An expert panel explored a new austerity in America, focussing on its potential impacts on higher education and retirement, during a session at the Society of American Business Editors and Writers Annual Conference in Indianapolis.
Without grant money, Kantrowitz said students will most likely choose from three options. They could take out more loans, leading to heavy debt. They could attend less expensive schools or community colleges, which would hurt the graduation rate for some institutions and reduce the number of students earning bachelor’s degrees. Or students may opt out of attending college altogether.
Workers with bachelor’s degrees typically earn a 70-80 percent higher wage than employees without higher education credentials. If the number of students attending college decreases, the government will feel the pinch by receiving lower taxes from a group of workers with reduced salaries.
Nevin Adams, director of education for Employee Benefits Research Institute, said austerity also could hurt retirees, because many workers are currently unprepared for retirement. Current retirees and workers approaching retirement are not as confident they will have enough money to sustain themselves as they were several years ago.
To counter this fear of running out of money, many workers plan on staying in the workforce longer, Adams said. But he added that the majority workers are actually taken out of the workforce earlier than age 65, often because of their or a family member’s health concerns.
To compound the problem, Adams said, many workers haven’t found out how much they will need to save and, by the time they find out, it is often too late to make a significant impact. This forces more retirees to rely heavily on Social Security checks.
But Adams noted that retirees are slightly more confident than workers entering retirement. They appear to have more optimism that they have enough money to live comfortably. He said this shows that once workers begin to live in retirement, they realize they may not need as much money as they originally thought.
Tamara Draut, vice president of Demos, a research and public policy institute, said she isn’t sure austerity in America is a new trend. She pointed to income rates steadily declining, and noted that before the recession many children made less money than their parents.
If austerity becomes more prevalent in America, Draut said she is worried about families who were struggling even before the recession.