Jeffery Lacker, president of the Fifth District Federal Reserve Bank in Richmond, spoke on “Investing in People as an Economic Growth Strategy” at the Lynchburg Regional Business Leaders Breakfast at LC Thursday morning. It was the first time Lacker had been to Lynchburg in a professional capacity.
Dr. Joe Turek, dean of the LC School of Business and Economics, introduced Lacker, who has been in his position since 2004 and is regarded as one of the most influential presidents in the reserve system.
Lacker spoke about the importance of investing in human capital at an early age and emphasized the need for “soft skills,” including patience and a strong work ethic.
The chronically unemployed and underemployed have a hard time catching up if they have not received a strong education in both their homes and schools, beginning in preschool, he said.
“Workforce development is a long-term vaccine to make workers more resilient,” he said.
Lacker said efforts to retrain older workers are often unsuccessful and that greater use of social safety nets might be better for them.
Lacker said there is no question that a college degree is the best investment for young people who are prepared academically. A college graduate makes on average $1,100 per week vs. a high school graduate’s $651 per week. Over the course of a lifetime, that translates to $2.3 million in earnings vs. $1.3 million.
However, Lacker said, the 40 percent of students who start college but don’t finish are only marginally better off than high school graduates. They earn, on average 15 percent more than high school graduates compared to 83 percent more for college graduates.
Many of the students who drop out of college do not understand that they are ill-prepared for college-level work, and would be better off attending community colleges to improve their skills, or consider a trade school or apprenticeship, he said. The average debt load for college dropouts is $14,000, which puts them further behind.
On the other hand, he noted that students from poor families sometimes have the necessary academic abilities, but overestimate the cost of college and underestimate the availability of financial aid.
After his remarks, Lacker accepted questions and comments from the audience. One woman said that we often overemphasize the value of a college education to the detriment of other good-paying jobs. Her son, for example, didn’t want to attend a four-year college, but instead went to a technical school to become a diesel mechanic and at age 22, makes more than she does with her college degree.
Mike Davidson, economic development director for nearby Campbell County, said 27 percent of the jobs in his county are still in manufacturing (much higher than the national 10 percent figure) and that more people need to understand there are still good jobs in that sector.
In response to other questions, Lacker said he will continue to support low interest rates but does expect them to rise slightly by next year. He also foresees a continued, sluggish growth rate at between 2 and 2.5 percent.
Lacker said the current level of national debt is not a crisis now, but it could be in 15 to 20 years unless the political gridlock in Washington, D.C. is broken so that changes can be made to reduce the debt.
He also said he expects the next two years to be rather tumultuous for business owners as they deal with implementation of the Affordable Health Care Act.