Jessica: Economic Profile and Analysis
Economic Profile:
Jessica dreams of “owning an island, a hot air balloon, a vineyard, and a boat.” On the other hand, Jessica fears of “being homeless and dying for lack of healthcare.” Here is her economic story.
Jessica, an unmarried, forty-year-old female, currently works full-time as a tutor as a part of the organization called Tutor Doctor. She received a BA and a MA in English from the University of Nevada, Las Vegas, and she previously worked as an adjunct English professor at schools such as Clark College, University of Nevada, Las Vegas, College of New Rochelle, South University, teaching for a total of ten years. She received a scholarship for all of her higher education, and therefore she left school with no debt. She has lived in many places including Las Vegas, Nevada, Ojai, California, Vancouver, Washington, Brooklyn, New York, Kilkenny and Tra Mhor, Ireland, and San Diego, California, and in each location, and she has rented but never owned a home.
Jessica places herself in the lower socioeconomic class. As a tutor, she makes $35 dollars an hour for all her tutoring appointments, but she doesn’t believe this to be a livable wage. Additionally, the number of client meetings she has and the number of hours she works with those clients vary each week, so she couldn’t pinpoint a yearly salary. Her tutoring schedule is dependent upon when her students are not at school, leaving mostly after-school hours and weekends hours for her to work. Despite the unpredictability of this profession, she prefers tutoring to traditional teaching because she believes her strength is one-on-one teaching. As a college professor, she lamented that there wasn’t enough time to help every student due to the large size of college classes. Additionally, she disliked being a professor because, as she mentioned, “I was only paid for hours in the classroom, but grading papers, which I did outside of the classroom, was ninety-percent of my work.” As a tutor, she assists her students in English as well as economics and history.
Despite leaving school with no debt, Jessica believes that she is worse off than her parents because her “job provides no benefits and no insurance” and she has “no retirement account.” However, she is very passionate about tutoring English, and she stated that she “could be worse off financially but still be just as happy, if not happier” than she is right now in her current job. Jessica suggested that it was her choice of major that affected her economic well-being today. As noted earlier, she chose to major in English for both undergraduate and graduate school, a major that didn’t provide her with a pathway to high-paying work.
In terms of government intervention in Jessica’s economic history, she noted both ups and downs. She is a big fan of Obamacare. She noted that without this government program, she wouldn’t have had access to healthcare. With this program, she can afford quality care and stay healthy. She fears that with the upcoming presidency her situation might change and she’ll lose this medical coverage. Additionally, the 2008 financial crisis destroyed the 401(k) she had been saving and the following job crunch limited opportunity for new positions. She also noted that she is not saving for retirement right now, but she plans to start again soon and rebuild her 401(k) account.
Although she is passionate about English and literature, she advises that young people not major in English because of the long-term economic consequences. She also has a few economic suggestions for young people given her life experiences: save 25% of what you make every check, cut out expensive habits, and make sure to network.
Economic Analysis:
From our six economic principles, the two that are most applicable to Jessica’s life are that “all choices have consequences that lie in the future and reshape what is possible” and that “all choices have costs.”
In analyzing Jessica’s life and her economic choices, her most defining decision, as she noted herself, was that of her choice of major: English. However, Jessica’s situation is rather unique. She attended college cost-free; she left school without debt. Initially, this seems as if it would have given her a leg up later on in life in terms of her financial well-being, but her choice of major has led to what she believes to be an unstable economic situation at age forty.
Without the burden of student loans, she had more freedom when choosing her area of study. She didn’t have to sacrifice her passion for English because of her financial situation and go into a stem or tech major. Even without the college debt and even with her BA and MA in English, however, the job opportunities and salaries for English majors were and continue to be quite inferior to those of graduates in the hard sciences. She graduated from college in 1994. According to the National Association of Colleges and Employers, college graduates from all fields in 1994 earned an average starting salary of approximately $46,000, whereas English majors specifically earned approximately $34,000 (these values are adjusted for inflation). 
Despite the economic sacrifice, she decided to pursue her passion. Of course, these charts don’t take into account the fact that Jessica went on to get a graduate degree, which raised her salary potential. She received her graduate degree in the late 90’s, but here are some current projections (also from the National Association of Colleges and Employers) for people with graduate degrees in the humanities (which includes English) in comparison to other disciplines. There’s still a huge difference in starting salaries today.
Another one of Jessica’s choices that has significantly shaped her current financial situation was her decision to become a tutor instead of continuing as an adjunct professor. The hourly pay for her tutoring sessions is $35 dollars an hour (which, for a point of reference, is well above Oregon’s minimum wage at $9.75 dollars an hour), but her tutoring schedule is much more unpredictable than a traditional minimum wage job. She doesn’t work a standard 9-to-5, five day work week. She works when clients schedule appointments. This means that her yearly income is unpredictable even though she has a list of regular clients.
After doing a bit of research into university salaries and Tutor Doctor, the company that she currently works for, I found that she actually earns more as a tutor. With this decision she prioritized doing what she loved (she prefers one-on-one teaching over being a professor), which ended up being the more fiscally responsible route.
As an adjunct English professor at the University of Nevada, Los Angeles (a position she has held) the average salary is approximately $1,500 per month, so around $18,000 a year for income, as listed on Glassdoor (a website that provides economic information about companies and their employees). In contrast, she earns $35/hour as a tutor, and the the median salary for a tutor who works at that rate in Portland, OR is $30,000 a year, according to Glassdoor (but I don’t know if this is actually her yearly salary, it’s just an estimate from this site). However, a downside to both lines of work is that neither job provides health or retirement benefits. 
I learned, from reading reviews of Tutor Doctor, from its workers, that there are some more downsides to tutoring this way: there’s no compensation for gas used to travel to a client’s house, travel time, or work done outside of official tutoring sessions. Still, Jessica greatly prefers tutoring to traditional teaching, and she earns a lot more.
After reading an Atlantic article from 2015 about income inequality in higher education, I think it is definitely for the best that Jessica left traditional teaching. In this article entitled “The College President-to-Adjunct Pay Ratio” I learned about the extreme inequality that occurs on public university campuses: adjunct professors make around $20,000 whereas college presidents make hundreds of thousands of dollars and sometimes millions of dollars. Of course, these adjunct professors are often only part-time employees, but that shouldn’t mean that they are devalued to an unlivable wage: “a quarter of all part-time college faculty receive public assistance, such as Medicaid or food stamps...many adjuncts earn less than the federal minimum wage. Unless they work 30 hours or more at a single college, they’re not eligible for health insurance from that employer, and similar to other part-time employees, they do not qualify for other benefits. The temporary status and low income of adjunct professors can make it difficult for them to provide quality instruction and support to their students.” Our society doesn’t seem to value public education and it doesn’t value its teachers. Professors and adjunct professors aren’t receiving wages that seem appropriate for the amount of work that they do. If we are to encourage quality education, our society needs to invest in these quality educators and make teaching worthwhile. Jessica was never paid for the paper grading and other work she did for her students outside of class. http://www.theatlantic.com/education/archive/2015/09/income-inequality-in-higher-education-the-college-president-to-adjunct-pay-ratio/407029/
Even though tutoring turned out to be the better financial decision, Jessica still considers herself to be in the lower-class. She is concerned about her financial future, especially her retirement savings. Apparently, her retirement account was destroyed after the 2008 financial crisis. She plans to start saving and investing her money again soon, but considering that she is already forty, her late start may push back her retirement date. Jessica has been tutoring for about four years, which means that after paying for living expenses, the basic necessities, and travel expenses to meet with her clients, there may not be a lot of money left to save, and she may not be able to meet the target amount of savings that’s suggested on the graph (left) below.
The CPI, the Consumer Price Index (at right), which includes consumer expenditures on transportation costs, like gasoline, food and beverage costs, and renter households, all of which affect Jessica’s daily life. As seen by the CPI graph, the cost of living is rising. Jessica is concerned that if her income doesn’t increase (by tutoring existing clients more or taking in new clients) to keep up with this rise, it may be harder for her to rent and work in Portland.
Jessica has never owned a home, and so she has never had to take out a mortgage. She has never had to borrow money and later pay off some massive debt. She has only ever rented homes, and I don’t believe she plans on becoming a homeowner, at least not soon, so it would seem that the federal funds rate doesn’t really affect her. However, increases in the federal funds rate can indirectly affect her. According to the NYT article linked below, “higher rates mean that landlords must pay more to purchase and renovate their properties, so in the long run, those are costs they could easily pass on to renters.” Looking at the chart below, it looks like the interest rates are climbing, which could pose a problem for Jessica in the future. If interest rates go up, the rental cost for her home increases.
Conclusion:
I was very surprised at the low pay of adjunct professors. Before my research, I figured that Jessica’s position as a professor probably paid more than her job as a tutor, but I was wrong. The economic equality that exists in public higher education is very interesting. I think it’s just a given nowadays that educators are paid very little, but it doesn’t make sense because teachers are so important to society. What can the government do to address the wealth gap in this scenario? Could the government require public institutions of higher education to give retirement and health benefits to all employees no matter whether or not they’re full or part time? I don’t really know what kind of reach the government has in these decisions, but it would be interesting to find out.
I also think that it’s very admirable that Jessica decided to follow her passion for English and literature, despite the fact that she was aware of the financial consequences. Her advice to other young people is not major in English, but she doesn’t regret her choice. She loves getting to work with students.
Now that we have learned so much about personal finance and how we should start investing early, I am concerned about her retirement savings and whether or not she’ll be able to save enough to get to a comfortable financial place at a reasonable age. However, I might be off on her yearly salary prediction of $30,000, so maybe there is less need to worry. Her salary could actually be up to $50,000 a year .
