Sources of a No Growth Economy

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ben_franklinYounger people are putting off marriage, children and buying  homes because they lack financial security — unstable jobs and too  much student loan debt.

That’s one of the interpretations of a new report from the Census Bureau on Millenials. (1)

In looking at generational change, the report compares 18 to 34-year-olds in 2016 versus 1975.  In looking at just the older portion of this group, 25 to 34-year-olds, there are striking differences:

  • 1975: 45% lived on their own, were working, had married and had a child.
  • 2016: 24% live on their own, are working, have married and have a child.

From the point of view of the economy, the difference is huge. Buying a home drives spending on furniture and appliances, as well as painters and a range of other services. Having children drives demand for larger cars and clothing. Doing neither reduces spending in all of these categories.

The average income for 25-34-year-olds in 1975 was $30,101. In 2016, it was $43,751. That sounds good until you factor in inflation.

  • A salary of $30,101 in 1975 dollars is worth $134,283 in 2016 dollars.
  • The percent of people with student loans has climbed from 17% in 1975 to 41% today.

More people have gone to college, but they’re paying more for education in order to earn functionally less than their parents.

The report also notes that among the growing percentage who live with their parents, there are issues with health or grandchildren that interfere with employment. There’s also an issue with a cohort of younger white males who lack a college degree and have very limited employment prospects.

As long as politicians ignore these trends, efforts to keep the economy going will run out of steam.  In this context, Andrew Cuomo, the government of New York, seems especially prescient in eliminating college cost as a burden for many New York residents.

 


Sources:

  1. Vespa, Jonathan, “The Changing Economics and Demographics of
    Young Adulthood: 1975–2016,”Current Population Reports,P20-579, U.S. Census Bureau,Washington, DC, 2017.

More on Diabetes

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The US is seeing modest, steady growth in the incidence of diabetes among children and teens. A new analysis of data from 2012 to 2012 shows

  • An increase in Type 1 Diabetes of 1.8% per year and
  • An increase in Type 2 Diabetes of 4.8% per year.

While there’s a genetic component, diabetes risk is associated with

  • Family history
  • Immune system issues
  • Diet and weight (and exercise)
  • Blood pressure

Europeans understand that how you care for yourself affects health care costs and health insurance rates for everyone around you. It’s not just about you. Teaching a child to veg in front of a computer or TV simply shortens the child’s life.

However, one of the frustrations with public health data is lack of currency. Has the situation gotten better or worse in the last five years?  My guess is worse, but we simply don’t know.


Sources:

  1. Elizabeth J. Mayer-Davis, Jean M. Lawrence, Dana Dabelea, Jasmin Divers, Scott Isom, Lawrence Dolan, Giuseppina Imperatore, Barbara Linder, Santica Marcovina, David J. Pettitt, Catherine Pihoker, Sharon Saydah, Lynne Wagenknecht. Incidence Trends of Type 1 and Type 2 Diabetes among Youths, 2002–2012. New England Journal of Medicine, 2017; 376 (15): 1419 DOI: 10.1056/NEJMoa1610187
  2. NIH/National Institute of Diabetes and Digestive and Kidney Diseases. “Rates of new diagnosed cases of type 1 and 2 diabetes on the rise among children, teens: Fastest rise seen among racial/ethnic minority groups.” ScienceDaily. ScienceDaily, 14 April 2017. <www.sciencedaily.com/releases/2017/04/170414105821.htm>.
  3. International Diabetes Foundation, “Risk Factors.” http://www.idf.org/about-diabetes/risk-factors
  4. Mayo Clinic, “Diabetes.” http://www.mayoclinic.org/diseases-conditions/diabetes/basics/risk-factors/con-20033091

Rehab Robots!

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“Injury” is a uselessly unspecific term. It covers a range from simple scrapes to complex concussions that mean a lifetime of suffering. Some things are generally true about injuries:

  • They’re unexpected.
  • They can happen at anyone at any age.
  • Complexity of the injury and age can prolong recovery time.

Toyota has embarked on a new program, the manufacture of robots designed to help people recover from and cope with serious injury.

As reported in PC Magazine:

Toyota wants to solve that problem with a robot rental system. The first of these was demonstrated yesterday when the company launched a walk assist system rental service. The robot is called the Welwalk WW-1

000, and it’s designed to help in the rehabilitation of anyone suffering with lower limb paralysis. While that could happen at any age, leg weakness is common following a stroke.

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The initial system is designed for clinics serving large numbers of patients, but there is a vision of a home version of the robotic leg that could be an on-going help with personal mobility.

Unlike Toshiba’s disastrous flirtation with nuclear energy, Toyota is using core technology in a way that will benefit a large number of people across the globe and for which there should be substantial demand for decades to come. I’m looking forward to seeing what they do next.


Sources:

  1. Matthew Humphries, “Toyota Launches Rehabilitation Robot Rental Service,” PC Magazine, 13 April 2017. http://www.pcmag.com/news/353042/toyota-launches-rehabilitation-robot-rental-service?utm_source=email&utm_campaign=dailynews&utm_medium=title

Free College Tuition: a new reality in USA

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Free college tuition — it’s back!martin-luther-king-anger-quote1

There has been a continuing debate as to whether college education is a privilege or a right of citizenship. In an age in which demand for unskilled labor is fading, will people without college be employable in 10 or 20 years?

The US has taken one position on this; Europe and the Commonwealth countries, the opposite. Today, it’s possible for a US family to put four children through college in Europe at the price of sending one to college in the US. For Europeans in several countries, college is free.

In the “golden age” of the US economy after World War II, college was either free or very inexpensive in the US. When I was in high school, City College of New York and the University of California still were free to residents.  Ronald Reagan eliminated free tuition in California.  New York was earlier.

On February 7th, San Francisco because the first city in the current era to offer free community college education.

San Francisco Mayor Ed Lee announced at a press conference yesterday that, starting next fall, community college will be tuition-free for all San Francisco residents through the City College of San Francisco.

As first reported by the San Francisco Chronicle, San Francisco would become the first city in the nation to make community college free to all city residents. Any student who has lived in San Francisco for at least one year – regardless of income – is eligible.

“To California residents who are living in San Francisco, your community college is now free,” Lee said at the press conference. (1)

New York Governor Andrew Cuomo announced a plan in January to make all state, city and community colleges free to residents. There is now a bi-partisan budget deal to make that a reality.

Budget negotiators struck a deal late Friday that could make New York the largest state to offer tuition-free public higher education.

The $163 billion state budget agreement includes the Excelsior Scholarship, which covers tuition for any New Yorker accepted to one of the state’s community colleges or four-year universities, provided their family earns less than $125,000 a year. (2)

Interesting question: Why would you want to live in an expensive state like New Jersey when your kids can attend college for free next door? Or leave San Francisco for anywhere?

 


Sources:

  1. Zack Friedman, “Free College: San Francisco Joins New York With Tuition-Free Plan,” Forbes, 7 Feb. 2017. https://www.forbes.com/sites/zackfriedman/2017/02/07/free-college-san-francisco/#590c8b482bb6
  2. Danielle Douglas-Gabrielle, “New York set to become first state to offer free tuition at public four-year colleges,” The Washington Post, 8 April 2017. https://www.washingtonpost.com/local/education/new-york-to-become-the-largest-state-to-offer-tuition-free-public-higher-education/2017/04/08/3fe0563a-1c8b-11e7-9887-1a5314b56a08_story.html?tid=sm_tw&utm_term=.e16eea88beb6

 

Just how smart are you with your money?

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The Future is coming, whether you like it or not. In fact, some parts are going to be very ben_franklinpositive, and some aren’t. You have to be prepared to deal with both. The sooner you start to prepare, the lower your costs will be!

We like to think about buying a house, buying a car, fancy weddings, babies and graduations. We don’t like to think about down payments, maternity costs or paying for college. However, as economist Milton Friedman famously wrote, “there’s no such thing as a free lunch.”

The statistics are simple.

  • The average life expectancy (LE) in the US is 78.8 years (1) — shorter for the poor and Southerners; longer for women and the affluent.
  • The healthy life expectancy (HLE) in the US is 68.1 years. By comparison, the HLE for Bosnia is 68.8 years and for Canada it’s 72.3 years. (3) HLE in the US varies by state and is shorter for Southerners. (2)
  • The difference between LE and HLE is the amount of time you can expect to have to deal with some kind of physical impairment. In the US, that amounts to a decade of trouble on average.

A new study confirms what people with elder parents already knew: older people need help with daily living. Even if they are fairly independent, both finances and medications can get out of control. They may not have or want to be dependent on family members to manage either.

Over 10 years, 10.3% of those aged 65 to 69 needed help managing medications and 23.1% needed help managing finances. These rates rose with age, to 38.2% and 69%, respectively, in those over age 85. Women had a higher risk than men, especially with advancing age. Additional factors linked with an increased risk for both outcomes included a history of stroke, low cognitive functioning, and difficulty with activities of daily living. (4/5)

There are resources, but they aren’t free.

  • The average cost of in-home healthcare in the US is $3,600 per month, as I mentioned in a prior blog. The average cost of a nursing home is $9,200 per month. Medicare can pick up the first 100 days. One of the Trump proposals for Medicaid reform involves eliminating Medicaid as a way to deal with these expenses.
  • There is a  category of professional, “daily money managers.” These aren’t financial planners, but they deal with records management, budgeting, checking the validity of expenditures, and bill payment. Costs for these services vary but can start at around $450 per month. (6) Not only do they keep things together for their clients, they are an important line of defense against scammers preying on seniors.

So, how are your parents going to deal with this? How are you going to deal with this when it’s your turn?

These problems are  best addressed when you do what most people don’t — act early on them.

  • Set aside dedicated savings for retirement.
  • Purchase permanent life insurance with a rider that allows you to take up to 50% of the face value of the policy for disability and long term care expenses. (7)

Both of these actions are best done earlier in life rather than later

  • Starting savings early allows the most time for compounding of interest.
  • Starting life insurance early minimizes cost. Insurance premiums are directly related to the length of time the carrier expects to have your money before they have to pay out. The earlier you buy, the less it will cost and the more you can afford. For example —
    • In NJ, for a woman age 24 non-smoker, a new $200,000 whole life policy might cost $113.68 per month.
    • In NJ, for a woman age 44 non-smoker, the same policy would cost $365.08 per month.
    • In NJ, for a woman age 59 non-smoker, a new $100,000 policy would cost $395.08. From the carrier used to quote these examples, a $200,000 whole life policy would not be available for someone that age.

With age, the price goes up and what you can buy goes down.

Procrastination costs you money. Don’t put this off.

If you practice a healthy life style, you can try to minimize the gap between LE and HLE, but you can’t count on eliminating it. There are just too many factors outside of your control (e.g., ice, drunk drivers, pollution, etc.).

 


Sources:

  1. Centers for Disease Control and Prevention, “FastStats,” 17 March 2017. https://www.cdc.gov/nchs/fastats/life-expectancy.htm
  2. Centers for Disease Control and Prevention, “State-Specific Healthy Life Expectancy at Age 65 Years — United States, 2007–2009,” 19 July 2013. https://www.cdc.gov/mmwr/preview/mmwrhtml/mm6228a1.htm#fig1
  3. World Health Organization, “Healthy Life Expectancy at Birth — 2000 to 2015,” http://gamapserver.who.int/gho/interactive_charts/mbd/hale_1/atlas.html
  4. Nienke Bleijenberg, Alexander K. Smith, Sei J. Lee, Irena Stijacic Cenzer, John W. Boscardin, Kenneth E. Covinsky. Difficulty Managing Medications and Finances in Older Adults: A 10-year Cohort Study. Journal of the American Geriatrics Society, 2017; DOI: 10.1111/jgs.14819
  5. Wiley. “Many older adults will need help with managing their medicines and money.” ScienceDaily. ScienceDaily, 7 April 2017. <www.sciencedaily.com/releases/2017/04/170407113035.htm.
  6. For those in the NJ area, I have a friend, Nancy Sobin, who offers these services. Please see her at http://paperwork-services.com/. She belongs to the American Association of Daily Money Managers, http://www.aadmm.com/.
  7. There are some companies that offer these riders for term insurance, which is much less expensive than permanent. The problem is that term insurance typically terminates by age 65, and home or nursing home care expenses typically start after that age. There’s no point having a rider that’s not going to be in force when you need it.

Where are the people who want to get into the US?

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The US population grew by less than 1% last year. The Census estimate is for growth of 0.82%, with most of that increase coming from births in the US – 1.38 million births versus 1.25 million immigrants.

The Census forecast is that population growth rate will decrease, reaching a low of 0.45% in 2048.  Deaths among the Baby Boomers will offset both births and immigration.  In fact, if we had no immigration, the US population would decline.

As we have seen in both Maine and Japan, a population decline is a problem. It means slowing of economic growth and employers take jobs to other regions where labor is available.  It means there are fewer workers to pay for benefits for the elderly and disabled.

This forecast predates the last election and the entire discussion of a wall and restructuring of the H1-B visa program.

What you need to consider:

  • Know the facts before you listen to politicians and TV commentators.  Intentionally or not, a good portion of what they say is wrong.
  • Immigration restrictions won’t help people with the wrong job skills get work. Unless people recognize that old jobs are gone and they need to retool for what’s available, they’ll be stuck. There’s no future in unskilled labor.

Sources:

  1. US Census Bureau. https://www.census.gov/population/projections/data/national/2014/summarytables.html
  2. Ben Fifield, “Many Northeast, Midwest States Face Shrinking Workforce,” Pew Charitable Trust, 27 May 2016. http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2016/05/27/many-northeast-midwest-states-face-shrinking-workforce

Autism and Parenting

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OK, this finding isn’t rocket science, but it makes sense, and has all sorts of implications for the people involved and their friends and relatives. (1)

Parents of children with autism tend to be less satisfied with their marriage, have less time for each other, and are more prone to divorce. The time issue may be the key of the three items: autistic children place more demands on their parents.  Time demands add stress to what is in many cases a less than happy situation.

It’s one thing if there are others who know what’s happening and offer to help.  Still another if the healthcare system offers respite care (relief for caregivers — something common in Europe and almost nonexistent in the US).

These parents need understanding and they need help. Where they have a strong support system to help them, they’re very lucky.  Many don’t.

What you need to consider:

  • Do you know someone with an autistic child?
  • If yes, find a way to share the load. It matters.

Sources:

  1. Sigan L. Hartley, Leann Smith DaWalt, Haley M. Schultz. Daily Couple Experiences and Parent Affect in Families of Children with Versus Without Autism. Journal of Autism and Developmental Disorders, 2017; DOI: 10.1007/s10803-017-3088-2
  2. University of Wisconsin-Madison. “Insight into day-to-day lives of parents raising children with autism.” ScienceDaily. ScienceDaily, 21 March 2017. <www.sciencedaily.com/releases/2017/03/170321092728.htm>.