on credit cards to cover basic living expenses, particularly during those rst ew years in the work-place. As starting salaries have ailed to keep pace with rising student loan bills, housing costs orhealth care costs, the credit line serves as a lie line or many young people.

Te ensuing debt is exacerbated by a host o credit card industry practices such as universal de-ault and penalty interest rates, which make it exceedingly dicult to pay down the debt in atimely manner. Rising debt also threatens the ability o young adults to manage the costs o day-to-day living, build assets, save or retirement and support a amily.

New orms o high-cost credit, such as payday loans, have prolierated to ll the expanding rankso the cash-strapped. Payday lenders, which now outnumber ast-ood outlets, are concentratedin urban communities and military bases. Congress recently passed a law prohibiting interest

rates higher than 36 percent on payday loans made to military members, but everyone else is stilllegally being charged ees equivalent to anywhere rom 300 to 500 percent.


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Graph 6.1: Median Student Loan Debt, 1993-2004 (2004 dollars)

Source: American Council on Education, Federal Student Loan Debt : 1993 to 2004, Issue Brie, June 2005

Graph 6.2 Percentage o Borrowers Who Drop Out, by ype o Institution Attended

23%

19%

24%

32%

0 5 10 15 20 25 30 35

Freshman at private, for-profit,

less-than-4-year institutions

Freshman at public 2-year colleges

Freshman at 4-year institutions who

expect to attain a bachelor's degree

Freshman at all Institutions

Note: Percentages are or rst-time reshmen who rst enrolled in 19 95-96, and their status in 2001.

Source: Lawrence Gladieux and Laura Perna, Borrowers Who Drop Out : A Neglected Aspect o the College Student Loanrend, Te National Center or Public Policy and Higher Education

sden Lan De

In 2004, the median student loan debt orgraduates o 4-year public colleges anduniversities was $14,671 (mean $17,250),a 78 percent increase rom a decade ear-lier (Graph 6.1).

In 1993, less than hal o all 4-year grad-uates had student loans; today, nearlytwo-thirds graduate with debt (data notshown).19

One out o our borrowers who graduatedin 2004 had more than $25,000 in studentloans (data not shown).20

Low-income students, particularly thosewho receive Pell grants, are much morelikely to have student debt than other stu-dents. Among Pell grant recipients whoearned their degrees in 2004, 88.5 percenthad student loans, compared to just overhal (51.7 percent) o non-Pell recipients(data not shown).21 Pell grant recipientsalso carried 12 percent higher debt, car-rying on average $20,735 in student loandebt versus $18,420 or non-Pell recipi-ents.

A high percentage o students who bor-row or collegemore than one out o ve

(23%)drop out o college, leaving themwith debt to repay but no degree (Graph6.2).

Te median debt o borrowers who dropout is $10,000, with a median monthlydebt payment o $125 (data not shown).

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Bachelor'sDegree Private

4-year

Bachelor'sDegree Public

4-year

Associate'sDegree Public

2-year

$3,427

$5,879

$8,226

$14,671

$12,639

$17,125

2004

1993


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State

Average Debt

(% with Debt)

New Mexico $28,770 (81%)

District of Columbia $27,757 (49%)

New Hampshire $24,800 (71%)

Alaska $24,656 (52%)

Vermont $23,839 (66%)

Connecticut $23,469 (58%)

Minnesota $23,375 (72%)

Iowa $22,926 (74%)

Maine $22,877 (72%)

Pennsylvania $22,776 (69%)

Rhode Island $21,577 (52%)

Indiana $21,179 (58%)

Michigan $21,169 (60%)

South Dakota $21,103 (84%)

New York $21,092 (66%)

Idaho $20,696 (68%)

North Dakota $20,644 (66%)

Ohio $20,525 (65%)

Alabama $20,389 (56%)

West Virginia $20,360 (61%)

New Jersey $20,142 (65%)

South Carolina $19,697 (57%)

Oregon $19,667 67%)

Tennessee $19,549 (42%)

Florida $19,543 (51%)

Wisconsin $19,536 (64%)

State

Average Debt

(% with Debt)

Arkansas $19,256 (56%)

Nebraska $19,198 (64%)

Massachusetts $19,018 (60%)

Missouri $18,635 (66%)

Colorado $18,565 (48%)

Texas $18,334 (56%)

Mississippi $18,162 (62%)

Washington $18,040 (59%)

Virginia $18,039 (56%)

Arizona $18,026 (48%)

Louisiana $18,012 (52%)

North Carolina $17,760 (55%)

Georgia $17,753 (56%)

Oklahoma $17,680 (55%)

Illinois $17,650 (52%)

Kansas $17,617 (57%)

Delaware $17,589 (48%)

California $17,270 (47%)

Montana $17,209 (72%)

Maryland $16,872 (53%)

Wyoming $16,855 (44%

Kentucky $15,406 (63%)

Utah $12,807 (31%)

Hawaii $11,758 (29%)

Nevada n/a (n/a)

National $19,646 (58%)

Student debt levels vary greatly by state,rom $28,770 or students graduatingrom institutions in New Mexico to a lowo $11,758 or graduates in Hawaii (able6A).22

One contributor to higher levels o studentdebt in a state may be that those states have

higher average tuition. For example, theaverage tuition in New England is $17,367,compared to $9,983 nationallya producto the act that the proportion o privateschools in New England is higher than thenational proportion.23

Te percentage o students who graduatewith debt also varies depending on wherethe student attended college, rom a higho 84 percent o students graduating with

debt in South Dakota to a low o 29 per-cent in Hawaii (able 6A).

In 2006, the national student loan debtwas $19,646, with 58 percent o studentsgraduating with loan debt (able 6A).

able 6A: Average Student Loan Debt, Class o 2006

Source: Project on Student Debt, Student Debt and the Class o 200 6, September 2007


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Arican-American, Latino and American-Indian students are more likely to borrow to pay orcollege than are white students, while Asian students are the least likely to take out student

loans (able 6B). Arican-American and white college students borrow the most, while Ameri-can-Indian students borrow the least o all racial and ethnic groups.

Eighty percent o Arican-American students borrow to pay or college, compared to 71 per-cent o Latino students and 63 percent o white students (able 6B).

able 6B: Student Loan Debt by Race

% Who

Borrowed

19921993

% Who

Borrowed

19992000

Average Debt

19921993

Average Debt

19992000

American Indian 66.2 78.4 $13,300 $16,800

Asian 42.7 60.5 $13,500 $17,900African American 64.1 79.8 $11,400 $19,800

White 47.8 63.7 $12,300 $19,700

Latino 60.7 70.6 $9,500 $17,000

Source: U.S. Department o Education, National Center or Education Statistics, 1993/94 and 2000/01 Baccalaureate andBeyond Longitudinal Studies (B&B:93/94 and B&B:2000/01)


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sden Lan: Ipac n saving and Weal

Young households with education debt have ewer nancial assets and lower home equity thanyoung households that do not have student loans. Households age 18 to 34 carrying educa-tion-related debt had median nancial assets that were 28 percent lower than those house-holds without such debt (able 7A).

Only 6 percent o young adult households with education debt were economically buoyantcompared to 22 percent o those without education debt (able 7A).

Young homeowners that did not have education loans had greater home equity38 percent omedian home value compared to 20 percent among young homeowners with education debt(able 7A).

able 7A: Financial Assets and Home Equity, by Presence o Education Debt, 2004

Median Financial

Assets

Percent of House-

holds that are Eco-

nomically Buoyant*

Median Home Equity

as a Percent of Home

Value

Households Age 18-

34 without Education

Debt$5,720 22% 38%

Households Age

18-34 with Education

Debt$4,100 6% 20%

*Economic Buoyancy is dened as having enough net nancial assets to sustain a

household or at least three months without income.

Source: Dmos calculations o the 2004 Survey o Consumer Finances


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able 8A: Percent o Young Households with Credit Cards and Debt, 1989-2004

1989 1992 1995 1998 2001 2004

Percentchange

1989 - 2004

PercentChange

2001 - 2004

Percent of Households with credit cards

18-24 yr olds 42.9% 50.7% 53.7% 49.4% 56.3% 57.1% 33.0% 1.4%

25-34 yr olds 66.6% 70.9% 72.8% 67.1% 70.8% 65.6% -1.4% -7.3%

Percent of cardholders with credit card debt

18-24 yr olds 70.1% 78.7% 76.7% 78.3% 72.4% 66.3% -5.5% -8.4%

25-34 yr olds 72.5% 70.5% 72.0% 75.5% 69.2% 68.5% -5.4% -0.9%

Percent of income devoted to debt payments (debt-to-income ratio) of households with credit card debt

18-24 yr olds 13% 14% 15% 14% 14% 22% 69.2% 57.1%

25-34 yr olds 16% 16% 17% 20% 20% 25% 56.2% 25.0%

Source: Dmos analysis o Survey o Consumer Finance data, 1989, 1992, 1995, 1998, 2001 and 2004

Among young people with credit card debt, the overall percentage o income devoted to alldebt payments rose substantially or this generation: rom 13 to 22 percent or 18- to 24-yearolds and rom 16 to 25 percent or 25- to 34-year-olds. Tat is, in 2004, 25- to 34-year-oldswith credit card debt spent on average 25 cents o every dollar o income to pay all their debtobligationsmore than double what Baby Boomers o the same age spent on debt paymentsin 1989 (able 8A).

Additional survey research conducted by Dmos o low- to middle-income households oundthat, in 2005, the average indebted adult under age 34 had just over $8,000 in credit card debt(data not shown). According to these households, the most common reasons or their creditcard debt were car repairs, loss o a job and home repairs. Forty-ve percent o those under

age 34 reported using credit cards in the last year to pay or basic living expenses, such as rent,mortgage payments, groceries and utilities.


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oveall De bden

Te median debt-to-income ratio o households with any type o debt increased by 32 percentbetween 1989 and 2004 (able 9A).

Te median debt burden o young households age 25 to 34 rose by 38 percent between 1989and 2004 (able 9A).

Te youngest households (18 to 24 years old) median debt burden increased 148 percent be-

tween 1989 and 2004 (able 9A).

Te typical 25- to 34-year-old household with debt spent 21 percent o its income on debt pay-ments in 2004, up rom 15 percent in 1989 (able 9A).

able 9A: Median Debt-to-Income Ratio o Debtors, 1989-2004

1989 1992 1995 1998 2001 2004

Total 14.2% 14.6% 15.5% 17.5% 16.0% 18.7%

under 25 7.5% 14.4% 13.5% 15.6% 12.4% 18.6%

25 to 34 15.4% 13.1% 16.1% 18.4% 18.8% 21.3%35 to 44 16.0% 18.1% 17.4% 18.9% 17.5% 20.9%

45 to 54 15.9% 15.2% 16.3% 17.9% 16.2% 18.9%

55 to 64 10.2% 15.0% 14.9% 16.6% 13.7% 15.8%

65 + 7.5% 7.0% 7.2% 10.5% 10.7% 13.8%

Source: Dmos calculations o Survey o Consumer Finances data: 1989, 1992, 1995, 1998, 2001 and 2004


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able 9B: Debt Hardship o Debtors, 1989-2004

(Debtors with Debt-to-Income Ratios Greater than 40%)

1989 1992 1995 1998 2001 2004

Total 10.7 11.6 12.0 14.1 12.6 13.8

under 25 12.3 18.3 18.7 20.4 12.6 18.8

25 to 34 12.9 9.7 10.1 13.3 13.7 15.0

35 to 44 10.0 13.6 10.6 12.8 11.6 13.8

45 to 54 10.7 9.8 13.3 13.0 10.5 13.9

55 to 64 9.5 13.8 16.3 14.8 14.6 11.5

65 + 7.6 8.8 9.3 17.0 14.6 12.6


able 9C: Median Liquid Assets or Young Adults (2004 dollars)

1989 1992 1995 1998 2001 2004

18-24 yrs old $440 $265 $369 $591 $639 $700

25-34 yrs old $1,466 $1,318 $1,231 $1,391 $1,704 $1,500


Spending more than 40 percent o income on debt payments is considered a sign o distress ordebt hardship. While younger households debt-to-income ratios are only slightly higher thanthose o their middle-aged counterparts, the percentage o younger households in debt hardshipis higher than all other age groups (able 9B).

Te youngest households, those age 18 to 24, had the highest percentage o households indebt hardship, 18.8 percent in 2004an increase o more than 6 percentage points since 1989(able 9B).

Between 1989 and 2004, debt hardship among young people age 25 to 34 increased rom 12.9percent to 15 percent (able 9B).

Compared to 25- to 34-year-olds in 1989, todays young households have similar levels o sav-ings, with a median o $1,500 in 2004 (latest national data available). While savings grew orthis age group between 1998 and 2001, they ell back to their 1989 levels between 2001 and2004 (able 9C).

Savings or the youngest households, those age 18 to 24, have grown by 37 percent since 1989,to $700 (able 9C).


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tend in Cllege C

Since 1980, tuition at public 4-year universities has more than doubled, ater adjusting orinfation. In 2006, the average tuition at a public 4-year college was $5,836, up rom $3,856 in1996 and $2,628 in 1986 (2006 dollars). Add in room and board charges or 4-year colleges,and the total cost o attending in 2006 was $12,796, up rom $9,258 in 1996 and $7,528 in1986.29

In the last ve years alone, tuition at public our-year colleges has increased 35 percent, higher

than any other ve-year increase rom 1976 to the present.30

uition at community colleges has also risen, though not as steeply. In 2006, the cost o tuitionat 2-year colleges was $2,272, up rom $1,899 in 1996 and $1,227 in 1986.

Graph 10.1: Average uition and Fee Charges, 1976-2006 (2006 Dollars)

Source: College Board, rends in College Pricing, 2006

$0

$1000

$2000

$3000

$4000

$5000

$6000

$7000

Public Four YearPublic Two Year

2004-052000-011996-971992-931988-891984-851980-811976-77

$1,005$1,227

$1,889

$2,272

$5,836

$3,856

$2,628

$2,192


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tend in Cllege Enllen

Te percentage o high school graduateswho enroll in college in the all immedi-ately ater high school increased between1975 and 2005 rom 51 to 69 percent (a-ble 11A).

Gaps in enrollment by income have per-

sisted over three decades, though the di-erence has narrowed slightly. In 1975, 65percent o high-income and 31 percento low-income high school graduates en-rolled in collegea gap o 34 percentagepoints. In 2005, 81 percent o high-incomeand 54 percent o low-income studentsenrolleda gap o 27 percentage points.

Te gap between college enrollmentamong white, Arican-American and La-

tino students has widened over the last 20years.

In 2004, the enrollment gap betweenwhite and Arican-American students was10 percentage points, up rom only 8 per-centage points in 1980 (Graph 11.1).

Te enrollment gap between white andLatino students was 17 percentage pointsin 2004, up rom an 11 percentage pointgap in 1980 (Graph 11.1).

able 11A: Percent o High School Graduates

Who Enroll in College in the Fall, 1975-2005

Total

Low Income

(bottom 20%)

Middle Income

(middle 60%)

High Income

(top 20%)

1975 50.7 31.2 46.2 64.5

1980 49.3 32.5 42.5 65.2

1985 57.7 40.2 50.6 74.6

1990 60.1 46.7 54.4 76.6

1995 61.9 34.2 56.0 83.5

2000 63.3 49.7 59.5 76.9

2005 68.6 53.5 65.1 81.2

Source: U.S. Department o Education, National Center or Education Statistics (2007); Te Condition o Education 2007, Indica-tor 25: Immediate ransition to College, able 25-1, Washington, DC: U.S. Government Printing Ofce

Graph 11.1: Percent o 18-24 Year OldsEnrolled in College, 1980-2004

Source: U.S. Department o Education, National Center orEducation Statistics (2007); Te Condition o Education2007, Indicator 25: Immediate ransition to College, able25-1, Washington, DC: U.S. Government Printing Ofce

0

5

10

15

20

25

30

35

40

45

50

200520001995199019851980

16%

25%

32%

42%

20%

28%

White African American Latino

0

5

10

15

20

25

30

35

40

45

50

200520001995199019851980

16%

25%

32%

42%

20%

28%

White African American Latino


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tend in Cllege Cplein andDegee Aainen

Te percent o 25- to 29-year-olds whocompleted at least some college educationincreased rom 34 to 58 percent between1971 and 2006 (data not shown). Te rateincreased during the 1970s, leveled o

during the 1980s, and increased in theearly and mid-1990s. Since the mid-1990s,the rate has leveled o again.31

For each racial/ethnic group, the percent-age completing at least some college washigher among this generation in 2006 thanamong Baby Boomers in 1976. In 2006, 66percent o white 25- to 29-year-olds hadcompleted at least some college, comparedwith 50 percent o their Arican-Ameri-

can peers and 32 percent o their Latinopeers.32

Te rate or completing a bachelors de-gree or higher was roughly hal the rate orcompleting at least some college duringmost years. Between 1976 and 2006, thepercentage o 25- to 29-year-olds who hadcompleted a bachelors degree or higherincreased rom 24 to 28 percent. Over thelast decade, the rate o college attainmenthas remained relatively fat, between 27and 29 percent (Graph 12.1).

Te percentage o 25- to 29-year-olds witha bachelors degree or higher increasedor all three racial/ethnic groups over thelast three decades. Due to aster growthamong white students, the gaps betweenwhites and their Arican-American andLatino peers widened during this period(Graph 12.1).

Graph 12.1: Percentage o Young People (age 25-29) with Bachelors Degree or Higher

0%

5%

10%

15%

20%

25%

30%

35%

40%

LatinoAfrican

AmericanWhiteTotal

2006199619861976

24%

26%

13%

7%

22%

25%

12%

9%

27%

32%

15%

10%

28%

34%

19%

10%

Source: U.S. Department o Education, National Center or Education Statistics (2007); Te Condition o Education 2007,Indicator 27: Educational Attainment, able 27-3, Washington, DC: U.S. Government Printing Ofce


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In a generational reversal, young women (age 25 to 29) today have higher rates o educationalattainment than men. From 1976 to 2006, the percentage o young women with at least abachelors degree climbed rom 20 percent to 32 percent (able 12A).

In 2006, 32 percent o young women and 25 percent o young men had bachelors degrees orhigher. (able 12A).

Womens educational attainment began surpassing mens in 1991 and has remained higherevery year, with accelerated gains in the mid- to late-1990s (able 12A).

Gaps among women by race persist, though the dierences among women are not as wide asthose among men (able 12A).

Young white women have the highest rates o college attainment at 37 percent, higher than theoverall average o 28 percent (able 12A).

Degrees among young men have declined overall since 1976, rom 27.5 percent to 25.3 per-

cent. However, both young white and Arican-American men o this generation are better-educated, while young Latino men have lost ground (able 12A).

able 12A: Percentage o Young People (age 25-29) with a Bachelors Degree or Higher

Total White African American Latino

Male Female Male Female Male Female Male Female

1976 27.5 20.1 29.8 21.6 12.0 13.9 10.3 n/a

1981 23.1 19.6 25.5 21.7 12.1 11.1 8.6 6.5

1986 22.9 21.9 25.8 24.5 10.3 13.1 8.9 9.1

1991 23.0 23.4 26.5 26.9 11.5 10.5 8.1 10.4

1996 26.1 28.2 30.9 32.3 12.2 16.6 10.2 9.8

2001 26.2 31.1 29.7 36.3 17.9 17.8 9.1 13.3

2006 25.3 31.6 31.4 37.2 15.2 21.7 6.9 12.8

U.S. Department o Education, National Center or Education Statistics (2007); Te Condition o Education 2007, Indicator 27:Educational Attainment, able 27-3, Washington, DC: U.S. Government Printing Ofce


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HousinGOver the past decade, rents and home prices in major cities across the country have escalatedrapidly. As young adults transition rom college into the workorce, already owing nearly $20,000in student loan debt, securing aordable housing in the current market can pose a signicantchallenge. Because our nations largest cities contain the best prospects or high-paying jobsand proessional career paths, young proessionals still migrate to major metropolitan areas like

New York, Chicago, San Francisco and Boston. Te high cost o rent, however, oten leaves themtrapped in a prolonged rental cycle, unable to save enough money or a down payment on a home,or prompts them to become nancially overextended by taking on large, risky home mortgages.

While young proessionals gravitate toward the largest cities, young adults without college de-grees are migrating away rom them. Unable to aord the cost o housing in the cities where theygrew up, many o these young adults are moving to lower-cost alternativescities like Atlanta,Dallas, Phoenix and Las Vegas. Our nations largest and most diverse cities are become virtuallyunaordable or many young people with, and most without, college degrees.

Te rising cost o housing helps explain why, compared to a generation ago, higher percentages oyoung people are considered housing burdeneddened as spending more than 30 percent o

pre-tax income on rent or a mortgage.Despite rising home prices, homeownership increased substantially among young adults between2000 and 2006, rising rom 47 percent to 49 percent. Innovations in mortgage nancing, such asno downpayment loans and the growth o subprime mortgages, were responsible or ueling thesurge in homeownership among rst-time buyers.33 Te rise in homeownership among youngpeople, particularly those who became homeowners with little or no downpayment, may provetenuous as home prices decline in previous red-hot housing markets and adjustable rate mort-gages begin to reset . Young homeowners who bought in these markets may nd themselves hold-ing a mortgage greater than the homes valuea scenario that leaves them without the option torenance. In 2006, one estimate put the number o homeowners with mortgages exceeding the

value o their property at 8.8 million. 34


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ren C

Over the last three decades, the cost orenting an apartment has absorbed a great-er percentage o young peoples income.In 1980, the average gross rent paymentabsorbed 22 percent o a 25- to 34 year-olds income; in 2006, it was 25 percent.

Te youngest adults experienced greaterincreases, rising rom 26 percent in 1980to 32 percent in 2006 (able 14A).

able 14A: Average Gross Rent as a Per-centage o Pre-ax Household Income

1980 1990 2000 2006

18-24 years old 26% 29% 27% 32%

25-34 years old 22% 22% 20% 25%

Note: Gross rent includes amount o rent, plus the estimatedaverage monthly cost o uel and utilities.

Source: U.S. Census Data, 1980-2006, Integrated Public UseMicrodata Series: Version 4.0

Compared to a generation ago, a higherpercentage o young people are spendingmore than 30 percent o their income onrent (designated threshold o aordabil-ity). In 2005, 43 percent o 25- to 34-year-olds spent more than one-third o their

pre-tax income on rent, up rom 18 per-cent in 1970 (graph 14.1).

Te rising rental cost burden is a unctiono two trends: rising housing costs and de-clining incomes.

Graph 14.1: Percentage o Young Adults (Age 25-34) Spending More than 30% oPre-ax Income on Rent

Source: U.S. Census Data, 1970-2000, Integrated Public Use o Microdata Series, and U.S. Census Bureau, 2006American Community Survey

0

5

10

15

20

25

30

35

40

45

20052000199019801970

18%

30%

33%32%

43%


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hewneip

Homeownership rates or young house-holds age 25 to 34 began declining in the1980s, alling rom 48 percent in 1982 to 43percent in 1992. As the market rebound-ed, the late 1990s witnessed the largestnational gain in the homeownership rate

since the 1950s, boosting the young adulthomeownership rate to 47 percent. By2006, 49 percent o those age 25 to 34 werehome owners (able 15A).

As home prices have risen and median in-comes or young households have allen, ho-meownership has become less aordable orthe typical rst-time buyer (Graph 15.1).

Te housing aordability index equals 100when a amily earning the median income

has enough income to qualiy or a mort-gage on a median-priced home, assuminga 20 percent down payment. Between 2000and-2007, aordability declined steadily,dropping rom 81 to 74.

able 15A: Homeownership Rate,1982-2006

Less than 25years

25 to 34 years old

1982 19.3% 48.0%

1983 18.8% 47.0%

1984 17.9% 46.9%

1985 17.2% 46.1%1986 17.2% 45.5%

1987 16.0% 45.5%

1988 15.8% 44.5%

1989 16.6% 44.9%

1990 15.7% 44.2%

1991 15.3% 43.4%

1992 14.9% 43.1%

1993 15.0% 43.7%

1994 14.9% 42.5%

1995 15.9% 44.9%

1996 18.0% 44.9%

1997 17.7% 44.6%

1998 18.2% 45.7%

1999 19.9% 45.9%

2000 21.7% 47.1%

2001 22.5% 47.0%

2002 23.0% 47.8%

2003 22.8% 49.0%

2004 25.2% 49.5%

2005 25.7% 49.2%

2006 24.8% 49.0%

Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey

Graph 15.1 First-ime Housing Aford-ability Index

0

10

20

3040

50

60

70

80

90

100

20072005200320011999199719951993199119891987198519831981

50.7

79.174.1

86.6 86.4

80.9

Rising Index Means More BuyersCan Afford To Enter the Market

Note: Index = 100 when median amily income qualies oran 80 percent mortgage on a median-priced existing single-

amily home.

Source: National Association o Realtors


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Wide gaps in homeownership by race havepersisted over a generation. While 53 per-cent o whites age 25 to 34 owned a home,only 26 percent o Arican Americans and36 percent o Latinos owned their home(able 15B).

Homeownership rates among young Ari-

can Americans have declined since 1980,dropping rom 31 to 26 percent (able15B).

Since 1980, the gap in homeownershiphas narrowed between young Latinosand whites and widened between AricanAmericans and whites (Graph 15.2).

able 15B: Homeownership Rates by Race,1980-2006

1980 1990 2000 2006

White

18-24 24.4 17.9 20.1 20.2

25-34 55.7 49.6 52.1 52.8

Af. Am.

18-24 11.6 7.5 10.5 7.8

25-34 30.5 22.2 27.8 25.7

Latino

18-24 13.5 10.1 15.2 15.625-34 35.2 28.6 33.3 35.7

Source: U.S. Census Data, 1980-2006, Integrated Public UseMicrodata Series: Version 4.0

Graph 15.2: Homeownership Rates by Race, 2006

Source: U.S. Census Data, 1980-2006, Integrated Public Use Microdata Series: Version 4.0

0

10

20

30

40

50

60

WhiteLatinoAfrican

American

2006200019901980

31%

35%

56%

22%

29%

50%

28%

33%

52%

26%

36%

53%


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raisinG a faMilYMost parents with children under the age o six are in their late 20s or early 30s, making issues oamily leave, child care and work fexibility o core concern to young adults under the age o 34.oday, the average age a woman has her rst child is 25, up rom 21 in 1970. And today, the aver-age amily is one in which both moms and dads with young children are in the labor orce. In thelate 1990s, 57 percent o all mothers returned to work within six months o their childs birth and65 percent returned by the end o one year; in the early 1960s, 14 percent returned in six monthsand 17 percent by the end o one year.35

While having children has always been expensive, making the transition to parenthood poses asteeper nancial challenge today. Unlike previous generations, todays young amilies are otenstill paying o student loan debt and juggling mortgages or rents that absorb a larger percentageo their income. Te additional expenses o child care, and the drop in income many amilies ex-perience during the initial months ater the birth o a child can create serious nancial burdensor new parents.

While practically every nation except the United States oers some orm o paid parental leaveproviding an economic saety net that allows parents to bond with their child without ear o

missing a house payment or sliding deeper into debtthe United States does very little to helpderay the costs o child rearing. Forty-ve percent o U.S. workers do not qualiy or Te Familyand Medical Leave Act (FMLA), which requires employers with 50 or more employees to provideup to 12 weeks o unpaid leave to care or a newborn or adopted child. Among those who doqualiy, many cant aord the lost pay associated with taking unpaid leave, and as a result, mostparents dont take parental leave. Only 36 percent o women and 33 percent o men take parentalleave ater having a baby.36

Child care is one o the biggest expenses in a young amilys household budget, oten second onlyto housing payments. Limited subsidies are available to help lower-income parents, mostly singlewomen transitioning o welare, pay or child care. Te generosity o these benets is determinedby each state, but in general, waiting lists or a subsidized spot can be long and eligibility levels are

too low or moderate- or middle-income amilies to qualiy.

Parents pay or the largest portion o child-care costs, contributing about 60 percent; ederal, stateand local governments pay 39 percent; and businesses and oundations cover only 1 percent. 37According to several studies, most child care in this country is o poor to mediocre quality.38 Teprice o child care is r ising aster than infation, with average monthly ees or two children in care

exceeding the median rent cost in nearly every state.39


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La Fce Paicipain Paen

More than hal o women with a child under age one were in the labor orce in 2004, up rom31 percent in 1976 (Graph 16.1).

In 1975, only two out o every ve mothers with a child under age six held a paid job. As o2005, 62.6 percent o women with children under age six were in the labor orce (data notshown), and 59 percent o mothers with children under age three were in the labor orce.40

Te majority o women who work within one year ater the birth o their rst child return tothe same employer (83 percent), and nearly eight out o 10 work the same number o hours asbeore their birth, while 20 percent work ewer hours (data not shown).41

Graph 16.1: Labor Force Participation o Mothers with Young Children, 1976-2004

Note: U.S. Census Bureau does not provide data or 1996.

Source: U.S. Census Bureau, Current Population Survey, 1976-2004

0

10

20

30

40

50

60

70

Children Under Age 1Children Under Age 3

2004

2002

2000

1998

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

34%

57%

31%

55%


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Paenal/maeniy Leave:te Edcainal Divide

During pregnancy and ater their rstbirth, 39 percent o women received paidmaternity leave, and 29 percent receivedunpaid maternity leave. Te availabilityo paid leave diers by level o education,

with 60 percent o women with a bache-lors degree or more using paid leave com-pared to 39 percent o women with only ahigh school diploma.42

Compared to the previous generation, thepercentage o women receiving paid leavehas increased or women at all educationlevels.

In addition to maternity leave, womenalso used paid and unpaid vacation and

sick days during the period beore and a-ter their rst birth, with one out o threecombining paid and unpaid leaves to covertime beore and ater their rst birth.35

Graph 16.2: Percent o Women Who Received Paid LeaveBeore or Ater Teir First Birth

Note: Paid leave includes all paid maternity, sick and vacation leave used beore the birth and up to 12 weeks aterthe birth.

Source: allese D. Johnson, Maternity Leave and Employment Patterns o First-ime Mothers: 1961-2003, Current

Population Reports, U.S. Census Bureau, February 2008

0

10

20

30

40

50

60

70

Bachelor's Degree

or HigherSome CollegeHigh School Graduate

2001-20031991-19951981-19851971-1975

22%

26%27%

43%

49%

59%

29%

40%

63%

39%

49%

60%


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Cild Cae: type ued and I C

Te primary type o child care used by em-ployed mothers with children under ageve varies by education, race and income.Among all employed mothers, paid carewas the most common arrangement with27 percent o children in some type o day

care setting (19 percent ormal day carecenter; 8 percent amily-based care). Tenext most common child care arrange-ments were with a grandparent (20.5 per-cent) or ather (18 percent) (able 17A).

Mothers with bachelors degrees or higherwere more likely to have their children insome type o day care setting, while moth-ers with less education were more likely tohave their children in the care o a grand-parent or other relative (able 17A).

Families with an employed mother and achild under age ve paid on average $129per week or child caredevoting 9 per-cent o the amilys monthly income tochild care (data not shown).44

Te cost burden or child care is muchhigher or amilies living in poverty, with26 percent o amily income devoted tochild care payments (data not shown).45

able 17A: Primary Child Care Arrangements o ChildrenUnder Age 5 with Employed Mothers, Spring 2005

Relative Care Non-Relative Care

Father GrandparentOther

relativeDay care

centerFamily day

careNursery/

preschool

Other

non-relative

(babysitter/nanny)

TOTAL 18.2 20.5 5.4 19.1 7.8 5.3 9.0

AGE OF CHILD

Less than 1 year 19.3 25.4 6.4 16.2 8.5 0.4 9.9

1-2 years 18.5 20.7 5.3 21.0 9.1 2.9 9.5

3-4 years 17.5 18.4 5.1 18.5 6.4 9.5 8.1

RACE OF MOTHER

White alone 19.3 20.2 4.8 18.1 8.5 5.2 9.5

Non-Latino 20.4 18.4 3.6 19.9 9.6 5.9 9.1

African Americanalone

12.7 20.3 7.8 23.6 6.9 5.5 6.9

Asian alone 11.3 28.6 7.0 21.4 1.1 6.3 10.0

Latino (of any race) 15 27.7 9.7 11.7 4.0 2.3 10.7EDUCATION LEVEL OF MOTHER

Less than high

school

23.1 16.8 11.1 10.4 3.2 - 9.3

High schoolgraduate

17.4 27.2 7.8 16.0 4.6 3.1 9.1

Some college 18.6 23.0 5.3 19.2 8.4 5.3 7.8

Bachelors degree orhigher

17.2 13.7 2.5 23.1 10.5 8.0 10.1

WORK STATUS OF MOTHER

Employed full-time 15.7 21.4 5.4 22.5 8.9 5.2 9.1

Employed part-time 25.1 21.2 6.4 11.9 6.5 4.8 8.7

Self-employed 16.8 10.5 1.9 13.1 3.3 7.7 8.7

FAMILY POVERTY LEVEL

Below poverty level 21.1 20.9 7.1 17.1 4.4 1.3 7.9

At or above povertylevel

17.8 20.6 5.1 19.6 8.5 6.0 9.0

100-199 percent of

poverty level

21.2 21.7 8.7 16.5 4.0 2.9 6.5

200+ percent of

poverty level

16.7 20.2 3.8 20.7 10.0 7.0 9.8

Source: U.S. Census Bureau, Whos Minding the Kids? Child C are Arrangements: Spring 2005, able 2B


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able 17B: 10 Least Afordable States or Pre-School Age Care in a Center

Average Annual

Price of Full-Time

Preschool-Age

Care

Child Care as a

Percentage of

Median Single

Parent Family

Income

Child Care as a

Percentage of Me-

dian Two Parent

Family Income

Rank (based on

percentage of

two-parent family

income)

Oregon $9,012 46.1% 14.3% 1

New York $9,391 40.0% 12.1% 2Minnesota $9,204 34.7% 11.9% 3

Massachusetts $10,668 41.8% 11.8% 4

Washington $8,364 35.2% 11.6% 5

Montana $6,108 34.7% 11.2% 6

District of Columbia $10,920 48.6% 10.8% 7

North Carolina $6,756 35.5% 10.6% 8

Maine $6,725 33.6% 10.4% 9

California $7,477 29.3% 10.4% 9

Source: National Association o Child C are Resource & Reerral Agencies, Parents and the High P rice o Child C are,2007 Update

Child care costs vary widely by state, with ull-time care or a toddler ranging rom $3,794to $10,920 and ull-time care or an inant ranging rom $4,388 to $14,647 per year (able17B).46

In every region o the country, child care or two children at any age exceeds the median rentcost and is as high or higher than the median monthly mortgage payment (data not shown). 47

In 30 states, the average annual price o ull-time care or a pre-school age child is greater thanthe average cost o ull-time tuition and ees at the states public our-year colleges (data not

shown).48


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As a percent o state median income or two-parent amilies, the average annual cost o childcare or a pre-school age child ranged rom a high in Oregon o 14.3 percent to a low o 6.6percent in Louisiana.

Single parents ace particularly high cost burdens or child care: the average annual price ocare or a pre-school age child ranges rom 49 percent o the state median income or a single-parent in the District o Columbia to 20 percent in Utah.

able 17C: 10 Least Afordable States or Inant Care in a Center

Average Annual

Price of Full-Time

Infant Care

Child Care as a

Percentage of

Median Single

Parent Family

Income

Child Care as a

Percentage of Me-

dian Two Parent

Family Income

Rank (based on

percentage of

two-parent family

income)

Wisconsin $11,855 50.7% 16.5% 1

Massachusetts $14,647 57.4% 16.2% 2Washington $11,388 48.0% 15.8% 3

Pennsylvania $11,200 50.3% 15.7% 4

Minnesota $12,168 45.9% 15.7% 4

New York $11,887 50.6% 15.3% 6

California $10,745 42.1% 15.0% 7

District of Columbia $14,560 64.7% 14.4% 8

Oregon $8,988 45.9% 14.3% 9

Illinois $10,198 43.4% 13.4% 10

Source: National Association o Child C are Resource & Reerral Agencies, Parents and the High P rice o Child C are, 2007Update


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PoliCY reCoMMendaTions

A New Social Contract

As a new generation makes its way to adulthood, evidence abounds that the levers o opportunityand pillars o economic security that once ueled and dened Americas middle class have beenweakened or become antiquated.

Te social contract that emerged ater World War II represented a grand bargain between govern-ment, business and workers that ushered in unprecedented prosperity. Te economy and publicpolicy worked hand in hand to make a middle-class lie possible or millions o young amilies.Ater World War II, educational attainment rose as the GI Bill and Higher Education Act o 1965increased college access and aordability. Homeownership increased as government programsenabled more people to obtain home loans, made mortgage interest tax deductible, promotedsuburban housing development, and enacted reorms targeting discriminatory lending practices.Income and wealth grew as legislation raised the minimum wage to a historic high in 1968 andpublic policy ueled the economy by ensuring a tight labor market, promoting ull employmentand acilitating union organizing. Tese postwar policy eorts and investments, combined with

the commitment o employers to provide health and pension benets, created a system throughwhich millions o Americans could enter the middle class. Under the postwar social contract,companies provided job stability, regular increases in pay and social insurance protection. Work-ers reciprocated this loyalty through long job tenure and an investment in the quality o the goodsand services they produced. While beneting labor and business, the positive eects o this sys-tem were elt across sectors o American society and throughout the economy.

Te world has changed dramatically since the 1970s, with technology and globalization vastlyaltering the nature o work. Global competition has put downward pressure on American wagesand the new jobs created in the service economy pay less than the manuacturing jobs they re-placed. An emphasis on short-term prots has created pressures or businesses to slash costs andtrim employee benets. As each decade has unolded since the 1970s, these trends have madegetting into the middle class and staying there more dicult or each successive generation. Whilethese orces certainly pose new challenges, the outcomes have also resulted rom the ailure torenew our public policy to ensure shared prosperity.

As evidence mounts that todays 20-somethings are likely to be the rst generation to be lesswell-o than their parents, it is time to renew our social contract. Te policies outlined below areintended to give a broad sense o the reorms needed to usher in a new era o middle-class expan-sion and economic opportunity.


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Creating More Good Jobs

oday millions o young adults work in jobs that pay wages too low to cover basic living expensesor allow them to save or the uture. Tis trend shows no signs o abating, but rather stands toworsen as much o the uture job growth in America is predicted to be in the lower-level, lower-paying service sector. Public policy should work to improve the quality o jobs by investing in thegreen economy, expanding and proessionalizing worker-training initiatives, and acilitating theability or workers to unionize their workplace.

Green Collar Jobs: Global warming is not only a crisis, but an opportunity to revolutionizeour economy and create millions o new jobs in green industries. But experts predict a majorskills shortage that may hamper this economic transormation. And without a major eort totrain and hire young or unemployed workers rom under-resourced communities, the greeneconomy could easily recreate the inequalities o the old economy. Green-collar job trainingprograms are partnerships between local or state governments, unions, community collegesand workorce development authorities. Te partnerships help attract employers who willmeet the green goals o a community, such as installing energy ecient technology or renew-able sources on homes and businesses. Te partnerships train and place young, unemployed,and hard-to-employ workersmostly without college degreesin high-pay, high-demand

jobs. Congresss Green Jobs Act o 2007 was a good start, providing $125 million in undingor green-collar jobs partnerships. States and localities can start green-collar job programs, aswell. Successul programs exist or are beginning in communities including Oakland, Chicago,Los Angeles, Milwaukee and Multnomah County, Oregon.

Career Ladders in Health and Education: Among the largest growing occupations over thenext 10 years will be low-wage jobs in health services like medical assistants, personal homeand health care aides, as well as the higher-paying jobs in the eld, like registered nurses. Tesame job growth trends are happening in the teaching eld. Over the next decade, there isrobust growth projected in both the low-endparaproessionals, also known as teaching as-sistants or aidesand the high-end, K through 12 teaching positions. Te act that in two ma-

jor occupational categoriesteaching and the health proessionsboth low- and high-wage

job growth is projected over the next decade signals an opportunity to design ormal careerladders in these elds. Career ladder programs, usually in partnerships between employers,unions and educators such as community colleges, oer on-the-job training and time-o orcertication to help workers move up at a company or in an industry. Successul programs ex-ist in Wisconsin, Boston and Las Vegas.


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Protect Homebuyers from Deceptive and Abusive Mortgage Lending Practices: Strong ed-eral standards should be established that would protect consumers throughout the entiretyo the mortgage process, including licensure at the ederal level or mortgage brokers. Lastly,Congress should require that consumers be oered the best possible loan or which they qual-iy, rather than the largest and most costly loan they can be convinced into taking.

Reduce Foreclosures Among Sub-Prime Borrowers: Lenders should be required to qualiyborrowers based on the ully indexed rate o the loannot the teaser rate as is the case with ex-

ploding adjustable rate mortgages. Additional steps to reorm the sub-prime lending industryinclude: encouraging agencies to pursue meaningul enorcement against lenders and brokerswhose underwriting practices harm homeowners; require that subprime lenders evaluate theborrowers ability to repay beore making a home loan; and outlaw mortgages with pre-pay-ment penalties. Finally, Congress needs to establish a rescue und to directly help householdscurrently acing oreclosure as a result o aggressive and predatory subprime mortgages withno regard or their ability to repay.

Putting Family FirstEnact Paid Family Leave: Paid parental leave is critical to ensure young parents have the nan-cial fexibility to stay home with a newborn child. In addition, evidence rom other countries

shows that paid parental leave increases the likelihood o a mother returning to her employer.Tree statesCaliornia, Washington and New Jerseyoer benets to workers taking timeo to care or a new child or sick relative. Tese state plans cost workers as little as $17 a yearand guarantee benets o up to two-thirds o their salary or up to six weeks.

Establish Universal, Voluntary Early Learning and Care: For the last three decades, our na-tion has pondered, then repeatedly rejected, the need or a coordinated, national system oinant care to pre-kindergarten programs. Its not just the right thing to do or working par-ents, but the smart thing to do or the uture o the nation. Child development experts haveconrmed that the rst three years o a childs development are a critical stage in cognitiveand emotional development. A universal and voluntary system would address three problems

that characterize child care today: cost, availability and quality. Experts dier on the ways toachieve universal child care, with some proposing direct subsidies to providers while otherspromote integrating early childhood care and education into the existing public school system.Another model exists in the child care program or military members, which provides care tochildren between our weeks and 18 years old, with parents paying ees on a sliding scale ac-cording to income.


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EndneHarry Holzer and Paul Oner, rends in the Employment

Outcomes o Young Black Men, 1979-2000, Black MalesLet Behind (Urban Institute Press: Washington, DC)

2006, pp. 17-24.

Te Kaiser Commission on Medicaid and the Uninsured,

Te Uninsured: A Primer, able 1, p. 34, October 2007.

Online at http://www.k.org/uninsured/upload/7451-

03.pd.

Bureau o Labor Statistics, Employment Projections,2006-2016, December 4, 2007. Online at http://www.bls.

gov/news.release/History/ecopro.txt.

Ronald Mincy, editor, Black Males Let Behind (Urban In-

stitute Press: Washington, DC) 2006.

Harry Holzer and Paul Oner, rends in the Employment

Outcomes o Young Black Men, 1979-2000, Black Males

Let Behind (Urban Institute Press: Washington, DC)

2006, pp. 17-24.

Network on ransitions to Adulthood website, rends and

Proles: Vulnerable Youth, online at http://www.transad.

pop.upenn.edu/trends/vulnerable.html.

Te Sentencing Project, Facts about Prisons and Prison-

ers, accessed online at http://www.sentencingproject.org/

Admin%5CDocuments%5Cpublications%5Cinc_actsab-

outprisons.pd on April 15, 2008.

John Schmitt, How Good is the Economy at Creating

Good Jobs? Center or Economic and Policy Research,

October 2005.

Te Kaiser Commission on Medicaid and the Uninsured,

Health Insurance Coverage in America, 2006 Data Up-

date, able 3, October 2007.

Ibid.

Sara R. Collins et al., Rites o Passage? Why Young Adults

Become Uninsured and How New Policies Can Help, Te

Commonwealth Fund, August 2007.Lawrence Mishel, Jared Bernstein and Sylvia Allegretto,

State o Working America 2006/2007, Economic PolicyInstitute, pp. 157-158.

Te Kaiser Commission on Medicaid and the Uninsured,Health Insurance Coverage in America, 2006 Data Up-

date, able 3, October 2007.

Lawrence Mishel, Jared Bernstein and Sylvia Allegretto,

State o Working America 2006/2007, Economic Policy

Institute, pp. 157-158.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Project on Student Debt, Quick Facts about Student

Debt. Online at www.projectonstudentdebt.org.

Te College Board. rends in Student Aid: 2006.

Deanne Loonin, Paying the Price: Te High Cost o Pri-

vate Student Loans and the Dangers to Borrowers, Na-

tional Consumer Law Center, March 2008.

Jose Garcia, In the Red or In the Black: Understanding

the Relationship between Household Debt and Assets,

Dmos, 2007.

Project on Student Debt, Quick Facts about StudentDebt. Online at www.projectonstudentdebt.org.

Ibid.

Ibid.

Project on Student Debt, Student Debt and the Class o

2006, September 2007.

Ibid.

College qualied reers to the index o college qualica-

tion designed by the U.S. Department o Educations Na-

tional Center or Education Statistics (NCES). Te index

evaluates high school seniors on cumulative academic

coursework GPA, senior class rank, NELS test scores and

SA and AC college entrance examination scores. Low-

income amilies reer to households with incomes below

$25,000. Moderate-income amilies reer to households

with incomes between $25,000 and $49,999.

Postsecondary Education OPPORUNIY, Unmet Finan-

cial Need, Student Work/Loan Burden and Net Price to

Family or Dependent and Independent Undergraduate

Students by Institutional ype/Control and Parental/Fam-

ily Income Quartiles, 2004, October 2005.

Access Denied: Restoring the Nations Commitment to

Equal Educational Opportunity, (Washington, D.C.: Ad-

visory Committee on Student Financial Aid Assistance,

February 2001).

Ibid.

Ibid.

Te College Board, rends in College Pricing, 2006.

Ibid.

U.S. Department o Education, National Center or Edu-

cation Statistics (2007); Te Condition o Education 2007

(NCES 2007-064), Washington, DC: U.S. Government

Printing Oce.

Ibid.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

Carlos Garriga, William . Gavin and Don Schlagenhau,

Recent rends in Homeownership, Federal Reserve Bank

o St. Louis Review, September/October 2006, 88(5), pp.

397-411.

Dan Levy, US Foreclosures Jump 57% as Homeown-

ers Walk Away, Bloomberg.com. Online at http://www.

bloomberg.com/apps/news?pid=20601087&sid=abvo2K

mwc6lw&reer=home.

U.S. Census Bureau, Te Fertility o American Women in

2004.

Columbia University, Te Clearinghouse on International

Developments in Child, Youth and Family Policies, Moth-

ers Day: More Tan Candy and Flowers, Working Parents

Need Paid ime O, Issue Brie, Spring 2002, available at

http://www.childpolicy.org/issuebrie/issuebrie5.htm.

Ewing Marion Kauman Foundation, Families Pay More

or Early Education than or College, Financing Child

Care, Winter 2002, pp.4.

Jessica Brauner, Bonnie Gordic and Edward Zigler, Put-

ting the Child Back into Child Care, Social Policy Re-

port, Society or Research in Child Development, Volume

XVIII, Number III, 2004, pp. 3-15.

Parents and the High Price o Child Care, National Asso-ciation o Child Care Resource & Reerral Agencies, 2007.

Online at www.naccrra.org.

U.S. Department o Labor Bureau o Labor Statistics.

Women in the Labor Force: A Databook, Septem-

ber 2006, available at http://www.bls.gov/cps/wl-data-book2006.htm.

allese D. Johnson, Maternity Leave and EmploymentPatterns o First-ime Mothers: 1961-2003, Current Pop-

ulation Reports, U.S. Census Bureau, February 2008.

Ibid.

Ibid.

U.S. Census Bureau, Whos Minding the Kids? Child Care

Arrangements: Spring 2005 , able 6.

Ibid.

National Association o Child Care Resource & Reerral

Agencies, Parents and the High Price o Child Care, 2007

Update.

Ibid.

Ibid.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.


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rELAtED rEsourCEs

te Fe middle Cla seie

By a Tread: Te New Experience o Americas Middle Class

OtherBy a Tread ReportsEconomic (In)Security: Te Experience o the Arican-American and Latino Middle Classes

Te Experience o Middle Class Households by Age Group(Fall 2008)

Te Experience o Middle Class Households by IncomeDemographic (Fall 2008)

Comparing Middle Class Security, 2000-2006 (Fall 2008)

Arican Americans, Latinos and Economic Opportunity in the

21st CenturyMeasuring the Middle: Assessing What it akes to be MiddleClass

Millions to the Middle: Tree Strategies to Expand the MiddleClass

Yng Adl Ecnic seie

Higher and Higher Education

Paycheck Paralysis

Generation Debt

Te High Cost o Putting a Roo Over Your Head

And Baby Makes Broke

Plicy biefng bk

FULFILLING AMERICAS PROMISE:Ideas to Expand Opportunity and Revitalize Our Democracy

bk

Up to Our Eyeballs: How Shady Lenders and Failed EconomicPolicies Are Drowning Americans in Debt, by Jos Garca,

James Lardner & Cindy Zeldin (Te New Press, April 2008)

Strapped: Why Americas 20- and 30-Somethings Cant GetAhead, by amara Draut (Doubleday, January 2006)

Inequality Matters: Te Growing Economic Divide in Americaand Its Poisonous Consequences, edited by James Lardner &David A. Smith (Te New Press, January 2006)

Falling Behind: How Rising Inequality Hurts the Middle Class,by Robert Frank (UC Press, July 2007)

Te Squandering o America: How the Failure o Our Politics

Undermines Our Prosperity, by Robert Kuttner(Knop, November 2007)

Cnac

Visit www.demos.org to sign up or updates, register or events,and to download research reports, analysis and commentary romthe Economic Opportunity Program.

amara Draut, DirectorEconomic Opportunity [email protected]: 212-633-1405 x402

Media inquiries:im Rusch, Communications [email protected]: 212-633-1405 x407


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