As Unemployment Rises, Kids' Future Dims

From the Wall Street Journal | Nov 10, 2009 | By Kelly Evans

Forget frugality. Want to know what the true lasting impact of this Great Recession will be? Then take a look at the kids.

A parent's job loss increases the probability that a child repeats a grade in school by roughly 15%, according to a new paper from two economics professors at the University of California, Davis.

"If we view grade repetition as a signal of academic difficulties,
these short-run effects may be consistent with findings of longer-term
negative outcomes in education and earnings," write Ann Huff Stevens and Jessamyn Schaller.
The effects are particularly large for families in which the parents
have only a high school education or less, their study finds.

"This is in contrast to earlier work that has found only limited
evidence of short-run effects of displacement on children's academic
outcomes," they write. Their study may also explain why areas of the
country prone to cyclical layoffs, such as those with a large factory
base, have trouble improving their school systems.

The authors find that household earnings are reduced by about 15% in
the year after a parent's job loss, based on their analysis of data
from the Survey of Income and Program Participation in 1996, 2001, and
2004, a program maintained by the Census Bureau.

In turn, while just over 7% of children without a parental layoff
repeated grades by the third SIPP study, more than 9% of children who
had a parent laid off repeated grades - resulting in about a 15%
greater chance that children who experience a parent's job loss will
repeat a grade. The effect is twice as likely in boys than in girls,
they find.

The findings come as the nation's unemployment rate hit 10.2% in
October -the first time it has crossed double-digits since 1982. A
broader gauge of unemployment, including those who are working
part-time for lack of full-time work, is at 17.5%. According to the Labor Department, about 15.7 million Americans are currently unemployed.

"More attention should be paid to the potential role of external
factors in affecting school level outcomes," they conclude. "Schools in
areas with large concentrations of displaced workers...may face
particular challenges in maintaining achievement standards during times
of economic hardship."