Want Americans to graduate college? Make it affordable.
Research from MIT's School Effectiveness & Inequality Initiative found making college more affordable cut dropout rates and boosted degree attainment.
29 December, 2020
Credit: Adobe Stock
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<p>The <a href="https://www.pewresearch.org/fact-tank/2014/02/11/6-key-findings-about-going-to-college/" target="_blank">benefits bestowed by a college degree</a> are well-known. Degrees open access to job opportunities and, with them, economic stability. The average earning potential of a college graduate is roughly twice that of someone with only a high school diploma. Graduates are less likely to live in poverty, more likely to be married, and more likely to be satisfied with their life and career choices. And the number of jobs that require a degree or postsecondary school training <a href="https://cew.georgetown.edu/cew-reports/recovery-job-growth-and-education-requirements-through-2020/" target="_blank">continue to increase</a>.</p><p>Many Americans can recite this litany, yet when it comes to attaining college degrees, the United States is woefully behind its Western peers. According to <a href="https://www.ed.gov/college" target="_blank">the U.S. Department of Education</a>, America was the world leader in degree attainment by young adults a generation ago. Today, it ranks thirteenth. Nearly half of students who begin college don't finish within six years, with <a href="https://www.brookings.edu/research/eight-economic-facts-on-higher-education/" target="_blank" rel="noopener noreferrer">a quarter of low-income students</a> dropping out by their second year. </p><p>Meanwhile, tuition continues to rise. Even after adjusting for inflation, the costs of attending a four-year public school have doubled in only three decades. Such ballooning expenses have spearheaded <a href="https://www.cnbc.com/2020/06/12/how-student-debt-became-a-1point6-trillion-crisis.html" target="_blank" rel="noopener noreferrer">a $1.6 trillion student debt crisis</a>.</p><p>For many young people looking toward a brighter future, college has become a gateway locked from the inside. As the Department of Education concluded: "Today, college remains the greatest driver of socioeconomic mobility in America, but if we don't do more to keep it within reach for middle-class families and those striving to get into the middle class, it could have the opposite effect."</p><p>Research has looked into the predicament and now suggests a daring, counterintuitive means of increasing degree completion among young people: We make college affordable.</p>
The study groups
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDk1OTU2OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NzYyMjgyMH0.HoOUfA4eXLgFltk-M_Mu3E3qORUh2shzeYoVa3wk86E/img.jpg?width=1245&coordinates=0%2C237%2C0%2C237&height=700" id="861dd" class="rm-shortcode" data-rm-shortcode-id="cfef9e15abee21ae82c46b76199c4436" data-rm-shortcode-name="rebelmouse-image" data-width="1245" data-height="700" />An aerial view of MIT and Harvard Bridge. The university's School Effectiveness & Inequality Initiative partnered with the Susan Thompson Buffett Foundation for the study.
Credit: Adobe Stock
<p>The study comes from <a href="https://seii.mit.edu/" target="_blank">MIT's School Effectiveness & Inequality Initiative</a>. Its researchers wanted to determine the effect scholarships had on degree attainment. As they put it, </p><p style="margin-left: 20px;">"Financial aid is typically motivated by a desire to increase postsecondary attainment by making college more affordable. This raises the question of whether aid meets this test by boosting educational attainment. As with any sort of award or subsidy, it's worth considering the extent to which financial aid changes behavior. The fact that aid is motivated by the desire to increase schooling does not mean aid programs accomplish this."</p><p>To test this question, they partnered with <a href="https://buffettscholarships.org/" target="_blank">the Susan Thompson Buffett Foundation</a>, an organization that offers scholarships to first-time freshman attending public colleges in Nebraska. The researchers designed a partially randomized study around the Foundation's 2012–2016 scholarship applicants, a cohort of roughly 16,500 students seeking aid. </p><p>Because low-scoring applicants were unlikely to complete college, they were not provided a scholarship and were removed from the study. Similarly, while high-scoring applicants were awarded a scholarship, they too were removed from the study as their degree completion was likely with or without the financial abetment. This left a middle pool of applicants, each sporting a comparable level of need and college-readiness.</p><p>The Foundation awarded scholarships randomly to this middle group of applicants; those who did not receive scholarships served as the controls. Because the number of applicants far exceeded the available aid, no student was artificially denied a scholarship for the study's sake. All told, the study included 3,699 scholarship-awarded participants and 4,491 controls. Most sought degrees at four-year colleges though some matriculated into two-year schools.</p><p>As this group was comparable in areas such as GPA, colleges attended, and expected family contributions, any statistically significant difference between the recipients and the controls would provide some evidence of a causal connection between financial aid and degree attainment.</p>Easing the six-year itch
<p>The researchers followed the students' college careers, from freshman year to spring 2019, and found that the scholarships did change behavior. Enrollment was only slightly higher for the aid recipients than the controls—98.7 percent compared to 96.1—but as the two groups' college careers continued, a noticeable difference emerged in dropout rates. By the end of their fourth year, only 71.6 percent of the control group remained, a dropout rate of 24.5 percent; meanwhile, the scholarship group only declined by 18 percent.</p><p>The scholarships also bolstered degree completion. Though bachelor degree completion was roughly even by the end of the fourth year, the aid recipients began to pull ahead after that. By the end of their sixth year, 71 percent of the award recipients received their degree, 8.4 percentage points more than the control. This suggests that as degree completion began to drag on longer, the infusion of extra financial resources made the final push more manageable.</p><p>The researchers not only found that aid promotes full-time enrollment, but that it benefitted historically underrepresented groups most, including non-white and first-generation applicants. These findings support a <a href="https://vtechworks.lib.vt.edu/handle/10919/100548" target="_blank">growing</a> <a href="https://files.eric.ed.gov/fulltext/ED545465.pdf" target="_blank" rel="noopener noreferrer">body</a> of <a href="https://kuscholarworks.ku.edu/bitstream/handle/1808/12507/Shulenburger_University.pdf;sequence=1" target="_blank" rel="noopener noreferrer">research</a> that suggests college affordability directly impacts student decision-making and degree attainment.</p><p>The study, titled "<a href="https://seii.mit.edu/wp-content/uploads/2020/10/SEII-Discussion-Paper-2020.06-Angrist-Autor-Pallais.pdf" target="_blank" rel="noopener noreferrer">Marginal Effects of Merit Aid for Low-Income Students</a>," is part of an ongoing research study. Additional reports will be released as the study continues.</p>What does college affordability mean?
<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="2f032882b6038c7d6734ac69f95fbb69"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/qZTnmMxnU0A?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>Scholarships are one way of making college more affordable, but they are part of a much larger conversation as to what affordability means.</p><p>The <a href="https://www.cnbc.com/2019/10/24/why-college-tuition-keeps-rising.html" target="_blank">ballooning cost of tuition</a> in recent decades is another concern. Factors for this surge include a massive increase in demand, cuts in state funding, new student services, and <a href="https://www.chronicle.com/article/executive-compensation-at-public-and-private-colleges/#id=table_public_2019" target="_blank" rel="noopener noreferrer">bloated administrative compensation</a>. While colleges could certainly rein in some of their more extravagant expenses, and legislators agree to fund more, <a href="https://www.luminafoundation.org/files/publications/ideas_summit/College_Affordability-What_Is_It_and_How_Can_We_Measure_It.pdf" target="_blank" rel="noopener noreferrer">the question of affordability</a> goes further still. </p><p>It concerns the quality of education, whether students are dependent or independent, their resources before matriculating, what they can expect from the investment after graduation, and how much of their future income they are willing (or able) to pay. The calculus must also consider <a href="https://bigthink.com/kenzie-academy/software-engineering-school" target="_self">available alternatives</a>, their costs, and their potential outcomes. It's a multifaceted balancing act between what's available, what students can afford, and what schools can offer with the resources they have available—which, of course, ties directly to the funds that schools have available. </p><p>In <a href="https://www.higheredtoday.org/2017/05/16/think-college-affordability/" target="_blank" rel="noopener noreferrer">an op-ed for Higher Education Today</a><em>, </em>Susan Baum, a senior fellow in the Education Policy Program at the Urban Institute, correctly points out that a "low-cost program designed purely to train people for an occupation that is unlikely to exist in 10 years, while appearing 'affordable,' is not affordable at all."</p><p>So then, how should we think about college affordability?</p><p>Baum recommends we start the conversation with need-based considerations at the forefront. "The financial resources available to a student at the time of enrollment are critical. Students have very different starting points for measuring outcomes and value depending on their circumstances," Baum writes. But it also requires us to think beyond funding; we need to consider the resources colleges need to provide a valuable education as well as the types of experiences that students want. </p><p>If we want more students to graduate, we need to discover the right balance between moderate spending, need-based aid, and program quality, a balance that will make college accessible to all who desire to attend.</p>
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Millennials reconsidering finances and future under COVID-19
A new survey found that 27 percent of millennials are saving more money due to the pandemic, but most can't stay within their budgets.
20 October, 2020
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<p>It can be tempting to look at the economic history of the last two decades and derive a certain lesson. That lesson being: The millennial generation is screwed. The Washington Post even tagged millennials as the "<a href="https://www.washingtonpost.com/business/2020/05/27/millennial-recession-covid/" target="_blank">unluckiest generation in history</a>."</p><p>It's understandable why the punditocracy would think this. Born between 1981 and 1996, millennials exited school and entered work right into the Great Recession. The recession forced many millennials to postpone financial milestones such as marriage, buying a home, retirement savings, or even reliable employment. That global setback quietly became a generational one. While the baby boomers and GenXers recovered their lost wealth relatively quickly, <a href="https://bigthink.com/politics-current-affairs/millennial-income?rebelltitem=1#rebelltitem1" target="_self">millennials couldn't</a> and became the first generation with a standard of living lower than their parents'.</p><p>A decade later, millennials face the pandemic shutdown. Although we can't say with certainty how the pandemic will affect us in the long-term, early <a href="https://www.cnbc.com/2020/09/17/how-millennials-have-been-impacted-by-pandemic-unemployment.html#:~:text=At%20the%20height%20of%20the,for%20unemployment%20insurance%20since%20March.&text=Data%20from%20the%20Bureau%20of,facing%20longer%2Dstretches%20of%20joblessness" target="_blank">forecasts suggest millennials will again take the brunt</a>. <a href="https://www.pewsocialtrends.org/2020/04/21/about-half-of-lower-income-americans-report-household-job-or-wage-loss-due-to-covid-19/" target="_blank" rel="noopener noreferrer">Pew Research Center</a> data, for example, suggest that about a third of millennial-aged homes have had someone in the household lose a job, while Bureau of Labor Statistics (BLS) data forecast millennials suffering <a href="https://www.salon.com/2020/08/18/the-recession-is-creating-another-generation-gap/" target="_blank" rel="noopener noreferrer">longer stretches of joblessness</a>.</p><p>"Millennials are in a fundamentally different economic place than previous generations," Reid Cramer, director of the Millennials Initiative at New America, wrote in "<a href="https://www.newamerica.org/millennials/reports/emerging-millennial-wealth-gap/" target="_blank" rel="noopener noreferrer">The Emerging Millennial Wealth Gap</a>. "Relatively flat but volatile incomes, low savings and asset holdings, and higher consumer and student debt have weakened their finances. The Millennial balance sheet is in poor shape."</p>
Taking control of bad luck
<p>According to <a href="https://themanifest.com/accounting/budgeting-money-tips-for-millennials" target="_blank">a recent survey by The Manifest</a>, a business news website, millennials agree with Cramer. The study found that, of millennials surveyed, their largest expenses were housing (66 percent), educational expenses (9 percent), and health insurance (6 percent). In light of the COVID-19 pandemic, millennials are using the remaining 19 percent of their paychecks to budget and increase their savings.</p><p>About a third of millennials said they are saving more money in response to the pandemic and creating new budgets for themselves. In fact, of all generations surveyed, millennials felt the most comfortable creating personal budgets. They were also willing to think critically and adjust budgets to match financial changes, both signs that this highly-educated generation is willing to learn and adapt.</p><p>Millennials still have a rough road ahead, though. According to the survey, about half of millennials make less than $50,000 a year. That puts them into the upper-lower or lower-middle <a href="https://www.pewresearch.org/fact-tank/2020/07/23/are-you-in-the-american-middle-class/#:~:text=In%202018%2C%20the%20national%20middle,(incomes%20in%202018%20dollars)." target="_blank">income class</a>, depending on where in the country they live. That matches <a href="https://www.bls.gov/opub/mlr/2019/article/time-use-of-millennials-and-nonmillennials.htm#:~:text=Among%20full%2Dtime%20wage%20and,with%2031%20percent%20of%20nonmillennials." target="_blank" rel="noopener noreferrer">BLS data</a>, which shows millennials earning less than older non-millennials. <a href="https://www.bls.gov/opub/mlr/2019/beyond-bls/the-kids-are-alright-millennials-and-the-economy.htm" target="_blank" rel="noopener noreferrer">The BLS also notes</a> that while millennials have less debt than GenXers, most of that is student loan debt rather than mortgages.</p><p>And despite their budgetary plans, only 11 percent of millennials surveyed were able to stay within budget, while uncertainty still looms in the future job market.<em></em></p><p>With all this said, there are caveats to The Manifest survey. It hosted a relatively small sample size, only surveying 502 Americans. Of those, millennials made up 22 percent of respondents. They weren't even the largest cohort in the study. That was the baby boomers at 32 percent. </p><p>This makes the survey more suggestive than indicative. But the suggestion is that millennials, to borrow a phrase from writer Vicki Robin, are ready to reinterpret their relationship with finances.</p>A push for financial freedom
<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="a463513bfbe5a2b7d5bcc59f8be265a7"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/J-B-b393epk?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>While budgeting and financial savvy have always been important, the millennial generation will need to be far more critical of their relationship with the economy. What <a href="https://www.youtube.com/watch?v=T_tDthUWsVM" target="_blank" rel="noopener noreferrer">Robin calls the old roadmap</a>—the idea that "growth is good, more is better, game over"—is unlikely to support millennials as it did past generations. They'll need a new roadmap, charting both a new macro (the relationship between our economic and ecological footprints, for example) and micro (our individual relationships with money).</p><p>Because the macro is a whole other article, we'll stick with the micro here:</p><p><strong>1) Track and cut your spending</strong></p><p>The first step to financial freedom is to track your spending and cut unnecessary purchases. For Robin, these are often the things, services, and subscriptions that we buy out of habit, but we no longer consider whether they add value to our lives.</p><p>A pernicious modern example is the subscription economy. We subscribe to services for food, clothes, television, exercise, self-help, video games, bric-a-brac, computer programs, and on and on. These services quickly fade into the financial background as just another bill we pay. </p><p>But if we watch Netflix nine times out of ten, why pay for Hulu and Disney+ and HBO Max and CBS All access? Instead, every month or so, we should scrutinize our subscriptions to ask whether they still add value to our lives. If they don't, unsubscribe.</p><p><strong>2) Kill your debt</strong></p><p>Debt doesn't just take away money we could save elsewhere; it's also a self-replicating devourer of wealth. Your debt interest rates are almost certainly higher than your investment returns, especially on credit cards. Because of this, no matter your saving rituals, you're likely bleeding wealth the longer you remain in debt.</p><p>Instead, focus on removing debt from your life. Again, credit card debt especially. The good news is that most companies have hardship programs to help debtors. You can call them to see if they can lower your interest rates or provide other helpful services.</p><p>"Financial accommodations are generally readily available right now," Amy Thomann, the head of consumer credit education at TransUnion, <a href="https://www.nytimes.com/2020/08/29/at-home/manage-finances-save-money-millennials-coronavirus.html" target="_blank" rel="noopener noreferrer">told the New York Times</a><u>.</u> "Lenders, just like consumers, understand the hardships that are going on in the economy."</p><p><strong>3) Have an emergency fund</strong></p><p>Of course, you'll need some savings when the unexpected happens. Say—I don't know—a worldwide pandemic? Experts like Robin and Thomann recommend people have three to six months' worth of expenses on reserve. These should be in liquid assets so you can access them easily and quickly.</p><p>Of course, that's not always feasible, but you should save what you can. </p><p><strong>4) Find social outlets that don't cost</strong></p><p>The economic shutdown has offered one financial boon: It has revealed ways we can enjoy each other's company with overspending. We can host movies remotely with our friends. Play video games online. Enjoy physical-distance strolls through the park. And a host of other creative connections. After the pandemic, the occasional bar hop or Friday dinner out can still be a guilty pleasure. But unlike sitcom characters, we shouldn't be spending our social lives on the set of our favorite coffee shops or local watering holes.</p><p><strong>5) Reconsider your relationship with money</strong></p><p>Robin pushes her readers to be financially free. That is, to understand that there's an economy, people have a relationship with it, but it shouldn't become an obsession that runs their lives. As <a href="https://www.youtube.com/watch?v=xDaBjc4QyWU" target="_blank" rel="noopener noreferrer">she told <em>Big Think</em></a>: "It's like there are so many presumptions that drive us into wage [slavery], and it doesn't matter whether you are at the low end or the high end. If you are engaged in that sort of anxious process of 'more, more, more,' you are not free."</p><p>The millennial generation has certainly been dealt a bum hand, but it's perhaps defeatist, and more than a little premature, to label them the unluckiest generation. Perhaps after being led astray by the old roadmap, they will be the generation to reconsider their relationship with money—not as an end itself but a means to a healthier and more beneficial life. </p>
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AI and robotics are revolutionizing restaurant kitchens—here’s how you can invest
Miso Robotics has already served up over 12,000 hamburgers.
16 October, 2020
Credit: Courtesy of Miso Robotics
- Quick service restaurants are facing growing labor, food, and real estate costs.
- Miso Robotics is working with these restaurants to lower labor costs via automation.
- Miso Robotics has already produced over 60,000 pounds of food with its revolutionary technology.
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<p>AI is being used for far more than just self-driving cars and Siri; it's playing a pivotal role in the future of the restaurant industry. Quick service restaurants (QSRs) are among the most popular eating establishments around. However, they operate on incredibly lean margins and are being confronted by rapidly increasing labor, food, and real estate costs.</p><p>Needless to say, QSRs could use a hand—and that's where AI comes into the picture.</p><p><a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank">Miso Robotics</a> created Flippy, the world's first autonomous kitchen assistant. Designed with commercial kitchens in mind, Flippy has already cooked over 60,000 pounds of food and is in use at CaliBurger locations in Florida, as well as at stadiums servicing the Los Angeles Dodgers and Arizona Diamondbacks. White Castle, America's first fast food hamburger chain, has also partnered with Miso Robotics to develop, pilot, and undertake a beta of rollout of Miso Robotics' Flippy for White Castle's North American restaurants. </p><p>Flippy can work a grill or fryer, cooks food to perfection consistently, and can even work collaboratively with staff. In short, Flippy is a game-changer for QSRs looking to automate and cut costs.</p><p>Flippy is only the beginning for <a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank">Miso Robotics</a>, which has over a dozen patents pending in proprietary machines, learning and robotics, and control software. The company aims to make an impact in the $70.3 billion QSR market and is currently working on an overhead rail system that will cut production costs by 50 percent and leave no real estate footprint. </p><p>It's not too late to <a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank" rel="noopener noreferrer">invest in Miso Robotics</a> and the AI-powered future it's creating.</p><p><a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank" rel="noopener noreferrer">Miso Robotics</a> has raised over $14.6 million so far, and the company's raises have been led by Wavemaker, an early-stage venture capital firm with over $335 million in assets. Wavemaker's past investments and exits include Blue Bottle Coffee, MindBody, and Clutter. </p><p>You can learn more about <a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank" rel="noopener noreferrer">investing in Miso Robotics</a> with SeedInvest <a href="https://stackmedia.io/?utm_source=0a0b0cv4570&utm_medium=1a0b0cp393&utm_term=scsf-411956&utm_content=100-a0x1P000004sfQQ&pub_id=2309" target="_blank" rel="noopener noreferrer">here</a>. With minimum investments as low as $500, SeedInvest makes diversifying your portfolio easy. </p><p><em>Sponsored by Miso Robotics.</em></p>
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Learn the fundamentals of real estate for just $25
The market is moving — dive in now.
12 October, 2020
Credit: Digital Marketing Agency NTWRK on Unsplash
- The pandemic is accelerating real estate transactions into the digital age.
- Despite an economic downturn, certain real estate markets are booming.
- Professional real estate investment techniques are skills anyone can learn.
<script async="true" src="https://widgets.stackcommerce.com/js-deal-feed/0.1/widget.js" type="text/javascript"></script><p>While the economy is uncertain, real estate markets across the country are on the upswing. Investing in real estate takes work and effort, though with a bit of training, it’s possible to understand how the market moves—and where to put your money.</p><p><strong>The Fundamentals of Real Estate Investment Bundle </strong><span style="font-weight: 400;">is your entry point to the real estate market. These five courses feature 181 lessons that teach you all the ins and outs.</span></p><p><span style="font-weight: 400;">The bundle is tailored to newbies who are fresh to the market. The first course looks at </span><span style="font-weight: 400;">foundational real estate concepts you'll need to understand prior to making your first investment. You’ll learn how to identify and mitigate risks while evaluating both commercial and residential real estate.</span></p><p><span style="font-weight: 400;">Once your feet are wet, you'll dive into flipping rental properties by using professional-grade investment models to evaluate your deals. Then learn how to differentiate between good and bad deals, as well as structuring those deals with investment partners.</span></p><p><span style="font-weight: 400;">A deep dive into commercial real estate analysis offers over a dozen detailed case studies inspired by real-world commercial deals. You'll also learn foundational concepts, like the 70% Rule and the Fixed Costs Method, to evaluate your wholesaling deals. By the end, you’ll emerge with a better understanding of how to present deal economics to potential flip investor buyers </span><em><span style="font-weight: 400;">and</span></em><span style="font-weight: 400;"> buy and hold investor buyers.</span></p><p><span style="font-weight: 400;">The bundle is taught by Symon He, a best-selling online instructor of real estate and business courses that has taught over 300,000 students worldwide. He is the author of "</span><span style="font-weight: 400;">Real Estate Investing QuickStart Guide"</span><span style="font-weight: 400;"> and co-author of "</span><span style="font-weight: 400;">Airbnb for Dummies."</span></p><p><strong>The Fundamentals of Real Estate Investment Bundle</strong><span style="font-weight: 400;"> is <a href="https://shop.bigthink.com/sales/the-fundamentals-of-real-estate-investment-bundle?utm_source=bigthink.com&utm_medium=referral&utm_campaign=the-fundamentals-of-real-estate-investment-bundle&utm_term=scsf-422043&utm_content=a0x1P000004XqQ8QAK&scsonar=1" rel="noopener" target="_blank">on sale now for just $25</a>, over 90% off of the original list price. </span></p><div data-react-checksum="-1348713116" data-reactid="1" data-reactroot="" style="position: relative;"><a data-reactid="2" href="https://shop.bigthink.com/sales/the-fundamentals-of-real-estate-investment-bundle?utm_source=bigthink.com&utm_medium=referral-cta&utm_campaign=the-fundamentals-of-real-estate-investment-bundle&utm_term=scsf-422043&utm_content=a0x1P000004XqQ8QAK&scsonar=1" rel="noopener" target="_blank"> </a>
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Income is tied to happiness and hope for the future
Money can't buy happiness, but try being hopeful and broke at the same time.
25 September, 2020
Credit: Perfectlab/Shutterstock
- A new study finds money alone doesn't make people happy—they need some hope for the future too.
- The study adds to the increasing pile of literature on the subject of how hope influences our wellbeing.
- The findings, particularly on when this effect doesn't work, may have implications for future policy decisions.
<p>While the adage that money can't buy happiness may be true, it has also been said that it can rent happiness for a long time. The scientific literature on the topic seems to bear this out, as studies show that more money tends to make people happier, but not always. How much people get out of the money can be extremely variable. </p><p>One surprisingly unstudied aspect of this is how our income and wellbeing relate to hope, specifically how people think the future will turn out for them. While it is known that people are more hopeful when things are going well for them and that how we perceive the future can dramatically impact our mood, no study has looked directly at the connection between income and hope.</p> Given that the connection between money and wellbeing is known to be positive but subject to various other factors, this missing data is particularly strange. Correcting for this, a new <a href="https://link.springer.com/article/10.1007/s10902-020-00309-6#Abs1" rel="noopener noreferrer" target="_blank">study</a> published in the aptly named <a href="https://www.springer.com/journal/10902" rel="noopener noreferrer" target="_blank">Journal of Happiness Studies</a><em> </em>surveyed hundreds of Americans to determine if hope can buy the things money can't.
<p>A group of 515 American participants selected from the Prolific platform were initially involved in the study, however many of them failed to answer all relevant questions over the course of three years.</p><p>Participants were asked each year to fill out a questionnaire covering their income level, their life satisfaction, overall happiness, experiences of positive and negative emotions, and expectations on their future standard of living. They were contacted multiple times over three years to determine if changes in income impacted their levels of hope and life satisfaction. Their answers were then statistically analyzed for relationships. </p><p>To the surprise of no one, those making more money tended to report higher levels of life satisfaction. Also, as expected, higher levels of income tied to higher levels of hope. Increases in hope were strongly and directly linked to improved levels of satisfaction, and the ability of statistical models to predict how happy a participant was more than doubled by adding in their levels of hope.</p><p>However, the effect didn't exist for those making less than $1800 a month; increases in income below that point didn't increase hopefulness much. It is worth noting that this is around the poverty line for a multi-person household with children at the time of the study. The authors speculate that "this might be explained by the (lack of) capabilities that an income below $1800 can offer," and note that many of their test subjects would fit into the category of multi-person households at that level. </p><p>It seems money can buy happiness, or at least hope, but that it is more expensive than many people can afford. </p><p>There are a few caveats. While the study's demographics were similar to that of the United States overall, there were points of significant departure. Notably, the median test taker made less than the median American, was more likely to be unreligious, and rated their overall happiness slightly lower than other tests show Americans tend to do. While these differences may not prove substantial, the mentioned findings held up across all demographics involved in the survey; they may temper claims of how universal the results are.</p><p>The authors themselves admit that casualty cannot be inferred from these findings. It might be the case that a higher income causes people to be hopeful, which, in turn, improves their level of life satisfaction, or it could be that the causation runs the other way, with optimistic people making more money as a result of their already being hopeful.</p><p>In any case, hope does mediate the relationship between income and life satisfaction. While perhaps intuitive, this finding will advance the literature on the subject and has many practical applications.</p>
<iframe width="730" height="430" src="https://www.youtube.com/embed/JyzoIYqmzMQ" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe><p>This study provides further evidence that while having enough money to get by is necessary for happiness, it is not having piles of money alone that make people happy. It appears that it is what people can do (or at least believe they can do) as a result of having more money that actually increases their wellbeing. People looking to improve their outlook on life might do well to remember this.</p><p>The authors also suggest that there are policy implications in these findings. They conclude their study by pointing out:</p><p style="margin-left: 20px;">"Our findings signal that policy aimed at increasing wellbeing through higher wages should take into account that the stability of income matters, and that only over a certain threshold income can offer enough possibilities to invest in a better future and as such create more hopeful and happy lives."</p><p>That is, since the hope, income, and satisfaction relation only kicked in above a certain income level, any policy geared towards improving people's lives will have to focus on getting them above that level to see lasting effects.</p><p><em> <br> <br></em></p>
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