Is College Worth it? You Bet It Is!

Every now and then someone comes along to suggest that maybe a college education really isn't important any more. Beyond the genuine improvement in one's understanding of how the world works, a college education is, in fact, a good financial investment. These are the clear findings of a study just released by the US Census Bureau. The authors, Tiffany Julian and Robert Kominski, use data from the American Community Survey to show that "education levels had more effect on earnings over a 40-year span in the workforce than any other demographic factor, such as gender, race and Hispanic origin." Mikoto Rich at the New York Times picked up on the story and added these comments regarding the persistent gender bias in earnings:

Among full-time, year-round workers, white men with professional degrees make nearly 49 percent more in lifetime earnings than white women with a comparable education level. The gender gap is narrower for blacks with professional degrees: black men with professional degrees earn 24 percent more in lifetime earnings than their female counterparts.

Would You Want to Hide in Niger?

Niger has been in the news lately because of reports that some of Col. Gadaffi's loyalists have driven south there across the desert to seek refuge from the rebels who are now in control of Libya. Most of us do not know a lot about Niger, and so I was reminded of a recent article about the country published in the journal "International Perspectives on Sexual and Reproductive Health," by demographers Malcolm Potts, Virginia Gidi, Martha Campbell, and Sarah Zureick. Their major point is that although Niger is currently a country of only about 16 million people, it is growing at a pace that will reach 55 million by the middle of this century! Yet, no one knows what exactly how Niger is going to cope with this growth, since it is almost unimaginably poor.

In 2008, Niger ranked 174 out of 178 countries on the Human Development Index, with more than 60% of its population living on less than US$1 per day,  and the country’s Gross National Income that year ($330; purchasing power parity, $680) was among the world’s lowest. Furthermore, recent economic growth (approximately 2% per year) has been lower than population growth (more than 3.9%). Niger’s high dependency ratio (i.e., the ratio of dependent people to the working-age population) of 108 per 100 undermines the potential to build up the savings needed to expand the country’s infrastructure.

Pensions are a Problem in a Global Recession

There has been a lot of discussion in the United States and Europe about the cost of state-funded pensions--which are almost always PAYGO (pay as you go--current workers are paying for current retirees). The age structures of richer countries are heavy on the elderly of retirement age and light on the younger people of working age. This is why schemes are promoted to have workers pay into their own private pension plans over their lifetimes. In the current global recession, however, investments in the stock market, which are the major ways to "grow" your own pension, are going down, not up. As a report by Reuters notes, this may wind up forcing a delay in the retirement age even if governments don't push such a legislative agenda.

Pension funds in developed economies are facing a new crisis as falling equities and tumbling bond yields widen their deficits, threatening the incomes and retirement dates of future retirees.

At the heart of their problems is a steady move by pension plans in the United States, euro zone, Japan and the UK to cut exposure to risk after the financial crisis.

But this "de-risking" may end up depressing their long-term returns from stock market investment and challenge the conventional wisdom that shares generate higher returns than bonds.