Unemployment and Schooling

By Roosevelt Institute |

The New York Times ran a piece yesterday, Poll Reveals Trauma of Joblessness in U.S., that looked at the non-income parts of the stresses of being unemployed during the Great Recession. As opposed to some who have argued being unemployed is a fun break akin to “tak[ing] a trip”, the poll in question shows people who are unemployed suffering from depression, anxiety, and insomnia in greater numbers and to larger extents.

One line I wanted to pull out of it is this:

“Almost half [of unemployed workers] have suffered from depression or anxiety. About 4 in 10 parents have noticed behavioral changes in their children that they attribute to their difficulties in finding work.”

This issue about behavioral changes in children as a result of unanticipated unemployment spells crosses with an interesting paper I just read, Short-run Effects of Parental Job Loss on Children’s Academic Achievement by Ann Huff Stevens and Jessamyn Schaller of UC Davis (my underline):

“We study the relationship between parental job loss and children’s academic achievement using data on job loss and grade retention from the 1996, 2001, and 2004 panels of the Survey of Income and Program Participation. We find that a parental job loss increases the probability of children’s grade retention by 0.8 percentage points, or around 15 percent. After conditioning on child fixed effects, there is no evidence of significantly increased grade retention prior to the job loss, suggesting a causal link between the parental employment shock and children’s academic difficulties. These effects are concentrated among children whose parents have a high school education or less.”

The study finds this result even after controlling for all kinds of additional variables, including income, race, parents in household, parents divorced, recent moves, etc. There’s some additional stress of being unemployed that impact’s children’s education that is above and beyond simply being poorer for a longer period of time.

I was interested in this statistic from the paper: “The first column of Table 8 includes only the state-level unemployment rate three year average, without the individual job loss indicators. A one percentage point higher unemployment rate leads to a 0.3 percentage point increase in the probability that a child repeats a grade.”

There are currently 55 million students in K-12 in the country right now. If unemployment is 1% higher that means, roughly, 165,000 additional years of schooling will be repeated. This will fall disproportionately on poorer school districts as the effect is higher for people below the median income, and it doesn’t get an empirical handle on second-order effects of poor school performance such as crime and drugs, though it is easy to imagine they go up as well.

Considering right now we are, or at least should, be grilling the Federal Reserve as to why it is not more worried about getting unemployment down, it is little numbers like these that stay in my mind. In ‘cost-benefit analysis’, it is always very easy to get a solid number on the cost; the benefit is much harder to quantify. 4 years of unemployment 1% higher than it normally would be is half a million children, particularly those below the median income, needing to repeat schooling that they otherwise wouldn’t have. I highly doubt that is on the Federal Reserve’s mind. And to whatever extent unemployment is much higher as a result of financial deregulation, we need to consider that a million children could be repeating school as a result – is there any financial innovation that balances out that lost productivity?

There’s been a lot of talk about the effects of this recession on genders, men versus women. I think we need to have a more serious talk about the effects of this recession on the young, those just coming out of school and those still in it. Here’s OMB director Peter Orszag talking about those graduating into a recession, summarized by this graph:

The pernicious effects of people still in school should also become part of this dialogue.

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