Ask the grumpies: Time spent on housework by child status and gender

Laura Vanderkam asks:

Looking at the ATUS, how does having a kid affect how much time people devote to housework? Is this different for men and women? There are lots of different stories one could come up with: everyone does more housework because there’s more housework to be done. Everyone does less housework because there’s less available time to do it in. Mom does more and dad does less because they wind up conforming to traditional gender roles (and maybe mom winds up working less for pay, and so is the one around to do it). Maybe mom does a lot more and dad does a little more. So I’d love to know what the numbers actually show.

Lalalalala, Stata.  Ok, so I’m using the 2002-2012 ATUS here because I’m too lazy to download the 2013 one even though it’s now available.  In a bit I’ll show how things have changed if you limit to just 2011 and 2012.

How does having a kid affect how much time people devote to housework:

. ttest  bls_hhact_hwork, by(hh_child)

Two-sample t test with equal variances
——————————————————————————
Group |     Obs        Mean    Std. Err.   Std. Dev.   [95% Conf. Interval]
———+——————————————————————–
No |   72370     39.6372    .3054511    82.17145    39.03851    40.23588
Yes |   64590    44.33705    .3295443    83.75224    43.69114    44.98296
———+——————————————————————–
combined |  136960    41.85364    .2241497    82.95358    41.41431    42.29297
———+——————————————————————–
diff |           -4.699851    .4488466               -5.579582    -3.82012
——————————————————————————
diff = mean(No) – mean(Yes)                                   t = -10.4710
Ho: diff = 0                                     degrees of freedom =   136958

Ha: diff < 0                 Ha: diff != 0                 Ha: diff > 0
Pr(T < t) = 0.0000         Pr(|T| > |t|) = 0.0000          Pr(T > t) = 1.0000

Urgh, I can’t figure out how to make this pretty without making it a picture and I’m too lazy to do that (in word you make it courier new 9 or smaller and it’s all pretty).  Anyhow, this is saying that people with kids spend 44.33 minutes on housework and people without kids spend 39.63 minutes on housework during the reference day.  This is a difference of 4.7 minutes.  This difference (two-tailed is the one in the middle, since we didn’t have a prior about which direction it should go) is significant at the 5% level (also at the .0001% level).  So kids create housework.  (Which is no surprise, but the surprise is that people spend time doing housework– childcare is measured under a different variable.)

Note that theologyandgeometry reminded me that I’m supposed to be using sampling weights when I do this, and they do matter somewhat in the regression results.  Unfortunately, ttest doesn’t take weights.   The kludge is a pain in the rear in Stata 11 (which is what I have on my home computer), so I apologize, but you’re getting the unweighted results.

Next:  Is this different for men and women?

Let’s say I want to answer this question in one fell swoop.  I would do a regression with an interaction.  It would look something like this:

unweighted:
Housework_min = 18.96 + 37.47*Female – 1.04*hh_child + 8.21*(Femalehh_child)

I can’t get the standard errors to line up in wordpress, but the se for the intercept is 0.31, se for Female is 0.57, se for hh_child is 0.44, se for the interaction term is 0.82.   To see whether these coefficients are significant, you take the coeff and divide by the standard error to get the p-value.  If that number is bigger than 1.96, it is significant at the 5% level.  These coefficients are all significant.

weighted to take into account sampling weights:
Housework_min = 15.47 + 38.50*Female – 0.67*hh_child + 4.06*(Femalehh_child)

Here everything is significant at the 1% level except the main effect on hh_child is no longer significant even at the 10% level, with a se of 0.49.  So weights do matter.  Thanks for reminding me, theologyandgeometry!

Ok, so what does this regression *mean*?  Plug and chug, my dear Watson, plug and chug.

The way the dataset is coded, if you’re female, Female is coded as 1.  If you’re not female, then it is coded as 0 (it doesn’t allow for female and not female at the same time).  Similarly, hh_child is one if you have a child under age 18 in the household and 0 if you don’t.

So to answer: “how does having a kid affect how much time people devote to housework?” You would take [18.96 + 37.47*Female – 1.04*hh_child + 8.21*(Femalehh_child)] and plug in 1 for hh_child and then plug in 0 for hh_child.

[18.96 + 37.47*Female – 1.04 + 8.21*(Female)] – [18.96 + 37.47*Female – 0 + 0)]

The 18.96 drops out, the 37.47 drops out, and you’re left with -1.04 + 8.21*Female.

For women:  [-1.04 + 8.21*1] => having kids correlates with 7.17 minutes more housework

For men:  [-1.04 + 0]  => having kids correlates with 1.04 minutes less of housework

The savvy econometrician will note here that we’ve seen these numbers before– that -1.04 is the coefficient for the hh_child variable, and the 7.17 is what you get if you add that coefficient to the interaction term.

Doing the weighted version, you get:

For women: [-0.67+4.06*1] = having kids correlates with 3.39 minutes more housework

For men:  [-0.67+0] => having kids correlates with 0.67 minutes less of housework

Now, one concern is that there are a lot more single parent households with women heads than with men.  Let’s see what happens when we limit to married households with both spouses present only.

ttest  bls_hhact_hwork if married==1, by(hh_child)

Two-sample t test with equal variances
——————————————————————————
Group |     Obs        Mean    Std. Err.   Std. Dev.   [95% Conf. Interval]
———+——————————————————————–
0. No |   27875    40.94371    .5036533    84.08898    39.95653     41.9309
1. Yes |   40403    46.88803    .4207222    84.56725     46.0634    47.71265
———+——————————————————————–
combined |   68278    44.46122    .3230849    84.42228    43.82797    45.09446
———+——————————————————————–
diff |           -5.944315    .6569407               -7.231918   -4.656712
——————————————————————————
diff = mean(0. No) – mean(1. Yes)                             t =  -9.0485
Ho: diff = 0                                     degrees of freedom =    68276

Ha: diff < 0                 Ha: diff != 0                 Ha: diff > 0
Pr(T < t) = 0.0000         Pr(|T| > |t|) = 0.0000          Pr(T > t) = 1.0000

Having a child makes time spent on housework go up even more for two parent households than it does for everybody (about 6 minutes).  The difference is about one minute for unmarried households.  Maybe dads make a lot of mess.  More likely single moms don’t have time to do additional household chores while single people do have more time.  (Doing the interaction, this difference in the effect of having children between married and single couples is significant.)

Limiting to married couples only:

Housework_min = 14.23 + 51.44*Female +4.14*hh_child + 2.31*(Femalehh_child)

The interaction term is only marginally significant, and note a sign change on the hh_child coefficient.  Having a child affects married people by 4.14 +2.31*female.  Married men’s housework goes up by 4.14 minutes after having a child, but married women’s goes up by 6.45 minutes.

When you do it weighted, everything is significant at the 5% level.

Housework_min = 13.16+ 50.95*Female +2.51*hh_child + 3.39*(Femalehh_child)

Having a child affects married people by 2.51 + 3.39*female.  Married men’s housework goes up by 2.51 minutes after having a child, but a married woman’s goes up by 5.9 minutes.

Limiting to unmarried people only:

Housework_min = 22.29 + 28.89*Female – 5.41*hh_child + 6.34*(Femalehh_child)

All coefficients are significant.  Having a child affects unmarried people by -5.41 + 6.34*female.  Unmarried men’s housework goes down by 5.41 minutes and Unmarried women’s goes up by 6.34 minutes.  (Note that there are ~8,000 single men with kids and 16,000 single women with kids here, though I’m including married people whose spouses are absent in the “not married” category because we’re talking about housework.  It is more standard to include them in the married category when you’re looking at outcomes we care about like child well-being.)

Weighting the unmarried people regression:

Housework_min = 17.68 + 26.93*Female – 4.36*hh_child + 1.60*(Femalehh_child)

Here the interaction term is no longer significant, which suggests there isn’t a difference by gender in terms how how having a child affects housework.  Makes me wonder who the sampling frame is over- or under- sampling!  Here having a child affects unmarried people by -4.36 + 1.60*female.  Unmarried men’s housework goes down by 4.36 minutes when having a child and unmarried women’s also goes down (!) by 2.76 minutes.

There are other cuts that can be made… by age, by race, by ethnicity, by education, by work status etc.

I’m going to look now at the most recent years, 2011 and 2012.  Men are supposed to be more equal partners these days so…

. ttest  bls_hhact_hwork if year>2010, by(hh_child)

Two-sample t test with equal variances
——————————————————————————
Group |     Obs        Mean    Std. Err.   Std. Dev.   [95% Conf. Interval]
———+——————————————————————–
0. No |   13862    38.72681     .700486    82.47311    37.35376    40.09985
1. Yes |   11060    44.37197    .8187207    86.10202    42.76713    45.97681
———+——————————————————————–
combined |   24922    41.23204    .5330305    84.14795    40.18727    42.27682
———+——————————————————————–
diff |           -5.645164    1.072289               -7.746914   -3.543414
——————————————————————————
diff = mean(0. No) – mean(1. Yes)                             t =  -5.2646
Ho: diff = 0                                     degrees of freedom =    24920

Ha: diff < 0                 Ha: diff != 0                 Ha: diff > 0
Pr(T < t) = 0.0000         Pr(|T| > |t|) = 0.0000          Pr(T > t) = 1.0000

Having a child still increases the amount of housework done by around 5.6 minutes (so more than for the 10-year period).

Housework_min = 20.34 + 33.75*Female – 0.42*hh_child + 8.68*(Femalehh_child)

Here the coefficient on hh_child is nowhere near significant.  The interaction term is still significant, but having a child has no significant effect on minutes worked by itself, only as it interacts with gender.  Men no longer work less when they have a child.  But women still work more!  Results are pretty similar with the weights.

Limiting to married only provides:

Housework_min = 16.35 + 46.28*Female + 4.04*hh_child + 2.50*(Femalehh_child)

Now hh_child is significant, but the interaction term is no longer significant!  Everyone in a married couple works 4 min more (you could argue that women work 6 min more, but that difference is not significant) once they have children.  Again the weights matter, because with them, you get:

Housework_min = 15.06 + 44.79*Female + 1.55*hh_child + 6.22*(Femalehh_child)

With the weights, hh_child is back to being no longer significant and the interaction term is significant at the 10% level.   Married women work marginally significantly more than married women do upon birth of a child.

Limiting to the unmarried (and those with absent spouses) provides:

Housework_min = 22.77 + 27.25*Female – 3.89*hh_child + 7.72*(Femalehh_child)

These are all significant.  Having a child decreases the amount of housework for unmarried men by 4 minutes, but increases it for unmarried women by around 4 minutes.  (These results hold if I drop people who are married with spouse absent, so it’s not like truckers are driving this result.)

Putting the weights in again changes things:

Housework_min =18.15 + 26.06*Female – 3.04*hh_child + 1.41*(Femalehh_child)

Female is significant (as is the constant) but the other terms are not.  This argues that there’s really no difference once you have a kid in how much housework you do if unmarried, either by gender or not.  It could be that there’s not enough unmarried fathers in the sample to say much of anything once the weights are added (perhaps they over-sample single dads, who knows!  Well, presumably ATUS knows.)  Also I should note that their sampling weights seem to be based on 2006 methodology, so if things have changed, they could be introducing measurement error which might tend to bias towards not finding anything.

All in all, there’s less significance with only the last two years of the data, but the story is still very similar.

So, to summarize:  Having kids increases the amount of housework that people do each day by 5-6 minutes on average, but about 1 minute for single-parent households.  On average, having kids means more housework for women and less housework for men.  However, in dual-parent married households with both spouses present, having a child increases rather than decreases the amount of time spent on housework for men.  In households with only one parent present, women do more housework and men do less (though with weighting it seems they both do less).  Potential reasons for this difference could be that men outsource the housework or that they’re more likely to substitute childcare for housework (or that they put their kids to work and women don’t!).

Now, the variable I used above assumes marriage.  It turns out there’s a variable in the ATUS that also gets at whether or not there’s an unmarried partner in the household.

tab spousepres

Spouse or unmarried partner in |
household |      Freq.     Percent        Cum.
—————————————-+———————————–
1. Spouse present |     69,359       50.64       50.64
2. Unmarried partner present |      4,224        3.08       53.73
3. No spouse or unmarried partner prese |     63,377       46.27      100.00
—————————————-+———————————–
Total |    136,960      100.00

You would think that this shouldn’t change the results much.  Except it does.
. ttest  bls_hhact_hwork if spousepres==1 | spousepres==2, by(hh_child)
Two-sample t test with equal variances
——————————————————————————
Group |     Obs        Mean    Std. Err.   Std. Dev.   [95% Conf. Interval]
———+——————————————————————–

0. No |   30366    40.27857    .4782439    83.33803    39.34119    41.21595
1. Yes |   43217     46.9683    .4089027    85.00556    46.16684    47.76976
———+——————————————————————–
combined |   73583     44.2076    .3110836    84.38513    43.59788    44.81733
———+——————————————————————–
diff |           -6.689731    .6314013               -7.927276   -5.452187
——————————————————————————
diff = mean(0. No) – mean(1. Yes)                             t = -10.5951
Ho: diff = 0                                     degrees of freedom =    73581

Ha: diff < 0                 Ha: diff != 0                 Ha: diff > 0
Pr(T < t) = 0.0000         Pr(|T| > |t|) = 0.0000          Pr(T > t) = 1.0000

Having a child when you have a partner in the house increases housework by 6.7 min.

For cohabiters it’s an increase of 12 min!

. ttest  bls_hhact_hwork if spousepres==2, by(hh_child)

Two-sample t test with equal variances
——————————————————————————
Group |     Obs        Mean    Std. Err.   Std. Dev.   [95% Conf. Interval]
———+——————————————————————–

0. No |    2112    33.51657    1.586618    72.91542    30.40507    36.62807
1. Yes |    2112    46.34943    1.895052    87.08996    42.63307     50.0658
———+——————————————————————–
combined |    4224      39.933    1.239569    80.56248    37.50279    42.36321
———+——————————————————————–
diff |           -12.83286    2.471554               -17.67841   -7.987314
——————————————————————————
diff = mean(0. No) – mean(1. Yes)                             t =  -5.1922
Ho: diff = 0                                     degrees of freedom =     4222

Ha: diff < 0                 Ha: diff != 0                 Ha: diff > 0
Pr(T < t) = 0.0000         Pr(|T| > |t|) = 0.0000          Pr(T > t) = 1.0000

Married people spouse present:

Housework_min = 14.08 + 51.56*Female + 4.35*hh_child + 2.43*(Femalehh_child)

Everything significant at the 5% level.  (Results are similar with weighting)

Cohabiters:
Housework_min = 19.42 + 29.04*Female + 2.01*hh_child + 14.56*(Femalehh_child)
(results with weighting are pretty similar, with an even bigger interactive effect)

hh_child is not significant.  Note how much less housework cohabiting women do compared to married women!  (29.04 vs 51.56)  And look how much bigger that interaction of having a child is for cohabiting women– a child only adds 2.43 min (plus the 4.35 main effect that it adds to both parents) to married women, but it adds a full 14.56 minutes to cohabiting women (18.5 minutes in the weighted regression).  The story here is that cohabiters did less work and then were forced to be more traditional once a baby arrived.  With married women we’re probably seeing a lot of housewives increasing that female coeff.  There could also be differences in hiring out help between people who cohabit and people who are in more traditional marriages.  Or in how big the house/apartment is.  There are a lot of controls that could be put into these regressions (age, labor force status, etc.) if one wanted to try to get at causation instead of just the relationships.

Grumpy nation, how does this square with your experience, if applicable? And isn’t Stata awesome?

Ask the grumpies: Obligation to house a sibling?

Kellen asks:

Let’s say I have a sibling, older than me, who has received enough bail outs from our parents that they don’t want to bail this sibling out anymore. That is–they want to help, but they feel like it’s enabling said sibling to continue not standing on their own two feet.

Now, sibling just moved to a small town very far away because sibling’s partner moved there for work. Sibling has no job, no money, and maxed out credit card. Sibling would need financial help to even pay for the gas and probable car repairs needed to drive across the country to move close to the family. One suggestion from parents is that sibling must stay in the small, far away town, find a job, even if it’s bagging groceries, and save enough to pay sibling’s own way.

Now, here I am, in a very good spot in life, just made it to saving 50% of my income this month. I don’t know if it’s good for sibling to stay in this small town with no money, and learn to hold down a job, or if, as family, there’s some obligation to help sibling get to where I am and stay in my (sort of) spare room (which is really our office/living room space) while sibling finds a job around here (in the big city).

Also, sibling has a degree as an elementary school educator + a masters degree in something like team-building activities (?), but has been trying to work as a general contractor. So sibling is not completely without qualifications, but kind-of without qualifications to do the kind of work sibling likes (working outdoors, doing labor). Also, I only know people who work in offices, which sibling has 0 experience with, so I can’t really help sibling find a job.

So, this is the kind of question that if the grumpies could answer it, they’d be able to sell the answer and make millions and millions of dollars, maybe billions once you add in speaking tours and private consulting with very rich people.

In terms of whether or not you have an obligation to invite hir to where you are and stay in your spare room.  The answer there is no.  It sounds like your sibling has worn out your parents and they may be right that ze needs to figure things out before someone else comes to the rescue.  And it sounds like sibling probably isn’t in a situation where your help would actually be help rather than enabling.  Sibling is an adult.  There aren’t children involved.  Your parents have tried to help and have decided that that kind of help isn’t helpful.  What you can offer may not be helpful either.  Your parents may be right that sibling has to hit bottom and build hir way up before ze can actually make use of any help you could give.  They may be wrong, but it’s not like their decision has to be a permanent one.  Time will provide more information.

We can also tell you from personal experience that it is seriously irritating to house a user.  Housing someone like #2 when she needs it is great!  She’s thankful and does chores both asked (without complaint) and unasked and is basically a pleasant person to be around, and she gets stuff done that she came to do and so on.  Housing someone who is used to being bailed out gets seriously annoying when he doesn’t hold up his end of what he’s supposed to be doing, complains that you don’t keep the a/c low enough (and that he’s the one who has to move his car morning and evening to comply with the HOA) even though he’s not paying rent, assumes he’s staying longer than you thought you had agreed (say, until the out-of-state house sells), and wastes all his money on things like fast food.  And you get to hear how his wife won’t move to town and get a job because then she’d lose free babysitting from her mom that you suspect the mom didn’t exactly agree to.  It is super stressful.  *koff*

You do probably have a familial obligation to keep your ears open and keep in contact with your parents to make sure that someone is keeping a long-distance eye on said sibling.  But you do not have an obligation to invite hir to live with you.  And if said sibling seems to have turned things around a bit and seems to be on a path where it’s clear that you can help in some way that doesn’t have the potential to majorly blow up, then it would be nice of you to help.  And if said sibling hits a true rock bottom, it would be nice of you to help your parents pay for attorney’s costs or counseling costs or for you to help said sibling get into whatever (government or nonprofit) programs or systems that might help.

So we can’t tell you what to do, but we can give you permission not to invite your sibling to stay with you when your parents have given many second and third and fourth chances that seem to have hurt rather than helped.

What say you, grumpy nation?  Got any better advice?

Ask the grumpies: How to best use credit card rewards?

CPP asks:

What is best to do with accumulated credit card reward points? The fact that AmEx keeps nudging me to use them to pay my bill makes me think that is the worst thing I could do with them.

That’s probably a better question for Holly at Club Thrifty.

I’m seriously lame with my CC points and don’t try to maximize them in any way.  I just take the cash back option, and not even the “correct” cash back option since I’d get more cash back if I switched to a card for “high spenders” rather than the citicard I have that limits to $300 cash back/year.  I like our citicards because they don’t have the ridiculous points system, they just give 1% cash back.  It’s easy with the lowest mental load.  Because really, my time is worth more doing real work than it is chasing the optimal credit rewards (which always eventually disapparate and then you have to chase the newest optimal system).

I have heard that the best use of points is usually for travel, but that’s going to depend a lot on your card’s specific situation.  You’ll need to sit down and see how much of a return they give you for points for each of the different options they provide you.  Cash back should be your baseline and then you should see if there’s an amount of travel that you prefer to same number of points for cash back, or whatever your other options are (do you get a bonus for applying the cash back to your bill rather than to them cutting a check?).

So, that’s really a non answer from us.  However, we know that some our readers must know better than we do.

What should CPP do with his AmEx CC rewards?

Ask the grumpies: Class size research

Fiona McQuarrie asks:

Just curious whether you have any opinion on the Hoxby class size research (in Connecticut) that Gladwell discusses.

Here’s an interesting summary of class size research from Brookings.  It is worth reading if you’re interested in the topic.

There’s a lot of stuff going on with class size research (it is, in fact, the topic going through the Stock and Watson undergraduate econometrics textbook because it has been attacked through most standard econometrics methods).

A couple of important things to note about external validity for these studies:

1.  Natural experiments (and, indeed, standard experiments) are only as externally valid as the experiment itself.  That means that a study that finds an effect on kindergarteners is not going to necessarily say much about high school students.  We know a lot about class size and K-3, we don’t know so much about middle grades or higher.  This particular experiment is on 4th and 6th grade.  It argues that it gets cumulative effects of class size by cohort size, but when a cohort is expected to be a certain size, districts may plan differently by moving bad teachers to small cohorts and good teachers to larger cohorts etc.  They may do the same with aides when deciding where to make a class-size split, or they may make specific decisions about where to put the problem kids or whether to do tracking or clustering.  That kind of planning would completely wash out the effect in a way that you would not see if all classes were restricted to a certain size because of a policy change.  That kind of planning is more likely to be going on in the type of natural experiment that Hoxby examines in this study.

2.  Class size decisions are not made in isolation.  A policy asking for extra money from the federal government to reduce class size is going to provide different results than a policy that is forced to take that extra money out of another budget.  Generally, research suggests that, believe it or not, most schools are doing the best that they can with the budgets that they have.  When you give them an unfunded mandate, outcomes are hurt in ways that they wouldn’t be if you gave them a funded mandate.  Hiring more new teachers and buying portables while taking money away from other programs may end up having a negative effect even if smaller class-sizes are beneficial.  The type of natural experiment Hoxby is looking at is one of these situations– the budget isn’t changing based on class-sizes, they get the same $/kid whether they’re in a large cohort or a small cohort.  The only thing that changes is the expense from economies of scale (whether they need one teacher/classroom or two).  That’s a different situation than one in which expenses for everything else stays the same but the district gets extra money to hire more teachers and buy portables.

So, do Hoxby’s results mean that class size is unimportant?  No.  They just show that it seems to be unimportant in the type of situation that she’s studying, one in which variations in elementary school class-size are caused by variations in cohort size.  That’s why there’s a large literature on this topic– the answer is different in different situations.  We need a lot of experiments and natural experiments to get the full picture.

Side note:  Caroline Hoxby is one of my personal heroes.  If I ever decide to give up this academia thing, I’m totally going to beg her for an RA job.  She is an amazing economist.  Also, rumor has it (aka multiple of her coauthors has mentioned) that she is one of those people who sleeps 4 hours/night every night because of low sleep need.

Ask the grumpies: Do I stay or do I go now, and if I go… then what?

Tired of being grumpy all the time asks:

I’m an assistant professor.  I found your blog when looking for advice on dealing with horrible departments.  I don’t like my job and have become a big ball of stress and unhappiness.  I had been looking forward to escaping during my unpaid summer months, but have been given a pile of service and administrative deadlines to deal with (still unpaid).  I’ve tried to find another job without any luck.  I may or may not get tenure.

When I read the post on one of the Grumpies quitting, I, quite literally, had the breath knocked out of me.  It had never occurred to me that quitting without a new job was something that people actually did. My husband is on board with my quitting; he even suggested it earlier this year.

I am hesitant to discuss this with anyone I know– if my department hears, I fear they will choose not to renew my contract.  I’d rather choose to leave than be forced to.  Do you have any advice, thoughts, questions I should consider as I contemplate this new plan?

We both actually have experience with this.  Not only did #1 quit recently, but #2’s husband quit a year ago (pre-tenure) without having any other employment lined up.

Neither quit happened overnight.  It’s hard to quit something that allows a lot of freedom and can’t fire you on only two weeks’ notice.  It’s even harder to give up the potential for complete job security.  Add to that the weird culture of academia where, at least when you’re new, leaving the academic track seems like failure (it isn’t!), and you get people sticking around probably longer than they should.

Sometimes sticking around works out– you can change things or go on to other jobs.  Sometimes you just need a year of leave (and you can often get a year of unpaid leave off the tenure clock to try things out– #2’s DH did that just by asking).  Sometimes it’s just delaying the inevitable.

We both know many other people who have made the jump.  All are happier for it.  We know people who were considering making the jump but with one thing or another they decided they could make it work where they were or they got a job offer at a different place and everything worked out.  They’re happier than they were too.  And we know people who are still working on making the decision.

#1’s experience of quitting was that, somewhat thankfully, it got bad enough that I felt good about leaving.  If it had been less bad, I might still be there.  Perhaps that’s where you are.  It took me a year to decide to quit.  Other people in my department also have exit plans (and every year we’ve been hiring to replace recent exits), which tells you how bad it is there.  My experience has been that quitting my job makes me feel amazingly good, but I don’t think I would have felt that way if I’d left pre-tenure.  I also have financial luxury to faff about until I figure out a new career.  And I might hate my next job, too!  (But at least it will PAY MORE.)

Also, consider this:  it’s likely you can outlast administrators.  However, consider the direction your school as a whole is going in (your department, college, university as a whole).  That was one among many clues that I didn’t belong in that particular place.  It was hard, hard, hard for me to give up an academic career– that is, until I was ready to do it.  Everyone has a different breaking point.  While you’re finding yours, save money like a fiend.  Try to stay sane.  Maybe start consulting on the side if you want to turn that into a new career.  This could be an opportunity to move to where you really want to be!  (Better work environment for husband, closer to family or the beach, lower cost of living, whatever.)

There must be something you love about academia to even go into it.  There are also things you hate.  Are they things you hate about the career, or this particular job, or some of both?  If you can figure out the particular *aspects* that are turning you into a ball of stress, you can look at adjusting them within this job or in a new job.

Things to consider:

Academia is just a job

Pre-tenure angst *read this book*.  If you feel trapped, this book will help you feel untrapped and will give you the tools you need to get to freedom, whether that includes staying where you are with an exit plan or making a big jump.  It will help you turn the risk of losing/leaving your job into a calculated risk, increasing the upside and decreasing the downside.

For the past three years or so, #2 has been talking about getting ready financially for her DH to quit, dealing with him being out of work, and adjusting to his new income, off and on in her monthly mortgage posts.   Savings and lowering monthly expenses create the luxury of being able to make a measured risk.

Are you a scanner?  As #1 says, think about what aspects of work make you happy and read up on what kinds of jobs fit those aspects.  For example, like Cloud, my husband is a scanner, so he likes shorter projects.  He likes working in groups.  He likes figuring out problems.  He needs mental stimulation.  He needs regular validation.  He’s currently getting all of these things in his current job, but wasn’t getting them in academia.

From a practical standpoint, it took #2’s husband several months to get consulting contracts and job interviews, but they all kind of hit at once, probably because of the way hiring cycles and budgets work.  He started lazily networking in May, then more seriously in September, and by November he was working in his new job.  (He did get an unsolicited offer to continue teaching off the tenure track at the university, but had no problem turning that down.)

If you quit, you’re not alone.  If you decide to stick it out, you’re not alone there either.  If you decide to stay for a while and work on a gradual exit plan, that actually seems pretty common.  You can make any choice into the right one, if you can find what fits well for you and your life.

Does that help?

And now, check the comments for thoughts from the Grumpy Nation.

Ask the grumpies: Aftershock

Linda asks:

The book description of Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown notes: “From the authors who accurately predicted the bursting of the global bubble economy comes the definitive look at what lies ahead in 2013 and beyond.”

My reading of this book is summarized thusly: there are still more economic bubbles yet to burst and the global economy is “evolving” and not just “cycling” up and down. The authors acknowledge that it is very hard to accurately predict when this big “afterschock” will hit us. They recommend some employment and investing strategies that they say will help one better ride out the “aftershock,” although they note that one could lose some big returns if one shifts assets too early. The principal author is an economist, but he sounds very critical of economists in general.

The book was an easy read (maybe because there was so much repetition) and it appeals to the part of me that is always concerned that in my lifetime our society will become increasingly dystopian. (Could it be that I’ve read too much Margaret Atwood and Octavia Butler?) I’m wondering if true academics such as yourselves have a different opinion or general guidance on what to read to balance out the hype of this Aftershock idea.

Somewhat related: if one had a chunk of cash (such as from the sale of a home), what are the better options for saving or investing it for a short term (2 to 5 years)? I’m starting to think about what to do with the equity I’ll get when I sell my house later this year for my big move to the Bay Area, hence my unusual interest in investing and PF books. I will also be meeting with my (fee-based) financial adviser, but I like to have some ideas to discuss with him first.

 

Lots of economists were talking about the market crashing before it crashed.  I don’t think anybody really understood the *extent* of the housing crisis, but we all knew it was unsustainable and going to crash.  Ditto the earlier tech crash.  We’re actually pretty good at seeing bubbles but nobody knows when exactly they’re going to pop, probably because there’s an element of chaos theory there.  The bubbles in my lifetime have seemed to grow bigger than possible before inevitably popping.

With the current lack of regulation, of course there are going to be more bubbles.  The system is still set up for bubbles.  Government has to interfere for there to be no bubbles (as it did after the depression and again after the S&L crisis in the 1980s), but there’s a lot of money to be made in bubbles and the people with money are the people in power these days.

And yes, the US is growing increasingly dystopian.  This depresses me because I grew up thinking it would get better.  Two steps forward and half a step back.  But income inequality has been broadening and things have been getting worse for the poor.  There’s a lot of bad stuff that happens when income inequality gets bigger.  Very depressing.  (I voted for Al Gore, and I like to think in some parallel universe things are better.  More likely though there’s a backlash in that universe and the inevitable was just delayed a couple of decades.  *sigh*)  One of my (libertarian) colleagues is always saying, “Bread and circuses” and forecasting the downfall of civilization.  I hope he’s not right.  I still have the little fairy of Hope in my heart.

So, what to do?  Well, the standard advice *still applies*.  Bubbles mean you need money in stocks.  Bubbles popping mean you need money in bonds.  We can’t predict when a bubble is going to pop or how big it’s going to get.  So we diversify.

Investing for the short term is the same standard boring advice as well– if you’re going to need the money, put it someplace safe (with lower returns).  Bonds, laddered CDs, etc.  If you feel like gambling, put it in the stock market.  (Because houses in SF are so very expensive, and it’s generally a seller’s market, plenty of folks keep that “short term” money in the stock market rather than pulling it out.  When tech bubbles burst, so do housing prices in the SF bay area, so it isn’t quite as big a risk for them, but that’s a very unique market.)

Even if we go into hyperinflation, you’ll need money in stocks for the long-term.  If society collapses, then probably you’ll need bullets and bottled water more than anything else.  But it’s hard to say.  We’re not prepared for a zombie apocalypse.

Ask the grumpies: What to do with a lump sum?

Susan asks:

I’ve just finally unloaded my own slice of the housing crisis (PHEW), a condo in another place, and have been wired the proceeds, which are between $50 and $100k. What’s the best thing to do with that lump?

My only remaining mortgage (PHEW) is the house I live in. It’s for 80% of that house’s value, at 3.4%, and the monthly nut is reasonable, at ~30% of take-home. I have decent? retirement savings between IRA, investment and TIAA-cref accounts, about $70k (I’m 41). My car is paid off, and I have no CC debt or student loans. There are some upcoming expenses for the house that are within our planned budget. We do not have children and do not plan to.

I feel burned from the housing crisis (yet I know it wasn’t as bad for me as others). The proceeds represent my initial investment, so I came out about flat, although that money was locked up (or, circa 2009, nonexistent) for almost 10 years. Because of that, I’m hesitant to pay down principal on my current mortgage, more than the 20% we already have in there. But 2008 wasn’t so kind to investments, either. I know I don’t want to leave this money in checking or my 0.5% savings, so – where does it go?

Standard grumpy disclaimers apply:  We are not financial advisers.  Talk to a fee-based financial planner and/or do your own research before making any life-changing decisions.

You have a few good options.  Three of them jump to mind immediately.

1.  Put more money into retirement
2.  Pre-pay your current mortgage
3.  Put the money in taxable stocks

I do have a quibble with the last paragraph if your question.  Pre-paying the mortgage *can* provide cash-flow liquidity.  If you’re willing to reamortize (aka re-cast) the mortgage, then you can lower your monthly mortgage payments by re-extending the length of your mortgage if you have prepaid a significant amount.  You can do this even if you’ve lost your job, generally for the cost of ~$250.  Only if you’re willing/planning on foreclosing on your house would it make sense to never pre-pay under any circumstances, but since you didn’t foreclose on the condo, it’s unlikely that you’re in that situation.   The *debt* is what you should be focusing on, not the value of your house.  You will have the debt no matter what the value of your house is (absent willingness to foreclose, of course).  Pre-paying here is the safest option– the low risk, low return option.

Your interest rate on your house is pretty small, so it’s not obvious you should pre-pay the mortgage.  With a higher interest rate, it might tip your decision to the mortgage if doing so meant you could refinance, for example, and it would be a safe investment (assuming no plans to foreclose) and would allow you to decrease your monthly nut by reamortizing in the case of an emergency.  In this case, the return is pretty low and this is something you’d only think about doing if you wanted a safer option.  The return is higher than CDs or savings accounts, but you wouldn’t necessarily be able to get all your savings out in case of an emergency (because home equity loans tend to dry up when you actually need them), just enough to give you a somewhat lower monthly payment with re-casting discussed above.  [Note, too, that the earlier you pre-pay the bigger the benefit of prepayment-- you can play with the numbers using the GRS amortization calculator.]

You should think about how quickly you will want this money.  It sounds like you don’t have any major plans for expenditures that you can’t handle.  However, how are you feeling about job risks over the next 15 years or so?  Is there a chance that you or a spouse could lose income?  Is there a chance that you’ll want to move to a more expensive locale?  If you feel pretty secure on that, then putting the money away in a tax-advantaged retirement fund is going to be better than just putting it into the stock market because you will save money on taxes.  However if you see a chance for needing more liquidity, then you would want to tilt towards regular stock investing (keeping in mind that IRA Roth contributions can be taken out tax-free even if their earnings cannot, so they have added liquidity).

You should also think about whether or not $70K in retirement accounts at age 41 is putting you on track for retirement or not.  My druthers is that you could add more to that, but I also don’t know about your lifestyle and your planned expenses, your work situation, etc.  There are a lot of retirement calculators out there with various inputs that you can play with to get a better picture of how much you think you’ll need going forward.  It is unlikely that you have saved too much at this point.  (And if you have, you can always cut down on the retirement savings later.)

If you choose one of the two investing options, what stocks to put it in?  Broad-based low-fee Vanguard index funds if possible.  VTSMX is a good one if you just want diversification, but there are other combinations you can make with VFINX, VGTSX and so on.  You may want to throw in some bond fund, such as VBMFX.  And ask about their admiral fund shares if you invest with Vanguard directly.  With TIAA-CREF you’ll want to talk to an adviser to get numbers on fees for their broad-based indexes vs. their target-date funds.  We can go more into detail on these if you want to add more information about your options.

Personally I like having a secondary emergency fund in taxable stocks (and/or in IRA Roths) that I feel like I could tap by selling off stocks.  So far we have left ours untouched but the fact that it’s there (even when it dropped down to its lowest point in the recession– it has since more than doubled!) always made me feel more secure.

What I would do in your scenario would be to max out all the retirement accounts that I could (and given the sale, you may want to check with a tax accountant or other expert before putting money in the IRA), and put the rest into taxable stocks or (less likely given your situation) mortgage prepayment.  For the retirement accounts, I would either pick some broad-based indexes with low fees from TIAA-CREF, or I’d pay a little bit more in fees to get their target-based fund.  (Their target-based fund isn’t a no-brainer like Vanguard’s is, but if I didn’t want to sit down and create my own diversified sets of funds, I’d go for it.)

But again, you’ll have to think about what your short- and long- term goals and uncertainties are.  The best thing to do will vary based on your needs.  For shorter-term safety but low return:  prepay the mortgage (knowing your can re-cast for a lower monthly payment later, should you need to).  For longer term safety and the highest rewards:  max out your retirement options.  For a secondary emergency fund and somewhat risky growth (which will be correlated with the economy, as you note, but not necessarily your personal situation):  put it in Roths first and the stock market second.

Grumpy Nation:  What advice would you give Susan?  Are there other things she should be considering in this decision?  Bonus points if nobody mentions landlording as an option.  Unless Susan *really* wants to landlord.  Which we doubt.

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