Category: Labor Economics

Koch Employees Motivated by the Fulfillment of Meaningful Work

(p. A11) . . . , Mr. Koch defines “principled entrepreneurship” as the effort to maximize profit by “creating superior value,” as well as by “acting lawfully and with integrity.” What is good for business, he says, is good for society–another aspect of good profit.
The culture of a company is formed, Mr. Koch observes, when employees internalize such principles and practices. Although employees should be urged, he says, to be agents of change, to think critically and, when necessary, to challenge the decisions of their bosses, they will find that their most significant motivation is a sense of accomplishment and fulfillment. “We cannot ignite a passion for creating the greatest value,” Mr. Koch writes, “if there is no meaning in our work.”

For the full review, see:
JOSEPH MACIARIELLO. “BOOKSHELF; The Company He Keeps; Respect means treating people on their merits–not according to the rigid categories of identity politics. Merit will always create value.” The Wall Street Journal (Fri., Oct. 23, 2015): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date Oct. 22, 2015.)

The book under review, is:
Koch, Charles G. Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies. New York: Crown Business, 2015.

Focused Investing by Entrepreneurs Can Create Illiquid Wealth that Is Large But Precarious

The implications of the point made in the passages quoted below, were boldly drawn out by George Gilder in his article “The Enigma of Entrepreneurial Wealth.”

(p. B4) Wealth-X found that from July 2014 to July 2015, 45 percent of the ultrawealthy in the United States lost some part of their wealth; 11 percent lost more than half of it.

The reasons for the drop in wealth differed. But why so many ultra-wealthy people — defined as those with more than $30 million — lost so much of their wealth so quickly offers lessons in financial management, no matter how much money you have.
Sure, this group still has a lot of money. But those who lost a lot of money made similar mistakes: Too much of their money was tied up in one investment and too little of their money was in cash or some other liquid investment. And too often, they didn’t think enough about the likelihood that something could go wrong.
. . .
“A lot of people have this view that wealth is inherited,” said Mykolas Rambus, chief executive of Wealth-X. “That’s very much not the case.” Most are successful entrepreneurs who built fortunes, he said, “And most of their money is in privately held companies, not your Googles and Facebooks.”
He said 75 percent of the world’s wealth, when real estate is included, was privately held.
In the period examined by Wealth-X, overconcentration and illiquidity were big factors when someone lost a fortune.
Curtis James Jackson III, better known as the rapper 50 Cent, was worth $240 million in May 2014 and about $50 million last month, according to Wealth-X. The precipitous drop was caused almost entirely by the falling values of four of his companies, with interests ranging from clothing to film production. They declined to $7.2 million from $150 million in 12 months, according to Wealth-X’s research.
The same could be said for Mr. Charney, who was ousted from his company American Apparel, which later filed for bankruptcy protection. His share of the company was estimated at over $65 million in May 2014 and is now virtually worthless. At American Apparel’s height, in 2007, Forbes put Mr. Charney’s stake at $550 million.
“Every financial adviser in the United States says you’ve got to diversify,” Mr. Rambus said. “There is a lesson here about volatility and concentration. Rewind to the dot-com crash. There were plenty of folks who were seriously overexposed to tech and lost their shirts.”
But there’s a paradox here. Generally, it was overconcentration in one, illiquid company — whose value rose exponentially — that made people ultrawealthy in the first place.

For the full story, see:
PAUL SULLIVAN . “Wealth Matters; Reversal of Fortunes for Some Superrich.” The New York Times (Sat., DEC. 12, 2015): B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date DEC. 11, 2015, and has the title “Wealth Matters; The Bad Fortune of Some Ultrawealthy People.”)

The Gilder article praised above, is:
Gilder, George. “The Enigma of Entrepreneurial Wealth.” Inc. 14, no. 10 (Oct. 1992): 161-64, 66 & 68.

Affirmative Action Reduces Number of Black Scientists

Malcolm Gladwell, in chapter three of David and Goliath, persuasively argues that science students who would thrive at a solid public university, may be at the bottom of their class at Harvard, and in discouragement switch to an easier non-science major. Gladwell’s argument has implications for affirmative action, as noted by Gail Heriot in the passages quoted below.

(p. A13) . . . , numerous studies–as I explain in a recent report for the Heritage Foundation–show that the supposed beneficiaries of affirmative action are less likely to go on to high-prestige careers than otherwise-identical students who attend schools where their entering academic credentials put them in the middle of the class or higher. In other words, encouraging black students to attend schools where their entering credentials place them near the bottom of the class has resulted in fewer black physicians, engineers, scientists, lawyers and professors than would otherwise be the case.

But university administrators don’t want to hear that their support for affirmative action has left many intended beneficiaries worse off, and they refuse to take the evidence seriously.
The mainstream media support them on this. The Washington Post, for instance, recently featured a story lamenting that black students are less likely to major in science and engineering than their Asian or white counterparts. Left unstated was why. As my report shows, while black students tend to be a little more interested in majoring in science and engineering than whites when they first enter college, they transfer into softer majors in much larger numbers and so end up with fewer science or engineering degrees.
This is not because they don’t have the right stuff. Many do–as demonstrated by the fact that students with identical entering academic credentials attending somewhat less competitive schools persevere in their quest for a science or engineering degree and ultimately succeed. Rather, for many, it is because they took on too much, too soon given their level of academic preparation.

For the full commentary, see:
GAIL HERIOT. “Why Aren’t There More Black Scientists? The evidence suggests that one reason is the perverse impact of university racial preferences.” The Wall Street Journal (Thurs., Oct. 22, 2015): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary was updated on Oct. 21, 2015.)

Heriot’s report for the Heritage Foundation, is:
Heriot, Gail. “A “Dubious Expediency”: How Race-Preferential Admissions Policies on Campus Hurt Minority Students.” Heritage Foundation Special Report #167, Aug. 31, 2015.

Gladwell’s book, mentioned above, is:
Gladwell, Malcolm. David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. New York, NY: Little, Brown and Company, 2013.

“Growing Emphasis on Climate Aid Is Immoral”

(p. A13) . . . aid is being diverted to climate-related matters at the expense of improved public health, education and economic development. The Organization for Economic Cooperation and Development has analyzed about 70% of total global development aid and found that about one in four of those dollars goes to climate-related aid.
In a world in which malnourishment continues to claim at least 1.4 million children’s lives each year, 1.2 billion people live in extreme poverty, and 2.6 billion lack clean drinking water and sanitation, this growing emphasis on climate aid is immoral.

For the full commentary, see:
BJORN LOMBORG. “This Child Doesn’t Need a Solar Panel; Spending billions of dollars on climate-related aid in countries that need help with tuberculosis, malaria and malnutrition.” The Wall Street Journal (Thurs., Oct. 22, 2015): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary was updated on Oct. 21, 2015.)

“The Market for Greek Philosophers Has Tightened”

(p. A25) Senator Marco Rubio sent fact-checkers aflutter when he said at the Republican presidential debate on Tuesday that philosophy majors would be better off going into welding. The value of a vocational degree, he argued, was greater than the payoff that comes with contemplating the cosmos.
“Welders make more money than philosophers,” Mr. Rubio said. “We need more welders and less philosophers.”
. . .
On Wednesday [November 9, 2015] Mr. Rubio doubled down on his assertion, sending out a fund-raising email with the subject line “more welders” and calling for the overpriced higher education system to be dismantled.
The argument echoed one he makes frequently on the stump, which the senator admits probably irks some intellectuals: “You deserve to know that the market for Greek philosophers has tightened over the last 2,000 years.”

For the full story, see:

Alan Rappeport. “Philosophers Say View of Their Skills Is Dated.” The New York Times (Thurs., Nov. 12, 2015): A25.
(Note: ellipsis, and bracketed date, added. The last two quoted paragraphs were combined into one paragraph in the print version.)
(Note: the online version of the story has the date Nov. 11, 2015, and has the title “Philosophers (and Welders) React to Marco Rubio’s Debate Comments.”)

The Morality of Denying Hope to 30 Million Guanggun

(p. A4) One wife, many husbands.
That’s the solution to China’s huge surplus of single men, says Xie Zuoshi, an economics professor at the Zhejiang University of Finance and Economics, whose recent proposal to allow polyandry has gone viral.
. . .
By 2020, China will have an estimated 30 million bachelors — called guanggun, or “bare branches.” Birth control policies that since 1979 have limited many families to one child, a cultural preference for boys and the widespread, if illegal, practice of sex-selective abortion have contributed to a gender imbalance that hovers around 117 boys born for every 100 girls.
Though some could perhaps detect a touch of Jonathan Swift in the proposal, Mr. Xie wrote that he was approaching the problem from a purely economic point of view.
Many men, especially poor ones, he noted, are unable to find a wife and have children, and are condemned to living and dying without offspring to support them in old age, as children are required to do by law in China. But he believes there is a solution.
. . .
“With so many guanggun, women are in short supply and their value increases,” he wrote. “But that doesn’t mean the market can’t be adjusted. The guanggun problem is actually a problem of income. High-income men can find a woman because they can pay a higher price. What about low-income men? One solution is to have several take a wife together.”
He added: “That’s not just my weird idea. In some remote, poor places, brothers already marry the same woman, and they have a full and happy life.”
. . .
On Sunday [October 25, 2015], he published an indignant rebuttal on one of his blogs, accusing his critics of being driven by empty notions of traditional morality that are impractical and selfish — even hypocritical.
“Because I promoted the idea that we should allow poor men to marry the same woman to solve the problem of 30 million guanggun, I’ve been endlessly abused,” he wrote. “People have even telephoned my university to harass me. These people have groundlessly accused me of promoting immoral and unethical ideas.
“If you can’t find a solution that doesn’t violate traditional morality,” he continued, “then why do you criticize me for violating traditional morality? You are in favor of a couple made up of one man, one woman. But your morality will lead to 30 million guanggun with no hope of finding a wife. Is that your so-called morality?”

For the full story, see:
DIDI KIRSTEN TATLOW. “Bachelor Glut in China Leads to a Proposal: Share Wives.” The New York Times (Tues., OCTOBER 27, 2015): A4.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date OCTOBER 26, 2015, and has the title “Not Enough Women in China? Let Men Share a Wife, an Economist Suggests.”)

Hunter-Gatherers Use Division of Labor

(p. D4) The division of labor in hunter-gatherer communities is complex and sophisticated, and crucial to their economic success, researchers report.
A paper in the journal Philosophical Transactions B looks at two hunter-gatherer groups: the Tsimane game hunters of lowland Bolivia, and the Jenu Kuruba honey collectors of South India.
“In contrast to the simple cave man view of a hunter-gatherer, we found that it requires a tremendous amount of skill, knowledge and training,” said Paul Hooper, an anthropologist at Emory University and one of the study’s authors.
. . .
When Jenu Kuruba men go in search of honey, Dr. Hooper said, “there’s one man who specializes in making smoke to subdue the bees, another that climbs the trees, and others that act as support staff to lower combs.”

For the full story, see:
SINDYA N. BHANOO. “Observatory; Nothing Simple About Hunter-Gatherer Societies.” The New York Times (Tues., OCT. 27, 2015): D4.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 26, 2015.)

The academic article mentioned in the passage quoted above, is:
Hooper, Paul L., Kathryn Demps, Michael Gurven, Drew Gerkey, and Hillard S. Kaplan. “Skills, Division of Labour and Economies of Scale among Amazonian Hunters and South Indian Honey Collectors.” Philosophical Transactions of the Royal Society of London B: Biological Sciences 370, no. 1683 (Oct. 2015), DOI: 10.1098/rstb.2015.0008.

“Racist” Woodrow Wilson Adopted “White Supremacy as Government Policy”

(p. A25) In 1882, soon after graduating from high school, the young John Davis secured a job at the Government Printing Office.

Over a long career, he rose through the ranks from laborer to a position in midlevel management. He supervised an office in which many of his employees were white men. He had a farm in Virginia and a home in Washington. By 1908, he was earning the considerable salary — for an African-American — of $1,400 per year.
But only months after Woodrow Wilson was sworn in as president in 1913, my grandfather was demoted. He was shuttled from department to department in various menial jobs, and eventually became a messenger in the War Department, where he made only $720 a year.
By April 1914, the family farm was auctioned off. John Davis, a self-made black man of achievement and stature in his community at the turn of the 20th century, was, by the end of Wilson’s first term, a broken man. He died in 1928.
Many black men and women suffered similar fates under Wilson. As the historian Eric S. Yellin of the University of Richmond documents in his powerful book “Racism in the Nation’s Service,” my grandfather’s demotion was part of a systematic purge of the federal government; with Wilson’s approval, in a few short years virtually all blacks had been removed from management responsibilities, moved to menial jobs or simply dismissed.
My grandfather died before I was born, but I have learned much about his struggle — and that of other black civil servants in the federal government — from his personnel file.
. . .
Consider a letter he wrote on May 16, 1913, barely a month after his demotion. “The reputation which I have been able to acquire and maintain at considerable sacrifice,” he wrote, “is to me (foolish as it may appear to those in higher stations of life) a source of personal pride, a possession of which I am very jealous and which is possessed at a value in my estimation ranking above the loss of salary — though the last, to a man having a family of small children to rear, is serious enough.”
And the reply he received? His supervisor said, simply, that my grandfather was unable to “properly perform the duties required (he is too slow).” Yet there had never been any indication of this in his personnel file.
Wilson was not just a racist. He believed in white supremacy as government policy, so much so that he reversed decades of racial progress. But we would be wrong to see this as a mere policy change; in doing so, he ruined the lives of countless talented African-Americans and their families.

For the full commentary, see:
GORDON J. DAVIS. “Wilson, Princeton and Race.” The New York Times (Tues., NOV. 24, 2015): A25.
(Note: ellipsis added.)
(Note: the online version of the commentary has the title “What Woodrow Wilson Cost My Grandfather.”)

The Yellin book praised in the passage quoted above, is:
Yellin, Eric S. Racism in the Nation’s Service: Government Workers and the Color Line in Woodrow Wilson’s America. Chapel Hill, NC: The University of North Carolina Press, 2013.

See also:
Patler, Nicholas. Jim Crow and the Wilson Administration: Protesting Federal Segregation in the Early Twentieth Century. Boulder, CO: University Press of Colorado, 2004.

While Woodrow Wilson Was President of Princeton, “No Blacks Were Admitted”

(p. A1) PRINCETON, N.J. — Few figures loom as large in the life of an Ivy League university as Woodrow Wilson does at Princeton.

. . .
But until posters started appearing around campus in September, one aspect of Wilson’s legacy was seldom discussed: his racist views, and the ways he acted on them as president of the United States.
The posters, put up by a year-old student group called the Black Justice League, featured some of Wilson’s more offensive quotes, including his comment to an African-American leader that “segregation is not humiliating, but a benefit, and ought to be so regarded by you,” and led to a remarkable two days at this genteel (p. A17) campus last week.
. . .
Perhaps best known for leading the United States during World War I and for trying to start the League of Nations, Wilson as president rolled back gains blacks had made since Reconstruction, removing black officials from the federal government and overseeing the segregation of rank-and-file workers.
Raised in the South, he wrote of “a great Ku Klux Klan” that rose up to rid whites of “the intolerable burden of governments sustained by the votes of ignorant Negroes.”
During Wilson’s tenure as president of Princeton, no blacks were admitted — “The whole temper and tradition of the place are such that no Negro has ever applied,” he wrote — though Harvard and Yale had admitted blacks decades earlier. Princeton admitted its first black student in the 1940s.

For the full story, see:
ANDY NEWMAN. “At Princeton, Woodrow Wilson, a Heralded Alum, Is Recast as an Intolerant One.” The New York Times (Mon., NOV. 23, 2015): A1 & A17.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 22, 2015.)

Only 5% of Gender Pay Differential Is Likely Due to Discrimination

(p. A17) Full-time employment is technically defined as more than 35 hours. This raises an obvious problem: A simple side-by-side comparison of all men and all women includes people who work 35 hours a week, and others who work 45. Men are significantly more likely than women to work longer hours, according to the BLS. And if we compare only people who work 40 hours a week, BLS data show that women then earn on average 90 cents for every dollar earned by men.
Career choice is another factor. Research in 2013 by Anthony Carnevale, a Georgetown University economist, shows that women flock to college majors that lead to lower-paying careers. Of the 10 lowest-paying majors–such as “drama and theater arts” and “counseling psychology”–only one, “theology and religious vocations,” is majority male.
Conversely, of the 10 highest-paying majors–including “mathematics and computer science” and “petroleum engineering”–only one, “pharmacy sciences and administration,” is majority female. Eight of the remaining nine are more than 70% male.
Other factors that account for earnings differences include marriage and children, both of which cause many women to leave the workforce for years. June O’Neill, former director of the Congressional Budget Office, concluded in a 2005 study that “there is no gender gap in wages among men and women with similar family roles.”
. . .
Ms. O’Neill and her husband concluded in their 2012 book, “The Declining Importance of Race and Gender in the Labor Market,” that once all these factors are taken into account, very little of the pay differential between men and women is due to actual discrimination, which is “unlikely to account for a differential of more than 5 percent but may not be present at all.”

For the full commentary, see:
SARAH KETTERER. “The ‘Wage Gap’ Myth That Won’t Die; You have to ignore many variables to think women are paid less than men. California is happy to try.” The Wall Street Journal (Thurs., Oct. 1, 2015): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary was updated on Sept. 30, 2015.)

The O’Neill book mentioned above, is:
O’Neill, June E., and Dave M. O’Neill. The Declining Importance of Race and Gender in the Labor Market: The Role of Employment Discrimination Policies. Washington, D.C.: AEI Press, 2012.