IAN BOWLES, MASSINC PRESIDENT AND CEO: Tamara’s work on the finances of the young generation is really poignant. We have seen a dramatic shift in the last two decades in the nature of savings and student loans and many other areas. Thank you for coming out to hear a terrific presentation. Demos has a rich history in these issues, and is based in New York.
MILES RAPPAPORT, DEMOS PRESIDENT: I want to thank MassINC for collecting a terrific audience. Demos is Greek for people. We are a five-year-old old policy research and advocacy center. It’s a think-and-action tank. We have taken on making democracy work in an inclusive and vibrant way. We have a democracy that has shrunken, distorted and bleached in terms of participation. We work closely with the National Voting Rights Institute in Boston. It’s our responsibility to challenging reining assumptions, like a few problems with the election of 2000. We ought to make sure democracy is working at home. We have had over 30 years an attack on the notion of community and that the public sector can do something good. Everything has become privatized and we need to challenge that and preserve public structures that we have – levies, roads, the FDIC, for example. The third area is our economy. It has to work for everybody, young people, and retirees, people in need of support. We don’t have that right now. The strong middle class was the envy of the world. It is in danger of eroding. It’s harder for people to get into it and easier for people to fall out of it and we need to change that. We have greater and greater inequality. We try to put out ideas and research at www.demos.org and one thing that is the most important to us is to make sure your generation has as good a chance to pursue happiness as my generation. I think that is at risk right now.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: This is an interesting book. It has raised issues of special relevance in a high cost state like Massachusetts. There are generational issues here to explore. What responsibility does one generation have to the next? Our format is straightforward. We will talk with Tamara Draut and take your questions throughout our conversation. At 8 pm, we will move into the lobby for a reception and Tammy will be available to sign her book. It’s nice to have you back again on RealTalk. You were a panelist before at our housing panel. I wish I could tell you it’s gotten easier to buy a house. The key theme in the book is that for many young professionals, it’s hard to live the American Dream. Why is that?
TAMARA DRAUT, AUTHOR: It’s an obstacle course, going from school to being an independent adult. There are hurdles, getting an education, getting a house, starting a family. In each hurdle there has been a shift in policy and the economy so those hurdles have more jagged edges. There are whiplash turns and there are decisions made that are impacting young people’s ability to get through the course and into the middle class.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: There are now more risks, you say in your book, and we have to finance more. Isn’t that what we wanted, more choices?
TAMARA DRAUT, AUTHOR: This age group has the unfortunate luck of coming of age during a period when you were shifting from collective and social responsibility to everyone for themselves and individual responsibility. It’s the way we think about the economy and the market. The cultural and ideological and political shift, as a result of it, we have transferred the burden from all of us collectively to each one of you individually. Young people have $20,000 in student loan debt on average and 70 percent aren’t getting degrees. We came of age at the pinnacle of this age of personal responsibility.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: Isn’t widespread uncertainty there for all of us? Look at the Ford Motor plants that just closed.
TAMARA DRAUT, AUTHOR: Absolutely. Young adults’ economic circumstance are often more misunderstood. If they stopped buying Ipods and designer clothes and $5 lattes, they’d be fine, people say. The book is about how this is such an important stage of life, when all the important decisions unfold. By zeroing in on that, it’s a way to see how good a job society is doing in creating an environment where people can fulfill their potential and work hard and play by the rules and get ahead and live in a safe neighborhood with good public schools and work in a job where you get paid more every year.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You say people are living paycheck to paycheck. Haven’t they always, when just starting out?
TAMARA DRAUT, AUTHOR: Absolutely. The struggle to get ahead has always been part of becoming an adult. We are living check to check with minuses and minuses and minuses. We are in debt. Studies show this generation’s earnings are not growing as quickly in their formative years in the labor market. Their earnings at 25 to 34 are about the same in inflation-adjusted dollars as three decades ago. Think of everything that costs so much more, college and housing, health care and the reality that today’s young families need childcare and more access to support. We can no longer expect that today’s young people are going to age out of this.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: Talk about the debt issue. What’s so bad about the credit card companies?
TAMARA DRAUT, AUTHOR: It does start in college with a free T-shirt. Three decades ago, it was deregulated as an industry in terms of pricing and marketing through Supreme Court rules. So you have a runaway industry that reserves the right to change the terms of your account at any time for any reason. It’s not much of a card member agreement. Young people – debt begets more debt – if you enter real life with $30,000 in debt you will rely on credit cards more than someone without that debt. When the car breaks down, Visa and MasterCard will be the way to repair it. This generation relies on credit cards for real economic reasons, not for vacations. And you can go from 9 percent to 29 percent in minutes. Schools are often in collusion with the industry. They get millions of dollars to allow one credit card company to solicit on campus. They sell student’s names and addresses to the credit card companies and this is a real profit center, a way to build a new fitness center.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: But if you pay bills on time, you won’t have any problems.
TAMARA DRAUT, AUTHOR: Hopefully, you are making more than the minimum payment and putting a dent into the principal.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You talk about the debt-for-diploma system.
TAMARA DRAUT, AUTHOR: At the federal level, financial aid without any public debate has steadily shifted away from grants to providing loans, which have to be paid back and often with interest. The other thing is grant aid has not been increased to keep up with the rising cost of college and the fact that there are a lot more students today. States provide the bulk of operating support and have dropped the ball. They have been declining in the percent of revenues spent on higher education so colleges are raising tuition to make up the difference.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: We have higher and higher prices at colleges and more debt and it’s about going to the right college now, not just going to college.
TAMARA DRAUT, AUTHOR: A bachelor’s degree is what a high school diploma used to be. It’s the bare minimum to go into the middle class. Everyone wants one and is told they need one. Any margin you can get up on your peers is that much more important, going to an Ivy as opposed to a state college. The difference in who is attending elite universities and state colleges has just grown. Students at private select colleges are from upper income families. There is more race diversity and less class diversity.
AUDIENCE QUESTION: I am Lisa from Framingham. On creative working, at what point can you take on interesting jobs where you can get the money but not pay taxes on it?
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You are not going to run for office right? Many people need two jobs.
TAMARA DRAUT, AUTHOR: This age group of 18 to 34, compared to previous generations, are much more likely to hold down more than one job. A lot of professionals work in their chosen field and wait tables or in retail. I worked at Baby Gap – good times.
AUDIENCE QUESTION: I am Darren, also from Framingham. How does this generation differ from the generation that was at this age during the Depression? My grandfather told me he grew up in a triple-decker with family members at each level.
TAMARA DRAUT, AUTHOR: I won’t answer that good question fully because it’s not my area of expertise. But you hit on a big difference. We have become completely atomized. We don’t live with extended family networks. We are moving away from our family social networks in search of lower cost of living in places like Nevada and Georgia and Texas. This is not a new phenomenon. It’s just a different economy. Getting to college was not as important then. In my book, I talk about the post-World War II economy.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: I didn’t plan on this line of questioning but your critics say ‘Gee, you think you have it tough, what about the Depression?’ This is the wealthiest country in the world. We are one of the wealthiest states.
TAMARA DRAUT, AUTHOR: It’s so difficult get ahead because the wealth is concentrated. We are at a period of heightened income inequality. That impacts our lives. It changes political priorities and impacts whether you can afford a house when you are competing with people who make much more money than you can dream of making. Young people on the radio have become my toughest critics. They say they have buckled down. Older people who lived through the Depression say they feel so bad for their grandkids and can’t believe what has happened to this country.
AUDIENCE QUESTION: What does our government and what do we need to do as a whole to work on this?
TAMARA DRAUT, AUTHOR: I can’t answer about Boston specifically but the last chapter of the book addresses that. We know what works, much more generous access to higher education. We have to pressure states to keep funding it and to put away a rainy day fund, rather than lots of tax cuts, in the good years. Housing is an issue that is not an easy one to solve. We have land scarcity issues. There are incentives to build the most expensive houses the market will bear, instead of moderately sized houses. The housing issue – does everyone know Levittown in Long Island. In the 50s, a young person with two kids could buy a house for $52,000, adjusted for inflation in today’s dollars. Those houses are going for more than $300,000 now.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: But they were two-bedroom, one bathroom, pretty basic and minimum. People don’t want to buy that kind of thing.
TAMARA DRAUT, AUTHOR: Really? The condo market is soaring.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: But people want something more grand when buying a home.
TAMARA DRAUT, AUTHOR: How many people would be inclined to buy a two-bedroom house for $50,000? (Many hands went up)
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: Okay. You made your point. The problem is we won’t build those in Massachusetts.
AUDIENCE QUESTION: Don’t you think the public school system is so bad that the only kids that can compete went to private schools?
TAMARA DRAUT, AUTHOR: Being prepared to go to college is a huge issue. We have seen access decline while college prep has increased. So that is not the only answer.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: Tell us about the labor market for young people.
TAMARA DRAUT, AUTHOR: Nothing provokes the ire of bosses more than that this generation bounces from one job to another. Sometimes it’s the only time you can get a pay increase. Mid-level jobs at companies have shrunk. So young people are staying in entry-level positions longer. The benefit of bouncing isn’t what it used to be. Jugglers have become more common. We think of the typical student as living on campus and studying full-time. Now the typical person is working full-time and juggling. The paycheck seems to always prevail over the diploma and the dropout rate is high. Companies rely on temporary labor and young people make up the highest percentage of freelance and temporary labor. There are no benefits and job security. The pajamas are a subsection of the labor force – they work from home in writing and graphic design. To get a writing job at a newspaper, they are just rare. Almost all the articles are produced through freelance labor. Try to buy health care in the private market. It is like treating yourself to two hour-long massages each week – that is how expensive it is.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: So how do you build a career then?
TAMARA DRAUT, AUTHOR: It’s gotten a lot harder. People are on their sixth or seventh job and are not on a career track. The job growth often doesn’t correspond with your innate abilities or interest. My career advice is to become a teacher or a nurse. We have shortages. We should be paying more, but it is still a solid middle class job. Aspiring teachers can’t get through the four years of college – that’s the problem.
AUDIENCE QUESTION: About the debt for diploma issue, there is pressure to attend Ivy League schools. For those who can’t afford it, what’s your take on graduating with $100,000 in debt from an Ivy League? Does it ensure that you get a job to cancel out that debt?
TAMARA DRAUT, AUTHOR: In terms of the bang for a buck of going to a private college, some studies show a sizeable difference and others no difference at all. The benefits are the connections you make, the social capital you are buying, which I don’t think should cost $100,000. Compared to credit card debt, student loan debt is better but it is a major drag on the economic security of young people. Now more than ever, there is pressure to get the master’s degree, which almost all people finance through loans.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: We have a global economy and economists say it’s good for the economy and we had a society where the catchphrase was greed is good. Organized labor was an important force in developing the middle class. They are in retreat. We created all this. Is this what we wanted?
TAMARA DRAUT, AUTHOR: We didn’t create it. Some people wanted it. Organized labor is in retreat because of a rash of state laws that make it difficult for workers to organize. We have dropped the ball in terms of watchdogs enforcing workers’ rights to organize. People get that unions give you more paychecks and better benefits. There is a reason why Wal-Mart isn’t unionized and it’s because it’s what Wal-Mart wants. It’s going to mean higher benefits and wages. We have lost high-paying blue-collar jobs and replaced them with jobs at Wal-Mart.
AUDIENCE QUESTION: I am an Episcopal priest on Beacon Hill. A third of us in our parish are under 40 but what worries me is I can’t keep them. I work with Greater Boston Interfaith on health care and we are waiting for the conference committee to report a bill out. You talk about the shift to personal responsibility. There is also a lack of sociality and that we do depend on each other and can get more if we work together. I want you to help me keep my own people around. Should three single people go in on a house together and build equity?
TAMARA DRAUT, AUTHOR: You mentioned the shift to an individual. The third sector has been asked to pick up more of the burden. It’s not that government should do everything, but government can accomplish things that the philanthropic and non-profit sectors cannot come close to accomplishing. In the book, I have a whole chapter of reforms. Accept that we have a structural issue, even if we bring back unions, we still have incomes and costs that are way out of whack. As for single people going into a home, I do know that is happening but there is a lot of risk with that as well.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You talk about education, rewards for work, a stake in society and family life coming first.
TAMARA DRAUT, AUTHOR: Education as the cornerstone of social mobility. The US has relied on education as the prime engine of moving up the ladder. When we don’t invest, we see a breakdown in mobility. I talk about switching back and getting the balance back with more grants and less loans. Work should pay. I talk about the need to make the legal right of being able to organize your workplace a reality. I come from a union family and went through an anti-union period. After looking at the research, I believe without more unions, particularly in health care and retail, we are not going to get the economic security we once had. Stake in society – the tax code can create great incentives and disincentives. Some incentives are out of whack with mainstream values. We provide more benefits to someone who buys a second home than to someone who has a second child. We forego $330 billion in tax credits and tax deferred savings that never reach young people and lower income people. We could, for instance, give you a year to begin paying loans back and give a dollar for savings.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You talk about reforming the mortgage and interest deduction, the third rail of politics.
TAMARA DRAUT, AUTHOR: The Bush administration’s tax commission laid out a plan like mine and I about passed out. The mortgage deduction has drifted so far from what it was intended to do. You have people in multi-million-dollar homes deducting thousands and thousands in interests, which means they are paying less taxes. Maybe we could have limits. They will still get the benefit, but in a way that makes sense. We can invest in match savings accounts and providing real dollars to a child care system.
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| A packed house |
AUDIENCE QUESTION: The ideas are grand scheme and would be great for our kids. What do we do now?
TAMARA DRAUT, AUTHOR: It’s a tough question. Creating a child care system and paid family leave will benefit you all in a few years. On student loan forgiveness, if you have debt that is X percentage higher than the median income in your occupation, we can forgive whatever is over. Don’t discount the voting thing. Our generation has really dropped the ball in terms of flexing their political muscle. Politicians have not been talking to us or offering anything that will remotely affect our lives. At the same time, we don’t show up on Election Day and fill their email boxes when we are outraged.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: You are tough on this generation in this book. I give you credit for that. I didn’t hear any of what you are talking about in the State of the Union.
TAMARA DRAUT, AUTHOR: There is a gap on what Congress is working on and what keeps people awake at night. I am a little heavy in this area on the finger wagging. It’s old fashioned. If you are not reading a major national newspaper, read it for a month and something will piss you off or excite you. It is so easy now to be politically active. There are all types of organizations working on childcare and student loans. Visit the web sites and put your email address in. Emails in their in-boxes make a huge difference. Knowledge is the first step. You can’t fight against what you are not aware of in the first place.
AUDIENCE QUESTION: In terms of labor market concerns, what do you think about President Bush’s portable health savings account proposal?
TAMARA DRAUT, AUTHOR: We need to move toward universal health care and savings accounts won’t get us there. It’s a drop in the bucket. There are lots of ways to go about universal health care. We just need to do it. The cost to business may be the straw that breaks the camel’s back.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: There is some momentum around the health care issue again. There are plans being discussed. The governor requires everyone to have insurance. There is some resistance to that from younger people in terms of affording it. One challenge we have – the health care system has been so attached to your employment and we have to figure out how to move beyond that.
AUDIENCE QUESTION: I bought a house in Chelsea two years ago. I chose a neighborhood I can afford and if more people move in, these are going to be good school systems. Is there enough of a push to maybe not move into Newton and make where I am living nice? (Applause)
TAMARA DRAUT, AUTHOR: The flip side is you priced out everyone who had lived in that market. That is gentrification. There are ways to do that without making that happen. I applaud you. But I am a policy person.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: Is there a way to make mill cities more attractive to families, to immigrant families? I bought a house in Lowell, a community on the rise, but we sweated out about the schools and my youngest daughter is in a charter school.
AUDIENCE QUESTION: You said 70 percent don’t get a bachelor’s degree. And the labor idea about the unions – you can phone someone in India on an 800 number. As we get global, the costs are far higher. It seems like it’s not too realistic that unions today are working in the same field.
TAMARA DRAUT, AUTHOR: The fields with the fastest job growth are health care services and retail and home health care aides. These jobs cannot be outsourced. It will become more important as the biggest generation retires. Same goes for lots of service jobs, checking out groceries. That is why unions are so critical. We have to make those jobs good jobs. About 30 percent of 25- to 34-year-olds have bachelor’s degrees. The dropout rates are about 40 percent of entering freshmen. At community college, it’s much, much higher.
AUDIENCE QUESTION: My question addresses personal responsibility. Young people have to be their own experts about everything. Are we losing out on advice and education?
TAMARA DRAUT, AUTHOR: We hear that we just need better financial education but there are lots of smart people with lots of credit card debt. But the financial education is definitely lacking. Get a subscription to Money magazine, the Idiot’s Guides.
JOHN SCHNEIDER, MASSINC VP/INTERVIEWER: So where do we go from here?
TAMARA DRAUT, AUTHOR: One thing I want to make happen is to meet more organizations like One In Three and MassINC. I will do lots of meetings on the Hill, in Congress, and getting this stuff in front of their faces and saying this is a political issue that you can win on. I will be working with Rock The Vote. Young people need AARP for them, to organize and flex their political muscle. Have conversations with your neighbors. We need to start meeting people where they are at and figuring out a simple way to get stuff done. It’s gonna take a long time but we can’t give up. Have a little more hope. We are paralyzed by this idea that it’s all our fault. It disempowers our ability to think that maybe we can change the situation.
