Mitchell's Musings

  • 09 Nov 2015 8:54 AM | Daniel J.B. Mitchell (Administrator)

    We are again at a point where there is speculation about whether the Federal Reserve will raise interest rates. This time, the speculation is for December. As usual, the news media and – to some extent – the stock market, carefully parse every word of Fed chair Janet Yellen.[1] And, of course, she carefully chooses her words to be ambiguous. (Some would say she chooses her words to be clear that no decision has been made.)


    There continues to be a focus on the state of the labor market. Is the la market reaching a level of tightness where wages will be bid up and thus push up prices? The most recent data release on unemployment and payroll employment suggests a strong labor market. Unemployment is down to 5%. That level is still somewhat higher than at the prior pre-Great Recession peak when the rate was as low as 4.4%. Added monthly payroll jobs reported in the latest release show a strong number after some (supposed) prior softness. (I say “supposed” because we are talking about seasonally-adjusted monthly data subject to revisions.)


    Let me throw some other numbers into the decision pot. The chart below shows outstanding claims for unemployment insurance (UI) divided by new weekly claims. That ratio is suggestive of how long benefit claimants are receiving payments.[2] Not surprisingly, the ratio shot up during the Great Recession when jobs were hard to find. But it is now lower than it was at the pre-Great Recession peak. So by that measure, you might say that the labor market is tighter now than then.




    On the other hand, if you look at help-wanted advertising – a series maintained by the Conference Board measuring the number of online ads – you get a somewhat different picture. The chart below shows the ratio of continuing ads to new monthly ads. So the ratio is related to how long an ad stays in place. We might expect available new jobs to be snapped up relative fast when the labor market is soft (as in a recession and its aftermath) but more slowly when the labor market is tight. (Ads should stay around longer during tight markets as suitable workers are hard to find.) Because the data are quite noisy, we present the raw data (the dashed line) and a three-month moving average (the solid line). The numbers suggest that we are not yet quite back to the prior peak of labor market tightness.




    We could go on this way pointing to indicators that give conflicting signals of the degree of labor market tightness. And one suspects the Fed’s decision makers will be looking at such data. But there is a problem with a focus on the state of the labor market.


    What the Fed is interested in is avoiding excessive PRICE inflation. Up to now, there hasn’t been much price inflation. So the Fed is really looking ahead and trying to find indicators that might forecast accelerating inflation.  At best, labor market indicators tell you something about the outlook for WAGE inflation, not price. At one time, when unions were strong – say in the period from the end of World War II through the 1970s – one might plausibly tell a tale of tight labor markets empowering unions to push up wages through collective bargaining. But unions are no longer a factor for the vast majority of private-sector workers who are nonunion. So at most you can tell a tale of employers competitively bidding against each other for scarce labor. And then you might argue that if labor costs rise, prices would go up as firms try to maintain their markups.


    There is a problem, however, with that approach. As a recent study from the San Francisco Fed indicates, there is scant current evidence that knowing something about wages helps you forecast prices when you have other measures that directly are pricing indicators.3 That is, if you have a forecasting model for price inflation, throwing in wages doesn’t add information. You can forecast just as well omitting wage data. If that is the case, looking at the state of the labor market to give you information on likely wage behavior may not be a useful approach for the Fed even if, at some point in the past, it was. 


    There is no doubt that wage and price data are highly correlated. And there is no doubt that labor market measures of macro-level economic activity are highly correlated with product market measures. (Ups and downs of employment are correlated with ups and downs of real GDP.) It may well have been the case in the past that labor market information and wage information added to the ability to forecast inflation as part of a larger forecasting model. But institutions and economic processes change over time. 


    In short, the fact that the unemployment rate is down and that last month’s payroll job gains were strong may well influence what decision the Fed makes in December on interest rates. But if so, the decision will be based in part on prior assumptions about a labor-market-to-wage-to-price linkage. What has been normal in the past, however, may not be relevant in the present and future. 


    There has been much talk in the post-Great Recession period of a “new normal” in various economic contexts. But what is meant by that phrase is that the current circumstance is really a new abnormal when compared with the past. Yes, in the past, interest rates have not been held so low by the Fed at this point in the business cycle. But maybe, given the way the economy works now, that’s what it takes to sustain the current rate of (non-inflationary) economic advance. We do know that up to now, price inflation has not been a problem. Even though unemployment fell last month and there were strong job gains, is that really a signal that interest rates should rise?



    ---------------------

    [1] http://www.nytimes.com/2015/11/05/business/economy/fed-yellen-congress-interest-rates.html  
    [2] In a steady state with, say, 100 claimants at any point in time and 20 new claim
    ants each week, the ratio is 5. If each claimant on average stays 5 weeks, the number of claimants at any point in time remains 100. Each week 20 new claimants come into the system and 20 old claimants depart. Of course, the number of claimants at any point in time is not constant in practice, nor is the number of new weekly claimants.

    [3] http://www.frbsf.org/economic-research/files/el2015-33.pdf  

  • 02 Nov 2015 8:41 AM | Daniel J.B. Mitchell (Administrator)

    The Great Recession and the accompanying stock market crash substantially worsened the funded status of most defined-benefit (DB) pension plans. And nowadays, you typically find such DB plans in the public sector. Private sector plans of the defined-benefit type in the past were heavily associated with the much-reduced union sector. Generally, such plans were either not offered by private nonunion employers or, more recently, were terminated and replaced by defined-contribution (DC) plans, which are essentially tax-favored savings accounts.


    At the bottom of the Great Recession in June 2009, according to the U.S. Bureau of Labor Statistics (BLS), expenditures of private employers for DB-type pensions averaged 41 cents per hour. That average figure included the many employers who had no such plans and thus were paying zero. Private employers paid 53 cents per hour into DC-type plans. In contrast, state and local governments were paying $2.85/hour into DB plans and 31 cents per hour into DC plans. So the difference between the sectors as to plan coverage and cost is striking.


    What has happened since the end of the Great Recession in 2009? As the chart below shows, nominal wages rose at a very moderate pace in the state and local government sector through September 2015. On an annual basis, the pace ranged from a little below 1% per annum to a little under 2%. In contrast, the annual nominal increase in state and local benefit costs per hour ranged from 2.5% to a bit over 3%.



    The Employment Cost Index on which the chart is based doesn’t break down the composition of benefit costs. It’s likely, however, that an effort to catch up with the post-Great Recession unfunded liability in DB pensions was a major factor in the gap between wage inflation and benefit inflation in the state and local public sector. It’s true that health care costs probably played some role, too. The Affordable Care Act (“Obamacare”) took effect during this period and may have added some mandated costs. But in the public sector, health plans tend to be generous and they probably were not much affected. A significant element in Obamacare was expanding coverage which was already wide in the public sector.



    In the private sector, the faster pace of benefit inflation relative to wage inflation is marked only in the first couple of years of the 2010-2015 period. Private DB plans, like their public counterparts, experienced an increase in unfunded liability due to the Great Recession. But since DB pensions play a minor role in costs in the private sector, it is more likely that health expenses were the major factor to the extent that benefit inflation exceeded wage inflation. [1]                


    When a given level (quality and quantity) of benefits simply costs more – pure inflation – workers get no benefit from the added expenditure. So if a DB pension plan becomes more underfunded and payments to it are increased, there is no immediate benefit to workers. They have the same pension promise as before, but there are more costs (to someone) to maintain that promise. Similarly, if the costs of health care procedures rise and premiums are raised as a result, workers have the same benefit as before, but someone is paying more for it.


    As noted, with the coming of Obamacare, it is more likely that private-sector workers received some actual benefit improvement than did public-sector workers. Private workers were more likely to become covered by insurance and to experience improved coverage. However, for state and local government workers, the impact of DB pension underfunding is more likely to be the cause of benefit cost inflation. There was more cost - but no improvement in quality or quantity of the pension promise.



    When we look at wage changes in real terms (using the Consumer Price Index – CPI-U) for deflation), we find that in the post-Great Recession period, real wages for state and local public workers actually declined by about 0.3%/annum. (See the chart above.) Benefits in real cost terms rose by over 1.2%/annum – but, as noted, it is likely that the increase simply reflected catch-up funding for underfunded plans, not an improvement in promised retirement benefits. Private-sector workers since the Great Recession ended experienced a wage gain of +0.3%/annum. And some of their benefit gain of around 0.7%/annum may have reflected actual benefit improvements.


    In short, the data available suggest that the cost of added catch-up funding for underfunded public pensions fell at least partially on state and local government workers in the form of lower real take-home pay, even apart from any explicit increase in employee contributions. Today’s public workers are helping to fund a pension payment that someone neglected to make in the past. And that fact is something that is often neglected today in the debates over public pensions.


    --------------------------------------------                                        
    [1] BLS has a quarterly data series on Employer Costs for Employee Compensation. Unlike the quarterly Employment Cost Index on which the charts are based, the series does not have fixed weights and so changes in occupation and industry affect the time trends. Private employers spent $1.99/hour on health insurance in June 2009 which rose to $2.42/hour in June 2015 (the latest date for available data). The nominal increase was an annualized rate of 3.3%. (Figures include zeros for employers and employees without health insurance.) State and local government employers spent $4.34/hour on health insurance in the earlier period and $5.15/hour in the later period (a lesser annualized rate of increase of 2.9%).

  • 26 Oct 2015 2:34 PM | Daniel J.B. Mitchell (Administrator)

    Economics has always had a divide between theory and empirical research. There are empirical regularities of which researchers who are data-focused are aware, but which don’t follow from any economic theory. There is no theoretical reason, for example, why the unemployment rate might not fall to 2%. But anyone familiar with the unemployment data would be very surprised if that happened. Why? Because except during extreme wartime conditions, it hasn’t happened in the past.


    To take another example, if I were to forecast that in two years, California would have 14% of the U.S. population, there is no theoretical reason to say that such a prediction is implausible. But suppose you know that the current proportion is 12%, that California’s share of the U.S. population more or less stagnated at that level with the end of the Cold War, and that it would take an implausible in-migration to raise the share by 2 percentage points in two years. You would surely reject that forecast. So let’s look at another proportion, the ratio in percentage terms of female-to-male wages. You probably know (empirically) that the ratio is less than 100%. For much of the post-World War II period, the ratio bounced around 60%. The range on the chart below runs from 57% to 64% through 1979. 


    Presumably, that ratio can be “explained” by such factors as variation in hours worked (there is variation even when only full-time workers are used), occupational composition, education, discrimination, etc. But through the 1970s, as the chart shows, the ratio showed no trend. Indeed, the constancy of the ratio around 60% was likely one of the sparks that ignited the “comparable worth” movement of the 1970s which looked for legal remedies to raise the ratio. At the time as I recall, commentators on the issue would sometimes even point to Leviticus 27:


    “If it is a male from twenty to sixty years, the equivalent is fifty shekels by the sanctuary weight; if it is a female, the equivalent is thirty shekels.” 


    So it appeared, at least if you were a commentator on comparable worth in the late 1970s and early 1980s, that the 60% ratio (30 shekels/50 shekels) was – if not exactly God-given – at least a very longstanding empirical tendency.[1] However, as sometimes happens when there is no theory explaining an empirical regularity, the ratio started to change in the 1980s, just as the Biblical reference was being
    invoked.




    Did the agitation around comparable worth – an approach that didn’t get much legal traction – play some role in the rising ratio in the 1980s?[2] Maybe firms in making pay decisions responded to the agitation without legal compulsion. Alternatively, the author of the early 1980s article from which the 1939-1979 data in the chart above were drawn suggests that the ratio could be expected to rise due to increased workforce experience, education, and expectations of women.[3] And it did.


    What we do know is that the general upward trend, although hardly even from year to year, continued into the 1990s. Somewhere in the early 2000s, however, the female/male wage ratio seems to have stopped increasing, stalling at around 80% (with a range running from 79% to 83%). There seems to be a perception again – as there was when comparable worth became a topic of concern in the 1970s - that the overall ratio has become stuck, albeit it a higher level than the old 60%.[4] That perception may account, for example, for recent agitation about the lack of women in Silicon Valley/high-tech type jobs (which are generally well paid).[5] In any case, the plateau raises the question of whether 80% has become the new normal.
     
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    [1] There is some uncertainty as to the application of the passage, but it does not appear to refer to wages. It appears instead to refer to temple dues. Women seemed to increase in relative valuation (dues assessment) with age after age 5. From one month to five years, the shekel ratio was 3/5 (60%). From age 5-20, however, the ratio drops to 10/20 (50%). For ages above 60, the ratio is 10/15 (66.7%). There is an escape clause for those who cannot afford the assessment allowing payment of whatever could be afforded.

    [2] Apart from any legal issues, U.S. courts may have been fearful of becoming wage tribunals with the caseload that would have implied. 

    [3] June O’Neill, “The Trend in the Male-Female Wage Gap in the United States,” Journal of Labor Economics, Part 2, January 1985, p. S115. Data in the article go up to 1983, presumably around the time the article was written.
    [4] http://www.aauw.org/files/2015/09/The-Simple-Truth-Fall-2015.pdf.  
    [5] http://www.motherjones.com/mixed-media/2015/06/evidence-silicon-valley-really-sexist.  

  • 19 Oct 2015 8:00 AM | Daniel J.B. Mitchell (Administrator)

    Recently, California governor Jerry Brown signed a bill banning the word “Redskins” from being used as a public school team name or mascot. The name and variants were once commonly used for sports teams. Indeed, the name is still used by the Washington, DC professional football team despite its offensiveness to Native Americans. On the other hand, Brown vetoed a bill that would have banned confederate names from being used for parks and public buildings. (Various prominent figures in California history were confederate supporters.) It was up to local authorities, Brown indicated, to determine whose names were commemorated on public facilities.[1] 


    So was the governor just inconsistent in his decisions on what to sign and what to veto? Plainly, the impetus behind both bills was a change in present-day sensibilities relative to the past when the names were first applied. But there is a difference between the use of a term such as “Redskins” which is offensive and the naming of a building after a person who may have played a prominent role in some aspect of local history deemed positive even though that person may have also had negative qualities. 


    The line between one and the other can be hazy, however. After the recent shooting in North Carolina, there was a significant drop in the display of confederate flags in public spaces even though supporters of such displays came up with rationales as to why there were positive elements. But symbols and names are nonetheless different from persons. George Washington was a slave owner, but he has both a state and the national capital named after him. It’s hard to say that, as a person, he played an insignificant role in U.S. independence and history. 


    There is now resistance to celebrating Columbus Day due to the eventual impact of his voyages on Native Americans. But when Columbus set out he was not looking to create mass murder. After all, he did not know that the continents of the western hemisphere even existed, let alone that they had inhabitants. That he got to North American at all, given the limits of sailing and navigation technology, is surely a fact worth noting.


    The fact is that people who played a major role in history were all flawed – they were human and products of their societies – especially when viewed with modern sensibilities. And you don’t have to look back centuries. Martin Luther King had extra-marital affairs – not a Good Thing. And he was hardly alone in that department among major political figures of his time (and later). But we have Martin Luther King Day as a national holiday. 


    Most biographers of Earl Warren – and Warren himself ultimately – had trouble reconciling his desegregation and other major decisions as Chief Justice of the U.S. Supreme Court with his role as a gubernatorial candidate in California in incarcerating the West Coast Japanese-origin population during World War II. But there are today California public schools named after him as well as a state office building. What can you say other than what he did happened? He did what he did. And in the case of the Japanese internment, it is worth noting, there was virtually no opposition at the time.
                                                              
    After the Watergate affair, when the White House tapes were discovered, it was also revealed that previous presidents had recording devices in use. On a wholesale basis, the practice really started with Kennedy. But there were some limited recordings going back to Franklin Roosevelt. 


    In the Roosevelt era, magnetic recording (tape and wire recorders) had not been perfected and office recording devices were basically phonographs that could record for only short durations. Roosevelt had a machine installed that used film and recorded the way movie soundtracks of that period were made. 


    It thus could record for an extended period. He apparently wanted to use the machine for press conferences held in the Oval Office so that misquotes in the newspapers could be corrected. But the device picked up some other conversations.


    I came across one such conversation between Roosevelt, black union chief A. Philip Randolph, and Secretary of the Navy Frank Knox concerning the role blacks (“Negroes” on the recording) were going to play in the then-segregated military shortly after the draft was enacted in 1940.[2] Randolph was president of the Brotherhood of Sleeping Car Porters and his union’s membership reflected the occupational segregation on the railroads.[3] He was viewed as a black leader, not just a union leader, by Roosevelt.


    In the conversation, Randolph is looking for assurances that blacks would play a significant role in the military. While he hints at integration as a goal, it appears that he will settle for a role in the military for blacks that is more than menial. Roosevelt assures him there would be a combat role for blacks. But there are no promises of integration. When it comes to the Navy, it is pointed out to Randolph, you couldn’t have northern ships (where integration might be accepted) and southern ships (where segregation would be the rule). Roosevelt comes up with the suggestion that since musicians are being recruited by the Navy, you could have “colored” ships’ bands.


    OK. By modern standards, there is a lot wrong with this conversation about the draft and blacks in the military. So how should we think about it? At the time of the conversation, the U.S. had not yet entered World War II, but the War had already been going on for some time in Europe. It was evident to Roosevelt that the U.S. would be in the War eventually. (Why push through a draft law, if not?) Troops would thus be drawn from the general population with all of its social attitudes. 


    The south had been segregated for decades in 1940 and the Democrats – and thus Roosevelt – counted on the electoral votes of the “solid south.” (The solid south referred to the domination of the segregated south by the Democratic Party; Republicans – the party of Lincoln – had little chance there.) Even in the north and west, while there was no southern-style legal segregation, there was plenty of prejudice and de facto segregation. The conversation took place shortly before the 1940 presidential election in which Roosevelt was running for an unprecedented, and thus controversial, third term. Can you really judge the conversation without taking account of the world and domestic context of 1940?


    Perhaps even more problematic in hindsight is Roosevelt’s role in the internment of the West Coast Japanese-origin population in 1942 after Pearl Harbor. Yes, the internment was very much a product of agitation by Earl Warren and others. But it was Roosevelt who signed the executive order making it possible. In 1997, a memorial to Roosevelt was dedicated in Washington (there’s that name again!) D.C. And long before that Roosevelt was placed on the dime (because of his “March of Dimes” fundraising against polio). Should we now tear down the memorial and put someone else on the dime, given the negatives? 


    Unless you think such actions are the obvious and required way to go, you will want to be careful about what is sometimes termed “presentism,” i.e., judging historical figures based on modern attitudes. And, even if you think various historical figures might have done better than they did, you might want to contemplate the flaws of some more contemporary figures you admire. There is one thing of which you can be sure; in the future your own beliefs and behaviors are likely to seem odd, outdated, and - with hindsight - even wrong! [4]


    [1] http://www.latimes.com/politics/la-me-pc-redskins-mascot-banned-20151011-story.html 

    [2] https://www.youtube.com/watch?v=M5D3A12LKjw. The recording is only partially audible. I tried to reduce the background noise present in the original. 

    [3] http://www.pbs.org/wnet/jimcrow/stories_org_brother.html        
    [4] This musing started with discussion of a California state law banning a particular Native American-related word for public usage. Such words and symbols were common until quite recently. The first car I owned was a 1954 Pontiac bought in 1963 for $100. You can see the “Indian chief” hood ornament used on that model at
    http://fineartamerica.com/featured/hood-ornament-on-1954-pontiac-robert-jensen.html. Confession: I didn’t think anything of it at the time.  

  • 12 Oct 2015 8:32 AM | Daniel J.B. Mitchell (Administrator)

    No, this musing is not about global warming but rather about “climate” as it has been used in the context of universities to characterize the atmosphere for women and minorities. And, yes, I am well aware of the abuses that have occurred in the name of climate used that way in the form of excesses regarding “microaggressions” and “trigger warnings” on syllabi.


    Two items appeared recently in the Los Angeles Times regarding climate in the sense above at UCLA. One involved a fraternity and sorority party in which party goers allegedly appeared in blackface.[1] (Exactly what happened is not completely clear at this writing.) The second involved a survey undertaken by the consulting firm Korn Ferry regarding problems in the climate for women faculty at the Anderson Graduate School of Management (at which I had a full-time, and then a half-time, appointment before I retired in 2008).[2] I want to focus on the latter case but both stories connect climate to students, a fact which led to this musing.


    In the case of the Anderson School, the Korn Ferry report has circulated to faculty members, but is not supposed to be a public document. However, it is evident that the LA Times has seen the report. It has been distributed to faculty by email and thus is an easy “leak.” I will nonetheless not reproduce it here since it is not supposed to circulate. But in general terms the Korn Ferry report largely discusses intra-faculty relations at the School. In addition, as noted above, there is material concerning the atmosphere in MBA classes emanating from students


    In essence, the report describes a macho atmosphere in classes which can make life difficult, especially for junior female instructors. Management schools tend to take student ratings of instructors seriously. So classroom problems can pose an obstacle for advancement of junior faculty. Time spent by them dealing with such problems is time that is not available for research and journal publication, career elements which are critical for academic advancement.


    It is interesting to note that back in 2013, the New York Times featured a report on the Harvard Business School that had similar revelations – and which largely focused on (male) student behavior.[3] One suspects that you could investigate prestigious graduate business schools around the country and come up with comparable findings (just as there have been undergraduate fraternity-related incidents around the country comparable to the recent UCLA event). It is worth noting, however, that when the Harvard B-School report came out, Harvard in response raised the proportion of women in its MBA program to over 40%.[4]


    Which brings me to what might be done at UCLA. Faculty inherently turn over slowly; students turn over fast. A new crop of students is admitted annually. Even if there are major issues in intra-faculty relations (peer evaluations, promotions, etc.), it is hard for a dean or other school administrator to make rapid changes such matters. Hiring and advancement of faculty are handled through a complicated process involving committees, departmental meetings, and external reviews. In contrast, student admissions policy can change quickly. Faculty have little direct involvement in MBA admissions; the process is handled by internal School staff. Admission policy is a lever a dean can pull.


    One suspects that a jump in the proportion women – currently the percent female at UCLA Anderson is 30%[5] - would limit the kind of frat house behavior in core MBA courses that apparently went on at Harvard. One suspects that an increase in the proportion of non-traditional students (for example, those who want to work for nonprofits or the public sector or who have done so in the past) would also improve the climate for junior female faculty in particular.[6]


    My personal recollection – which may be faulty – is that the proportion of women in the 1970s at the UCLA management school was higher, perhaps 40% or so – and then fell back. When I arrived in the late 1960s, the proportion of women was very low so the change in the 1970s was dramatic. But the 1970s and 1980s also saw an effort to change the curriculum to be more like Harvard. In the mid-1970s and before, the UCLA program was much more individualized than it became.[7] The Harvard model – a fixed MBA curriculum with an emphasis on case studies – was implemented. The School imitated Harvard and thus became more like Harvard including, so it seems, the deficiencies found there and identified by the New York Times.[8]


    In an effort to promote the Harvard case method at Anderson – part of the general effort to be more like Harvard - there were classes for instructors on how to do it. Not surprisingly, the classes involved cases. One of these cases told the story of an instructor who walks into his class (the instructors in the stories were male) and finds his MBA students engaged in a food fight, literally tossing their lunches around the room at each other and making a mess. It then describes how the instructor took charge and began the day’s lesson. 


    What was remarkable about the story is that it treated such junior high behavior as if it were something that might be expected from a group of graduate students in their late 20s. When I suggested that the remedy for such behavior was not taking charge but rather discharge (dismissal), this idea was quickly put down. The theme of the case was in essence that boys will be boys and that instructors should expect to deal with that fact.


    In short, the Harvard B-school revelation in the New York Times in 2013 should not have been a surprise. It was the accrual of a long history. Imitating that program at other institutions (such as UCLA) could be expected to produce similar results, even if the dark side of those results was unintended. But if imitation is to be the policy, then why not start by imitating what Harvard did after the story came out in the New York Times? Raise the female/male ratio in MBA admissions substantially. And since it’s likely that it’s not just Anderson that has a problem, all other major B-schools should take notice. Admissions policy is not the only fix that’s needed. But it is a quick one.


    [1] http://www.latimes.com/local/lanow/la-me-ln-ucla-blackface-kanye-party-20151008-story.html. See also http://www.kcrw.com/news-culture/shows/which-way-la/is-the-lapd-over-reacting-to-a-hostile-atmosphere#seg-ucla-students-protest-blackface-frat-party.
    [2] http://www.latimes.com/local/education/la-me-ln-ucla-women-20151008-story.html 

    [3] http://www.nytimes.com/2013/09/08/education/harvard-case-study-gender-equity.html and http://www.nytimes.com/2013/09/10/education/harvard-business-students-see-class-as-divisive-an-issue-as-gender.html. (The latter reference referred to income-related snobbery.) 
    [4] http://poetsandquants.com/2014/01/28/hbs-dean-makes-an-unusual-public-apology/  
    [5] http://www.anderson.ucla.edu/degrees/mba-program/admissions/class-profile
    [6] California voters enacted Proposition 209 in 1996 which bans affirmative action
     in public universities – including affirmative action related to sex. [http://ballotpedia.org/California_Affirmative_Action,_Proposition_209_%281996%29] However, MBA admissions involve a significant degree of subjective judgment; it is not just a matter of test scores.

    [7] Up to that point, the School – it was not yet called “Anderson” – had a variety of separate programs for different fields – finance, accounting, marketing, etc. – as well as a general MBA program. The separate programs were similar to “majors” in an undergraduate college. All of the separate fields shared a limited common core of management classes. 
    [8] One element introduced – I think in the 1980s – was the organization of MBA classes into sections. The students were divided into section groups. Each group stayed together through the core courses. This arrangement may simply have been an administrative convenience that avoided the complications of individual student enrollment in each course. But it meant that a section in which a subgroup of students exhibited bad behavior was preserved in class after class to replicate the problem. 

  • 05 Oct 2015 12:41 PM | Daniel J.B. Mitchell (Administrator)

    Universities have been trying to reconcile notions of academic freedom with various versions of speech codes, meant essentially to protect students from statements varying from deliberately aggressive and intolerant to so-called “microaggressions,” statements not meant to be intolerant that might nonetheless be offensive to somebody.  Often these attempts at non-offensiveness degenerate into ludicrous examples that are widely mocked, particularly in conservative media, but also in mainstream outlets.[1] Closely related are efforts to place “trigger warnings” into course syllabi, warning students that some reading material might be offensive.


    Grafted on to this ongoing brouhaha in recent months was an effort by the Regents of the University of California (UC) to deal with complaints of anti-Semitic behavior related to criticisms of Israel, particularly as it is linked to the “BDS” (Boycott, Divest, Sanction) movement. Various student groups at UC campuses and a union representing UC teaching assistants adopted BDS-related resolutions.[2] Jewish student groups complained of incidents of intimidation ranging from anti-Semitic graffiti to asking a Jewish student who was up for a student government office whether she could be unbiased due to her religion. There was a counter-push to have the Regents adopt the “State Department” definition of anti-Semitism which connects the concept to an excessive concentration on Israel to the exclusion of other nations.[3] 


    At one point on an NPR broadcast, UC president Janet Napolitano indicated she favored the definition personally.[4] The UC Regents – who meet every two months – originally put the issue on their July 2015 agenda but then deferred the matter to their September meeting. Somehow, in the interval between these two meetings, university administrators took up the issue – anti-Semitism – and produced a general resolution against intolerance which did not deal specifically with anti-Semitism and was essentially feel-good Pablum.[5] Meanwhile, the California state legislature came out with a resolution condemning anti-Semitism (but not using the State Department definition).[6]


    At the September 2015 Regents meeting, various Regents condemned the Pablum resolution, essentially for saying nothing and omitting anti-Semitism as a specific topic. The Regents sent the university administration back to the drawing board to come up with something more specific – although it appeared from the discussion that the State Department definition was not what was wanted because of the potential conflict with academic freedom. Regent John Pérez, a former legislative leader, noted in particular that when he asked to speak to Jewish groups on one unnamed UC campus, he was told that he would have to “balance” such a discussion with a discussion with other groups. But he encountered no such balancing requests when he asked to speak with other students.[7] In any event, no time table was specified for a new resolution to be drawn up. What the Regents will eventually do is uncertain.


    Although Jewish groups took the Regents’ action as a victory – since it rejected the Pablum approach and pushed for something more specific to their complaints – the State Department wording was off the table. Even if the Regents had adopted the State Department definition, it was not clear what such an adoption would have accomplished. Any group that made statements that fit the definition could have disputed allegations that it was anti-Semitic. It could simply have argued that the definition was incorrect, whatever the Regents might have thought or said. And no particular penalty was entailed. So – is there any solution to reconciling the conflict between free speech/academic freedom with voicing a view that might be viewed (or even defined) as anti-Semitic? The problem lies in trying to define a motivation or thought process for a specific behavior or statement. Clearly, physical intimidation, property damage, and the like are illegal and violate various university standards of behavior. But when it comes to pure speech and advocacy, the motivational approach runs into a dead end. It’s hard to prove what someone was really thinking or what really motivated a statement when the individual could deny it.


    There is, however, an alternative that avoids assessing motivation and thought. The alternative is to focus on behaviors, not thoughts or motivations. Such an alternative focus won’t solve all problems in this area of controversy, but it will help. The B in BDS stands for a boycott based on national origin – Israeli in this case. And the simple fact is that when it comes to anything to do with employment (hiring, evaluation, selection for a promotion or a particular role, etc.) or admissions to university programs, such a boycott would be illegal. It is banned by federal laws – such as the Civil Rights Act of 1964 – related state-level laws, and university policy. Of course, anyone is free to advocate repealing or changing such laws and policy. But absent such repeal or change, the laws and policy are what they are.


    It really doesn’t matter what nationality is the target, so trying to prove an anti-Semitic motivation is not involved in the behavioral approach. A boycott related to employment or admissions would be illegal whether it involved the Israeli-Palestinian conflict, or Japanese whaling practices, or China’s policy toward Tibet, or Russia’s policy toward Ukraine, or Turkish denial of the Armenian genocide, or women’s rights in Saudi Arabia. If UC or any other university were to engage in a boycott aimed at Israelis, Japanese, Chinese, Turks, or Saudis, it could be sued. If agents of UC or any other university who have major roles in employment or admissions decisions were to advocate such boycotts (say, deans, department chairs, heads of research units, etc.), they could expose their university employer to damages.  


    While faculty have a right as individuals to espouse whatever causes they like, there is no right to be selected for key managerial and administrative roles. Anyone appointed to such roles is expected to carry out university policy and legal duties appropriately. Universities as employers can pick managers and administrators who are most likely to carry out university policy appropriately (and to avoid actions and statements that have the potential to expose their employer to legal liability). Indeed, in a more general context, employers typically screen potential candidates for managerial and administrative roles through interviews, examination of credentials and past employment records, etc., in the hopes of finding individuals who will likely best do the expected job. Someone who publicly opposes university policy and federal and state legal requirements would not seem to be a suitable candidate.


    What about student groups that favor boycotts based on national origin? The problem here is that such groups are seen externally as having an official status within the university. It might be best to make it clear that such groups are independent entities and that they speak and act for themselves only. As such, the Regents might want to reconsider policies that mandate student fees to support such student groups or provide some kind of readily available opt-out arrangements for those students who don’t support the political positions of these groups. Absent such distancing, the public perceptions that there is an official status and that student groups do speak for the university have some grounding in fact.


    And what about labor unions such as the TA union mentioned above? Under California labor law as it applies to the public sector, and to higher education in particular, UC must recognize and bargain in good faith with unions that attain a majority vote in a bargaining unit.[8] Typically, however, union contracts include language more or less taken from federal and state laws that forbid discrimination including national origin discrimination. Such clauses can be made more specific to representation of members of the bargaining unit who fall into the national-origin category that the union wants to boycott. Unions advocating national origin boycotts should at a minimum have such non-discrimination clauses in their contracts and employers can insist on insertion of such provisions in the contract. There are also various opt-out arrangements in place under federal and state law for those in the bargaining unit who do not support the political positions of the union. 


    In short, a refocus of the debate away from thought and motivation (anti-Semitism) and toward behavior (advocacy of boycotts and the legal problems that such advocacy entails) would be a better outcome than continued debate along the lines of what has so far occurred at the UC Regents. Clearly, however, all controversy will not vanish if the behavioral approach is adopted. Nonetheless, UC is the largest public university system in the U.S. If it moves toward a focus on boycott behavior, other universities – public and private - are likely to follow.

    --------------------------------------------------------------------


    [1] http://www.scpr.org/programs/airtalk/2015/06/24/43412/microaggressions
    -should-they-be-censored-on-colleg/

    and http://www.latimes.com/opinion/editorials/la-ed-microaggression-what-not-to-say-at-uc-20150624-story.html.  
    [2] In this musing, we don’t take up the issue of financial divestment from the UC portfolio (including the pension plan). However, the university issued a statement in 2010 setting extremely stringent conditions for divestment from a particular country: http://issuu.com/danieljbmitchell/docs/israel_divestment_2010. It might be noted that calls for BDS as it relates to UC often point to UC’s actions regarding South Africa during the era of apartheid. There was financial divestment in that case, in part owing to a deal between then-Governor George Deukmejian and state assembly leader Willie Brown. (Both were ex officio UC regents. In addition, the governor – who initially opposed divestment - needed the cooperation of Brown on state budget matters.)  But there was never an academic boycott of South Africa in that period. There was no regental ban on South African faculty, etc. I can recall visitors from South Africa coming to UCLA; the library continued to subscribe to South African academic journals, etc. Indeed, it would be hard to imagine American academic heart surgeons, for example, ignoring the early transplant work that took place in South Africa starting in the 1960s: http://www.nytimes.com/2001/09/03/world/christiaan-barnard-78-surgeon-for-first-heart-transplant-dies.html
    [3] http://www.state.gov/j/drl/rls/fs/2010/122352.htm.  
    [4] http://hereandnow.wbur.org/2015/05/21/janet-napolitano-anti-semitism-definition.  
    [5] http://regents.universityofcalifornia.edu/regmeet/sept15/e4.pdf.  
    [6] https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201120120HR35.

    [7] You can hear excerpts from the Regents’ session at https://www.youtube.com/watch?v=WUC07I-CikM. It might be noted that the Regents themselves have engaged in such “balancing.” A student regent is selected each year for a one-year term. Usually, recommendations as to who would be the student regent come from student government. In one year, the name chosen was a Muslim woman who favored BDS: https://www.youtube.com/watch?v=3LxXT8ocax4. The next year, the regents somehow selected – among all possible candidates – a pro-Israel Jewish student: https://www.youtube.com/watch?v=5l-e3rRDZxE. The balancing approach seems to exist at the campus level, too. For example, UCLA has a Center for Near East Studies which has elicited complaints of being anti-Israel: http://www.international.ucla.edu/cnes/. But UCLA also has a Nazarian Center for Israel Studies which goes in the opposite direction: http://www.international.ucla.edu/israel/home

    [8] The relevant statute is similar to federal labor law. See http://www.perb.ca.gov/laws/heera.aspx.

  • 28 Sep 2015 3:28 PM | Daniel J.B. Mitchell (Administrator)

    When I taught labor markets and got into incentives, there was always the issue of incentives which led to perverse behaviors that eventually harm the organization.  A simple example is a piece rate system that emphasizes quantity over quality and leads to defective, hasty production.  Usually, there is some awareness of the potential pitfalls of incentive programs and additional arrangements may be put in place to prevent perverseness. In the piece rate example, you can hire inspectors who watch for defects. But such supplementary efforts cost money and attaining 100% perfection may not be the optimal decision. Some level of defects may be acceptable. And no incentive system perfectly aligns worker interests with employer interests, despite claims and hypes.


    The idea of incentives should not be limited to explicit formulas that link pay to output (such as piece rates, sales commissions, etc.).  In organizations, there are inevitably ways employees discover to get ahead. Certain behaviors are rewarded, perhaps by promotions, plum assignments, and the like. The notion that organizations have “cultures” – for better or for worse - is closely related to the idea of built-in incentives. Employees figure out what gets them rewards. The actual culture may have little resemblance to grand platitudes in organization mission statements. It’s the substance of numerous “Dilbert” cartoon strips.


    What I used to say in class is that if you observe a perverse outcome, it could just be a one-time fluke or a mistake. But if the perversity repeats, there is probably something in the organization that incents such behavior.


    The recent Volkswagen scandal suggests a corollary to me. In the Volkswagen case, certain diesel engine cars had computer programming built in to allow detection of government emission tests. The engines operated differently during such testing than they did when run in actual driving conditions. In some cases, car buyers may have received government rebates based on the supposedly low emissions. As revelations of the fraud became public, the CEO of Volkswagen resigned hastily saying he was “not aware” of having done anything wrong. He said he was “stunned that misconduct on such a scale was possible in the Volkswagen Group."[1]


    If you think about this episode, you can see that the risks of the fraud becoming known over time had to be large. The programming was in the cars waiting to be detected by authorities that became suspicious.


    There is always some disgruntled employee or some righteous whistleblower somewhere in the system to leak out the information. And the gain to Volkswagen of having somewhat lower emissions really wasn’t all that great, especially when compared with the cost of the eventual revelation.


    So, is it possible that the emissions fraud was a one-off event, due to the action of some “bad apple” in the corporate barrel? Should the CEO really have been “stunned”? Maybe. But it seems very unlikely that – even if this incident was a one-off event – that only one bad apple could have pulled it off. There had to be a lot of folks at some level in the firm aware of what was being done, even if the CEO did not know of - or did not officially authorize - the plan.


    My corollary suggests that a really big fraud of the VW type is unlikely to be a one-off event. The corollary is instead that if there is a really big perverse event, look for earlier – perhaps less risky – frauds that have not yet been uncovered. If there were such frauds, and if those employees who perpetrated them were met with rewards, you can see how a perverse-incentive culture could form that eventually led to the emissions scandal. My suggestion to the authorities who will be probing the VW emissions fraud is to find out what preceded it.


                                                              
    [1] http://www.latimes.com/business/la-fi-vw-ceo-resign-20150923-story.html  


  • 21 Sep 2015 12:08 PM | Daniel J.B. Mitchell (Administrator)
    Last week’s musing involved the then-upcoming decision by the Federal Reserve on whether to raise interest rates. The musing noted that there was pressure on the Fed to raise short-term rates from near zero, not because there was some evident change in economic circumstances that would warrant a hike, but because near-zero rates were abnormal. I argued that the factors that should be the determinants – the general state of the economy in real terms (including the labor market) and inflation – were not indicating a need for a shift in policy. If anything, there were some weaknesses still present on the real side and inflation (whether we are talking wages or prices) was low and not accelerating. 


    Ultimately, the Fed’s decision – taken with only one dissent - was not to raise interest rates.[1] And the factors cited were pretty much along the lines above: the condition of the real economy and the lack of inflation:


    “On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable…”

    In the run-up to the decision, there were editorials and op eds and general articles. The upcoming decision was hyped, in some cases well beyond what was warranted. In view of some observers, there were suggestions that the current low rates were an aid to Wall Street.


    One article suggested that financial markets were addicted – as in morphine - to low rates.[2] But another op ed after the decision complained that it was Wall Street, or at least the holders of capital, that wanted a rate hike.[3] In fact, immediately after the decision the S&P 500 index rose and then fell. For the week ending September 18 as a whole, the index ended up almost exactly where it started.




    Basically, monetary policy is a blunt instrument when it comes to such concerns as income distribution (Main Street versus Wall Street; the 1% versus the 99%). Issues of income distribution are best addressed through fiscal policy. Unfortunately, at present fiscal policy is as gridlocked as ever. Indeed, at this writing, there is looming yet another threat of a federal government shutdown. So, as has been the case for much of recent history, monetary policy is the only macro instrument we have going. We should be grateful it’s in sensible hands.


    Luckily for the U.S., the Fed has been chaired in the Great Recession and its aftermath by two non-ideological pragmatists who let the data talk and avoid basing decisions on outmoded theories: Ben Bernanke and Janet Yellen. Here is Yellen’s policy statement after the recent interest rate decision:


    …Our actual policy actions over time will depend on how economic conditions evolve, which is quite uncertain. If the expansion proves to be more vigorous than currently anticipated and inflation moves higher than expected, then the appropriate path would likely follow a steeper and higher trajectory; conversely, if conditions were to prove weaker, then the appropriate trajectory would be lower and less steep.[4]


    What more do you want?


                                                              
    [1] http://www.federalreserve.gov/newsevents/press/monetary/20150917a.htm
    [2] http://www.latimes.com/business/la-fi-fed-market-influence-20150912-story.html (See the quote at the tail end of the article.) 
    [3] http://www.latimes.com/opinion/op-ed/la-oe-super-fed-rate-min-wage-20150918-story.html   

    [4] http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20150917.pdf

  • 14 Sep 2015 12:40 PM | Daniel J.B. Mitchell (Administrator)
    Imagine you are driving a car. If you depress the accelerator, the car tends to go faster as more gasoline flows into the engine. If you ease up on the accelerator, the reverse occurs. Over time, if anyone cared to do so, you could measure the average angle of the accelerator pedal relative to the floorboard for all the years you had been driving. I suppose you could say that this average angle was “normal” in some sense. But would anyone argue that at any point in time it was wrong to deviate from the “normal” angle? If you were driving up a hill, you would push the accelerator down to maintain speed so the angle would be below normal (average). If you were driving down a hill, you might take your foot off the pedal entirely. In neither of these situations would you say you were doing the wrong thing. You were simply adapting to driving conditions.


    When it comes to Federal Reserve policy on interest rates, however, the notion that deviations from the norm are wrong and should be corrected ASAP, regardless of economic conditions, seem to be in the air.  Interest rates are being kept low presently, which is seen as “abnormal” because on average they have been higher. Because the current level is abnormal, the Fed – it is argued - should raise rates. If the Fed doesn’t raise rates, Bad Things will happen because, well, it’s not normal for rates to be so low. The economy is sure to overheat and break out in inflation.


    When you dig into it, there are folks who believe terrible things will happen if we don’t revert to “normal” because there was much previous monetary creation by the Fed to combat the Great Recession and then to stimulate the recovery, as the chart below shows.
     


    The problem is that there still is no sign of this inflation. Moreover, there is no sign that financial markets are currently expecting inflation.  The 10-year “breakeven” inflation rate – the difference between 10-year inflation adjusted Treasury security yields and conventional 10-year Treasury yields shown below - has bounced around since the Great Recession (when something like the Great Depression was feared and zero inflation or less was projected). But the breakeven rate is currently in the 1.5-2.0%/annum range. So in what sense is the economy overheating or are financial markets expecting such overheating? The problem seems to be that for some folks, facts don’t get in the way of theory.  
     



    There is another strand of the argument that the Fed should be raising interest rates now, even though inflation isn’t high. In this view, there is a “natural” rate of unemployment. Below that level, labor shortages will arise, employers will start bidding up wages (faster and faster the theory goes).  The rising labor costs will show up in prices through markups and therefore will pass into price inflation.  It is true that as the unemployment rate has declined in recent years, the U.S Bureau of Labor Statistics’ (BLS) job openings (vacancy) rate has increased. In fact, the job openings rate (shown below) has exceeded its pre-Great Recession peak. But before panicking, there is a question as to whether we have the right story. Where is the ever-accelerating wage inflation? As measured by the latest release of the BLS Private-Sector Employment Cost Index, for example, accelerating wage inflation has yet to emerge, suggesting that past relationships are not holding.[1]
     
    Maybe the (new) natural rate of unemployment has yet to be reached. Maybe it has changed from whatever level it stood at prior to the Great Recession. Maybe the past is not prologue. There seem to be a lot of maybes here – too many – to make a major monetary policy decision based on old assumptions.




     We know there have been other changes in the labor market apart from the old wage inflation/vacancy/unemployment link. For example, the employment-to-population ratio is well below its pre-Great Recession peak. So there may be more slack present in the labor market than is suggested by measured unemployment or vacancies. No one knows for sure.



    Apart from whether the wage/vacancy/unemployment rate relation is the same as it was, say, ten years ago before the Great Recession, there is still another question to be posed.  The theory or story of the natural rate of unemployment is basically a labor market tale. It involves demand for labor pulling up wages and the resulting wage inflation being passed along into price inflation. The problem is that broad macro measures such as the unemployment rate are correlated with other broad measures such as estimates of the gap between actual GDP and “capacity.” It’s hard to say empirically which index we should be looking at or what the true story is.


    At one time when unions were strong, stories of worker bargaining and labor costs passed into prices may have made sense. But today, the determinants of price inflation (which in the end is what the Fed cares about) may be largely a product market story, not a labor market story. We may be looking in the wrong place when it comes to predicting the point when price inflation will become a problem.  All of which brings us back to our car analogy. The current position of the accelerator seems consistent with our current driving conditions. Current interest rate policy is not causing inflation. Why make a change?


                                                              
    [1] Readers of these musings will know that in a prior post, I expressed the view that it looked like there was some acceleration in wage inflation. See http://employmentpolicy.org/page-1775968/3328512#sthash.1ymQLhfw.dpbs.
    But we have to let the latest data talk and right now that is not the tale they are telling.

     
  • 07 Sep 2015 9:23 AM | Daniel J.B. Mitchell (Administrator)

    The standard Labor Day article either talks about whether organized labor will make a comeback after a long period of decline, or it picks up on some other aspect of labor market trends and problems such as stagnant wages, pay inequality, job insecurity, etc. This musing is being written shortly before the Labor
    Day articles for 2015 actually appear. So what the actual balance will be among these two types is unknown. 


    My own guess is that because of the decades-long trend in falling unionization rates, there will be more of the latter (labor market issues) – probably many more – than of the former (union comeback). You have only to ask what “CIO” stood for in 1955 (when the CIO disappeared into the AFL-CIO and unionization was at its peak) and what happens nowadays if you Google “CIO.” You are more likely
    nowadays to run into “Chief Information Officer” as the meaning of CIO or – even more tellingly – “Chief Investment Officer,” than you are to encounter the 1955 meaning. (If you don’t know the 1955 meaning, you’re just making my point.)


    So assuming articles on problems of the contemporary labor force are mainly what you will encounter, my further guess is that what you will also find is the idea that the jobs of the future will require college degrees. Higher ed, in other words, is the solution to today’s labor market problems, at least in that telling. Let’s put aside the inconvenient fact that according to the U.S. Bureau of Labor Statistics, the top projected job openings are in retail, food service, and other low-education and low-paid occupations.[1]


    What we are talking about here is public perceptions, not necessarily reality. Universities and colleges have long been referred to as “ivory towers.” Presumably what is meant by that phrase is insulation from the “real world.” Given that longstanding view, combined with the more recent perception that the solution for labor market problems is getting a college degree, and you have a circumstance that did not exist in the past. If, in the past, universities and colleges were insulated ivory towers, but you didn’t need to go there, their ivory tower aspects were a mere curiosity. If, on the other hand, you (or your kids) do have to go there, what might have been a curiosity back in the day becomes a potential conflict if you see future barriers to entrance.  


    The problem becomes especially acute in public higher education. Public institutions – because they are supposed to offer lower-cost attendance options than private - thanks to government subsidy – become viewed as the utilitarian route to labor-market advancement.  And if the folks in charge of those institutions seem engaged in odd activities unrelated to efficient and inexpensive student processing, public concerns are raised. What are those folks doing with taxpayer money? Why should I as a taxpayer be subsidizing such activities at a time of rising tuition?


    The most obvious elements of friction relate to admissions (access) and, as noted, rising tuition. During the Great Recession, state governments tended to reduce appropriations for public higher ed as tax revenue declined. As a result, tuitions rose and, in some cases, enrollments were cut. With a piece of their budgets cut away, such adjustments by public higher ed institutions were inevitable. In some cases the response of public higher ed institutions was also semi-privatization, usually admission of out-of-state and foreign applicants at higher-than-local sticker prices for tuition. Typically, however, the actual decisions to raise tuition and/or cut enrollments (or to semi-privatize) were made – not by the legislators and governors who cut the budget – but by the immediate authorities who run public higher ed institutions. So, conveniently for legislators and governors, blame was deflected to those authorities. 


    They made the choice.  While the Great Recession is over, its after-effects linger. Public higher ed authorities – having been cast as the villains in the tuition/enrollment/semi-privatization episode – must now appeal to already offended voters for funding restoration and support. Higher ed authorities may feel that it is unfair to have to shoulder the blame, but that is the reality. They can only go so far in trying to point fingers at legislators and governors since neither are anxious to assume blame, even retroactively.  And both are needed, along with voters, for support. 


    I am most familiar with the case of California, which has the image of a diverse “blue” state that takes generally liberal positions. So let’s look at voters there. You might expect a greater degree of public sympathy for higher ed in California than elsewhere because of its blue reputation. However, it ain’t necessarily so. Like a lot of things, it depends on perceptions.  


    The last gubernatorial election in California was held in November 2014, but the outcome was known well in advance. Incumbent Jerry Brown was expected to win reelection by a large margin. Under those circumstances, with no real contest at the top of the ticket, voter turnout was expected to be low (and it was). So voters who did turn out were presumably biased toward those in the electorate most
    interested in public affairs. 


    In order to predict the results of elections, the California Field Poll attempts to focus on those in the public who actually will vote. A few weeks before the November 2014 election, it polled what it considered to be a sample of “likely voters.”[2] What was the demographic and political makeup of that sample? The table below provides a summary that may surprise. 


    Democrats                43%   
    Republicans              34%
    No party/other          23%
    ===
     
    Strongly conservative      20%
    Moderately conservative  11% 
    Middle-of-the-road          41%
    Moderately liberal           11%      
    Strongly liberal               17%
    === 


    Age 18-29                 11% 
    Age 30-39                 14%
    Age 40-49                 16%
    Age 50-64                 32%  
    Age 65+                     27%
    ===


    White, non-Hispanic      70%
    Latino                          16%
    African-American            6%
    Asian/other                    8%
    ===
     
    Male                       50%
    Female                   50%
    ===
     
    Union household            18% 
    Nonunion household       82%
    ===


    If you want to characterize the median California voter – whose support presumably public higher ed institutions want - that voter is white, nonunion, age 50+, middle-of-the-road politically, independent, and equally likely to be male or female.[3] So the key to political success in California is definitely not denigrating or offending older white males. Other poll data suggest that the median likely voter has just a bachelor’s degree, i.e., 50% of likely voters have educations below that level, 50% have educations at that level or above.[4] 
     
    The notion that California is inherently “progressive” on social issues isn’t suggested or supported by the history of state ballot propositions over the past quarter century despite its blue state reputation. Consider the following election results:
     
    Prop 187 – Ban on public services for undocumented immigrants (passed 1994)
    Prop 209 – Ban on affirmative action in public higher ed admissions and state contracting (passed 1996)
    Prop 227 – Sharp limits on bilingual education (passed 1998)
    Prop 22 – Ban on gay marriage (passed 2000)
    Prop 8 – Ban on gay marriage (passed 2008)
     
    Clearly, if some of these propositions were on the California ballot today, they would not pass. Attitudes do change over time.[5] But to the extent that California – despite its blue state image – is on the leading edge of emerging causes, that leadership is more likely to be true in the environmental area rather than when it comes to social attitudes.
     
    Much of the latest social agitation in higher ed, including in the public institutions of California, has involved such matters as microaggressions, statements – perhaps inadvertent – that might offend. A good deal of this agitation has developed within universities.  It isn’t coming from median voters who  aren’t preoccupied with microaggression, but who do have concerns about tuition and access – based on all those labor market predictions that you must have a college degree in the future. 
     
    Those voters are not committed to public higher ed institutions as centers for promoting social change as California’s ballot history suggests. Particularly given the coarse discourse readily found in everyday political debate, the internet, popular entertainment, etc., what is characterized as a microaggression in university circles seems mild to anyone with a TV or laptop. Ten or twenty years from now, perhaps voters of that future period may have changed their views. But for now, issues such as tuition, access, and student debt are the big issues for higher ed. In contrast, a focus on other matters by those folks running public higher ed institutions is likely at best to appear off-topic and unresponsive to the concerns of the median voter. 
     
    Put another way, being off-topic and unresponsive may be viewed by median voters as a microaggression against them, what they think, and how they talk. And there are consequences if that is what voters come to perceive about public higher ed and believe is going on there. Within academia, there seems to be a body of psychological research on microaggression in the context of interpersonal interactions. It goes along with longstanding research on framing and hidden prejudices. Continued research of that type should be encouraged. But the research so far seems to lack an outward component when it comes to application to higher education.
     
    More precisely, what is odd is not the research in the abstract, but its policy consequences within higher ed institutions. There is much effort at documenting the impact of the microaggression controversy on everyone except those median voters on whose goodwill the fate of public higher ed institutions depends. Put another way, there seems to be great concern about the impact of what might be said within the institution. But there is no concern – or even perception – as to what the impact might be when bureaucratic university policies on microaggression leak outside the institution. 
     
    Thus, when a University of California guide that indicated that asking people where they are from is equivalent to telling them they aren’t “true American(s)” is discovered, and is (predictably) circulated on the internet, the guide – and the official “seminars” at which it was used - become a target of ridicule and offense.6 Did the University really believe that someone saying America was the “land of opportunity” was a micro-aggressor? And, no, it’s not just right-wing news media that pick up such stories. That episode found itself quickly aired in the mainstream.[7] It creates the image of academic administrators gone amuck with political correctness at a time when they should be focused on access and affordability.
     
    Ultimately, the idea that through official policy speech should be constrained so it never offends anyone within the institution, while at the same time its impact on outside political constituents should not only be ignored, but not even recognized, seems bizarre. It is even more bizarre in a world in which those median voters on the outside are being told that the key to labor market success is a college degree and  that their political support is thus needed to fund public higher ed. In an era of economic insecurity, where is the research on the impact of university-generated microaggression against the median voter? Where are the seminars on the external impact?


    [1] http://www.bls.gov/news.release/ecopro.t08.htm

    [2] http://www.field.com/fieldpollonline/subscribers/Rls2489.pdf

    [3] Note that there is a big difference between the general population and the likely voter population. Children don’t vote. Non-citizens don’t vote. Those eligible to vote have to register and then turn out. 
    [4] http://www.field.com/fieldpollonline/subscribers/Rls2490.pdf
    [5] Not all the propositions would necessarily be reversed today. A move in the state legislature to put a proposition on the ballot repealing Prop 209 (affirmative action) not long ago was quickly killed when the Asian community – that felt its kids would be disadvantaged by repeal – vocally objected.  

    [6] http://www.ucop.edu/academic-personnel-programs/_files/seminars/Tool_Recognizing_Microaggressions.pdf  . The official university position seems to be that speech was not being forbidden but that attendees at the seminar
    were being sensitized. 
    [7] http://www.scpr.org/programs/airtalk/2015/06/24/43412/microaggressions-should-they-be-censored-on-colleg/  

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