How Important is Formal Education?

The more you know the better off you are is true but here is the proof. Not only does getting a diploma or a higher education good training but it also shows a perspective employer you can finish something. Here is some interesting data from the “Calculated Risk” blog.

What this Unemployment Chart Shows You

The chart clearly shows you the better education you have the lower the statistical chance that you will be unemployed. It also shows that all levels of unemployment | employment tract the same.

What this Unemployment Chart Does NOT Show You

The chart does not show you the cost and opportunity cost of paying for college and other advanced degrees. For example, if a young person spends four years getting a college degree and pays for college he or she will most likely have $100,000 in college loans. Not only do they have the debt they are four years out of the job market. Assuming the non-college grad is a saver and using a balance sheet as a benchmark, your break even point will be 10 to 20 years depending on your income and savings rate. There are thousands and thousands of wealthy non-college grads and college grads.

How Does Unemployment Affect My Mutual Fund Investments?

If people are unemployed or under-employed:

They are not earning money
They don’t have much disposable income to buy things
They can not buy consumer goods and services to drive consumer product sales
If consumer product and services sales fall then the demand for business to business | Industrial goods and services fall accordingly
When consumer and industrial demands falls they lay off more workers and the problem multiplies
When the problem begins to multiply, then more people file for unemployment benefits and other public safety net services
That results in even fewer people paying taxes and reduces taxable corporate profits
That causes the outflow of money to governments to get worse and then they layoff government worker
As the economy continues to slow or shrink, corporate profits and outlooks are reduced and the value of mutual fund portfolios generally go down according.

Hence, a slow but steady unemployment downward spiral.

Conclusions About Unemployment by Education Level

The Unemployment rate is less volatile at the higher education levels
The Unemployment rate is on average must less the higher education levels
When the economy takes a downturn non-high school grads are by far hit the hardest
The Unemployed with no high school diploma were the hardest hit in the “Great Recession” but are coming back the fastest but still far lag behind in percentage of the unemployed
Young people need to decide which live path the think will make the them the happiest, most successful and the most secure

Unemployment by Education Level