Andria Smythe on the College Outcomes of Young Adults in a Recession

Chancellor: Hello, and thanks for joining us for the Poverty Research and Policy podcast from the Institute for Research on Poverty at the University of Wisconsin–Madison. I’m Dave Chancellor. There’s a sort of conventional wisdom that during recessions or downturns in the business cycle, more people enroll in college or stay in college longer when jobs become scarce. But it’s less clear that this, quote unquote, benefit of an economic downturn extends to everyone. So Andria Smythe, who’s an economist at Howard University, set out to understand how the college outcomes of young adults shifted when a recession hit. We recorded this interview while Dr. Smith was a visiting scholar at AARP just before the pandemic hit. I would have loved to ask her about her predictions for what she thought might happen with college outcomes in a pandemic induced recession. But we didn’t know what was going to happen. Still, I think you’ll find her discussion really interesting. Let’s turn to that now. Professor Smythe, thanks for being here today, just to get us started. Can you tell us a little bit about who you are and the kind of research you do?

Smythe: My name is Andrea Smythe. I am an assistant professor of economics at Howard University. I study issues related to poverty broadly, but specifically education as a route out of poverty. So that’s kind of the gist. I’m interested in poverty within the United States, but also in developing countries as well.

Chancellor: For this project of yours that we’re talking about here today. You looked at patterns of college completion as it relates to the business cycle and recessions. Can you explain this to me? What’s going on here?

Smythe: In this research I’m looking at the effects of recession specifically in young adults over the years. The idea is that window and I’m going to say 18 to 25, you know, you can adjust it down or up by a year, but it’s a very critical period in which to invest in human capital and human capital can be in the form of on the job training or formal schooling. And if you look at the data, it shows that if you do not complete a degree by age 25, you’re very unlikely to do so afterwards. Of course, there are people who will go back to school after those years and complete the degree, but it’s a very low likelihood that you’ll do that. So that’s a very critical window. So the idea that this exogenous shock, the state of the economy when you become of college age that can affect your human capital investment is a is a is a big one in the sense that the amount of human capital you acquired during those years can affect your lifetime trajectory in terms of earning and economic well-being. That’s why I wanted to look at this this age group specifically and then the effect of economic conditions during that period.

Chancellor: So can we talk about recessions? People know about the Great Recession, but can you help us understand what maybe the last 50 years or so have looked like when it comes to recessions?

Smythe: OK, so if we look at the last 50 years in terms of business cycles, recessions occur pretty frequently, right? Of course, frequent is relative, but to put numbers to it since the 1960s, every decade or so between 1990 and 2010, every decade open with the recession and pretty much all the decade, maybe except one has gone on to experience a second recession by the end of the decade. These things occur pretty frequently. And the idea is in a recession, of course, the biggest thing you think of, people lose their jobs, which kind of have a cascading effect. They lose their jobs, which means that income are not coming in. They can’t afford their mortgages. The last recession, we see people losing their homes. There’s a pretty kind of disruptive thing in terms of disrupting your finances and affecting your ability to not only consume in the present, but to invest in human capital, which is one way we invest for the future.

Chancellor: It seems like there’s a conventional wisdom of sorts about what people do or what we think people do when it comes to recessions, can you tell us about that, especially when it comes to higher ed?

Smythe: Right, so if you look at the literature in this area, there’s a lot of work done around recessions and enrollment into college, and we’ve seen for the most part that people are more likely to go to school. And that makes sense if you think about what we call the opportunity cost. The opportunity cost is what you will give up when you make that decision. When there are fewer jobs available, wages are lower. If you decide to enroll in school, you’re giving up a lower wage. The opportunity cost of school is lower. We’d see more people enroll in during recessions. But then in my research, I’m asking then what happens once they enroll? Is that being translated into completion for college? Completion is a big issue where we’re seeing completion rates tend to be very low to begin with and actually declining over the years. Completion is a big part of the college attainment equation. And not just enrollment.

Chancellor: but one of the things you’re trying to see is how recessions might have a larger effect on some people than on others. Is that right?

Smythe: When we think about the recession and who’s impacted, you know, my hypothesis is that people are impacted differently. First of all, as we look at the first order effects of what is effect of the recession on things like unemployment rate for different demographic groups, we see some differences there. So, for example, minority workers, youths, first of all, they have higher unemployment rates to begin with. And then during the recession, they’re hit worse in terms of their labor market outcomes. I’m thinking that the because of that effect, it may have a disproportionate effect on their enrollment patterns or completion patterns.

Chancellor: What recession are you looking at this work here?

Smythe: For this research I’m looking at the early 1980s recession. The reason is this is kind of a three-part paper. The first part I’m looking at enrollment patterns. And so that was a previous paper in this paper. I’m looking at completion, but then I want to extend this work further to look at life outcomes. Right. And, you know, I could look at the 2008 recession. That was a pretty deep one. But people are not in their 40s and 50s, which is what I want to capture. Are these recessions do not young adulthood affect in life trajectory? That’s why I’m focusing on the early 1980s recession.

Chancellor: Part of the reason you’re looking closely at this 1980s recession is because of the way it lines up with your data set, is that right? Can you can you tell me about that?

Smythe: For this paper, I’m using the NLSY. So that’s the National Longitudinal Survey of Youth. It is administered by the Bureau of Labor Statistics. In 1979, they started the interview and they’re interviewing a nationally representative sample of the population between age 14 and 22 in 1979. The cool thing about this data set is they’re interviewing these youth and young adults while the recession hit. I can see what their labor market and educational activities are right before and then during the recession and also after. It is a good data set to use because it’s targeted at those individuals at exactly the time when the recession hits.

Chancellor: Can you tell me how you actually went about trying to see how the recession had different impacts in different groups? What’s going on there?

Smythe: What I’m taking advantage of is the fact that the recession will hit different regions differently. We have some variation across states. I look at the regional level, but also the state and the local level. So different areas will be hit differently. I can see the impact of the severity of the recession on these on these outcomes. And the idea is that when individuals turn or become college age, they have no control over the state of the economy. We call that kind of an exaggerated shock in the sense that they cannot affect what will happen, but what happens can affect them. I know the direction of the effect there.

Chancellor: Can you tell me a little bit more about how you’re thinking about the way that the recession or the economy had an effect on people?

Smythe: Right. what I do, I take an individual. Let’s say they turn 18. We’re using that as kind of the start of the traditional college age years. Right. They turn 18 and the state of the economy when they turn 18, as I said, is this is an exaggeration. It’s kind of a luck of the draw. They turn 18 and at age 18, I say, OK, what is the state of the economy? Is it a poor economy or is it a good economy? And we have people who fall into both categories of a poor economy and a good economy. Then I can see what are the outcomes on both states of the world. And that will kind of give me a way to measure the effect of the economy because I have kind of a treatment group. Right. If we think of it in terms of medicine, you have one group that is treated with the recession and then one group that has fairly good economic conditions, then I can study the outcomes under both states of the world.

Chancellor: OK, so what did you find?

Smythe: Right, so what I find is it’s not a straightforward right. So I find that the effects of the recession, it depends on how severe the effect is. Surprisingly, I find that when the recession is less severe, people are less likely to go to college. But then as the severity increases, that’s when you see that positive completion effect. And my guess is that at this but by the time the recession is so severe, people really have no other options in terms of work. Then they do turn to school or they remain in school so they can persist through the pipeline and actually complete. We do see more severe recession will lead to more college completion.

Chancellor: But it’s not the same for every group. Right, that there are differences there.

Smythe: Exactly. To summarize those differences. I look at differences by race and ethnicity. I look at blacks and Hispanics and then others were nonblack, non-Hispanics. I also look at income levels when I look at low income or versus high income groups and people who are in poverty versus those who are not in poverty around that time period. I also look at gender. The idea is if you look at the industries that were affected by the recession, especially the early 1980s, you know, you think of your manufacturing and construction tends to be male dominated. My hypothesis there was that maybe men will respond more to the recession and also look at things like parental education. Are you a first-generation student? So those are the groups that I look at. And what I find generally is that groups that are more disadvantaged in the sense that they have lower probability of completion to begin with, they tend to be more sensitive to the recession. Right. So that pattern that I talked about, it tends to be more pronounced for more disadvantaged groups.

Chancellor: I want to talk a little bit about policy implications here. It seems to me that often during recessions, we kind of see drawbacks in funding for higher ed, at least for public universities. Does that line up with what you found? And if so, what are the implications of that?

Smythe: The issue is during the recession, funding tends to fall and that’s understandable. Budgets are constrained across the board, so we tend to see state policymakers cut funding to higher ed and then even private colleges and endowments will fall during recessions. We have a situation where funding is falling. But if you remember, I mentioned that enrollment tends to increase. We have the situation where enrollment is increasing. We have more students entering the college system at the time when funding is falling. We have less resources per student. And we know that’s one of the factors that affect outcomes. So that’s one thing that I think would negatively affect outcome. But then the other thing is the impact of, say, the business cycle on students’ psychological well-being. We see more alcohol use and even greater levels of suicide during recessions among students. Students have a harder time coping. You can imagine it’s harder to focus on your studies and in academics when there is so much going on in your world. You know, not only are they at higher risk of being laid off themselves, a lot of college students actually work while they’re in school, but maybe their parents have lost their job. Maybe the family is losing their home and then they’re still expected to perform academically. I think especially the lower funding. We have students enrolling who generally need more support in order to graduate, but is at the time when there’s less support available, whether support in the sense of academic support services, but also mental health services, those tend to decline during recessions.

Chancellor: OK, so we’re talking about the 1980s recession here, but how does your research extend to, say, the Great Recession or to future recessions? How do we think about it more broadly?

Smythe: To think about it more broadly, one thing I’ve been thinking about is the idea that. You have no control over the economic circumstances into which you’re born or right into which you go to school or where you enter the labor market, those things, or are luck of the draw really? Right. This can kind of give us ways to think more broadly about the economic opportunities that are available to people. Right. Even in the absence of a recession. But the recession really brings that into focus. Whenever there’s a recession, we generally don’t blame people for not being able to find a job. We understand that, oh, the state of the economy is affecting my ability to find a job. But this effect is there, regardless of whether there’s a recession or not. Right. For different demographic groups. If we think of black workers, their unemployment rates tend to be much higher than the average, even during a recovery period. Right. Where, you know, one of the largest expansion in history and the black unemployment rate is still above five percent. Right. So that’s high given it’s an expansion. Right. And we understand if it was a recession would understand. Oh, you know, the economy is not doing well. So that’s why these people can’t find jobs. We can even see there are groups that are persistently depressed, economic conditions. And this has been going on for the past like 70, 80 years for black workers. Right? During recessions, we do tend to be more sympathetic towards economic conditions. So that’s one way we can think about translating the recession. If you think of a recession as kind of a big earthquake. Right. But even when there’s no recession, we have like minor tremors going on for different groups who are feeling those effects. So that’s one way we can think about that. But then in terms of translating that research to say the 2008 recession, will the patterns be the same? There’s one reason it may not. It might or might not. Right. We can think that the higher ed landscape is just different. We have different policies, whether it’s more access to loans, more or less support in terms of Pell Grant. So the other conditions might be different. That might affect those outcomes differently. We’d have to study that recession specifically. But the broader ideas about fewer jobs available, opportunity cost lower. Those all hold across recessions. There are certainly similarities and lessons that we can learn, but then each recession tend to be a little bit different. We’d have to study that specifically to kind of get specific outcomes.

Chancellor: Thanks to Professor Andria Smythe for taking the time to share her work with us to learn more about her research, you can check out her website at andriasmythe.com. This podcast was supported as part of a grant from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. But its contents don’t necessarily represent the opinions or policies of that office or any other agency of the federal government or the Institute for Research on Poverty. Music for the episode is by Maarten DeBoer. Thanks for listening.