Labor Economics – Page 78 – artdiamondblog.com

Workers Want to See Compensation Related to Contribution

This is a great example contra (or at least qualifying) Daniel Pink’s claim that all you need do for knowledge workers is provide them enough money so that they can provide for the basic needs of themselves and their family.

(p. 145) The public offering process brought details of the intended allocation of Pixar stock options into view. A registration statement and other documents with financial data had to be prepared for the Securities and Exchange Commission and a prospectus needed to be made ready for potential investors. These documents had to be reviewed and edited, and it was here that the word apparently leaked: A small number of people were to receive low-cost options on enormous blocks of stock. Catmull, Levy, and Lasseter were to get options on 1.6 million shares apiece; Guggenheim and Reeves were to get 1 million and 840,000, respectively. If the company’s shares sold at the then-planned price of fourteen dollars, the men would be instant multimillionaires.

The revelation was galling. Apart from the money, there was the symbolism: The options seemed to denigrate the years of work everyone else had put into the company. They gave a hollow feel to Pixar’s labor-of-love camaraderie, its spirit that everyone was there to do cool work together. Also, it was hard not to notice that Levy, one of the top recipients, had just walked in the door.
“There was a big scene about all that because some people got (p. 146) huge amounts more than other people who had come at the same time period and who had made pretty significant contributions to the development of Pixar and the ability to make Toy Story,” Kerwin said. “People like Tom Porter and Eben Ostby and Loren Carpenter–guys that had been there since the beginning and were part of the brain trust.”
Garden-variety employees would also get some options, but besides being far fewer, those options would vest over a four-year period. Even employees who had been with the organization since its Lucasfilm days a decade earlier–employees who had lost all their Pixar stock in the 1991 reorganization–would be starting their vesting clock at zero. In contrast, most of the options of Catmull, Lasseter, Guggenheim, and Reeves vested immediately–they could be turned into stock right away.
“I decided, ‘Well, gee, I’ve been at this company eight years, and I’ll have been here twelve years before I’m fully vested,’ ” one former employee remembered. ” ‘It doesn’t sound like these guys are interested in my well-being.’ A lot of this piled up and made me say, ‘What am I doing? I’m sitting around here trying to make Steve Jobs richer in ways he doesn’t even appreciate.’ ”

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

For Daniel Pink’s views, see:
Pink, Daniel H. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books, 2009.

Stevenson and Wolfers Find People in Rich Countries Are Happier

“Betsey Stevenson and Justin Wolfers are the go-to pair on what some might call “lovenomics,” having produced much research on marriage, divorce and child-rearing. They are shown at home with their daughter, Matilda, and family dog, Max.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) . . . when Ms. Stevenson, 40, and Mr. Wolfers, 39, start talking about say, diapers or nursing, the conversation takes an odd turn. Suddenly, words like “inputs” and “outputs” — the economic kind — creep in. Mention loading the dishwasher and he tosses out “fungibility.” The low cost of two big teddy bears they bought for Matilda gets Ms. Stevenson ruminating on productivity gains.

If they don’t quite sound like the rest of us, that’s because these two Harvard Ph.D.’s form a sort of power couple in the world of the dismal science, or at least a certain corner of it. Faculty members at the Wharton School of the University of Pennsylvania, and currently visiting fellows at Princeton, Ms. Stevenson and Mr. Wolfers have become the go-to pair on the economics of marriage, divorce and child-rearing. That they are themselves a couple — unmarried, for tax reasons they regularly cite — adds to the allure.
. . .
Their research shows that men have grown happier as women have become unhappier. (Why? They don’t really know.) Are people in rich countries happier than people in poor countries? (Yes.) And contrary to popular belief, they show that the divorce rate in America has been falling, not rising, for decades. They cite a number of possible reasons, including more balanced expectations between men and women about how a marriage will actually work, as well as the fact that fewer people are marrying in the first place.
. . .
(p. 4) LAST month, Ms. Stevenson and Mr. Wolfers presented new research into what is known as the Easterlin Paradox. First documented by the economist Richard Easterlin in the 1970s, this concept involves the link between economic growth and happiness. The idea is that, within a given country, people with higher incomes are more likely to be happy, and yet, for the most part, the average level of happiness doesn’t vary much from rich countries and poor countries. What’s more, as countries become richer, their populations don’t become happier.
Using a red laser pointer to highlight PowerPoint graphs, Ms. Stevenson told a group of economists, psychologists and other experts gathered at the Russell Sage Foundation on the Upper East Side of Manhattan that earlier research had failed to take into account that as people and countries grow richer, it takes a much bigger amount of absolute dollars to raise incomes, and thus happiness.
So while it could appear that increases in happiness flattened out after incomes reached a certain point, “the richer you are, the more dollars it takes to give you the same increase in well-being,” Ms. Stevenson said. “To get a 10 percent increase in income, you need more dollars than when you are poor.”

For the full story, see:
MOTOKO RICH. “It’s the Economy, Honey.” The New York Times, SundayBusiness Section (Sun., February 11, 2012): 1 & 4.
(Note: ellipses added.)
(Note: the online version of the review is dated February 11, 2012.)

“Being Able to Work on a Great Project”

(p. 133) Recruiting was brisk; the magnet for talent was not the pay, generally mediocre, but rather the allure of taking part in the first fully computer-animated feature film. “Disney gave us a very modest budget [$17.5 million] for Toy Story,” Guggenheim said. “Although that budget went up progressively over time, it didn’t afford for very high salaries, unfortunately. We tried to make the other working conditions better. Just the enthusiasm of being able to work on a great project is as often as not what attracts artists and animators.”

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics and brackets in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

Innovative Entrepreneurs Need to Be Able to Fire People

(p. 116) Jobs met with the remaining employees soon after the layoffs and brought his reality distortion field with him. “You’re seeing your friends packing their stuff up and pushing it out to their cars,” Phillips remembered, “and yet somehow he had convinced you that that was the greatest possible thing that could happen.”
Within the Silicon Valley community, the talk was not of the way Jobs had handled his former employees at Pixar, but of his having kept Pixar going at all. It seemed to make little sense from a business point of view. For all his bravado about RenderMan, his motivation was likely a matter of status as much as economics. After his rise and fall at Apple, the onus was on him either to create another success story or to leave his peers to conclude that the first one had been a quirk of fate.
“It wasn’t really working,” Smith said of Pixar’s early years. “In fact, that’s being kind of gentle. We should have failed. But it seemed to me that Steve just would not suffer a defeat. He couldn’t sustain it.”

Married Batters Paid More than Equally Good Bachelor Batters

(p. C4) Many studies have found that married men earn more than their single peers, but whether they’re actually more productive is harder to answer. To settle the question, researchers looked to baseball.
They took a random sample of nearly 3,500 pro hitters, from 1871 through 2007, comparing their batting averages and other statistics with their salaries (as revealed in MLB archives and other sources). Until 1975, when the market for players became freer, there was no link between marriage, productivity and earnings. After 1975, there was some evidence that hitters who begin their careers in the bottom third of the ability spectrum gained a handful of points in batting average when they married, and a bit of salary, but the evidence was statistically weak.

For the full summary, see:
Christopher Shea. “Marriage Moneyball.” The Wall Street Journal (Sat., NOVEMBER 5, 2011): C4.

The paper summarized is:
Cornaglia, Francesca, and Naomi E. Feldman. “Productivity, Wages, and Marriage: The Case of Major League Baseball.” CEP Discussion Paper # 1081, September 2011.

Jobless Rate Appears Lower as Aging Population Leaves Labor Force

(p. A4) As more baby boomers leave the job market, the participation rate should continue to decline–a group of economists at the Federal Reserve projected in 2006 that it would fall to 62.5% by 2015. While that suggests the economy won’t need to create as many jobs to bring down the unemployment rate, said Barclays Capital economist Dean Maki, the downside is that it won’t have as large a work force to power it along and pay for the needs of an aging population.
“If you have a greater fraction of the population not working, that will make it harder to pay for costs that will be ballooning,” he said.

For the full story, see:
JUSTIN LAHART. “Aging Population Eases Jobless Rate.” The Wall Street Journal (Sat., November 5, 2011): A4.

Study Finds Lack of Control at Office Is Deadly for Men

(p. C12) . . . Israeli scientists found that the factor most closely linked to health was the support of co-workers: Less-kind colleagues were associated with a higher risk of dying. While this correlation might not be surprising, the magnitude of the effect is unsettling. According to the data, middle-age workers with little or no “peer social support” in the workplace were 2.4 times more likely to die during the study.
But that wasn’t the only noteworthy finding. The researchers also complicated longstanding ideas about the relationship between the amount of control experienced by employees and their long-term health. Numerous studies have found that the worst kind of workplace stress occurs when people have little say over their day. These employees can’t choose their own projects or even decide which tasks to focus on first. Instead, they must always follow the orders of someone else. They feel like tiny cogs in a vast corporate machine.
Sure enough, this new study found that a lack of control at the office was deadly–but only for men. While male workers consistently fared better when they had some autonomy, female workers actually fared worse. Their risk of mortality was increased when they were put in positions with more control.
While it remains unclear what’s driving this unexpected effect, one possibility is that motherhood transforms control at the office–normally, a stress reducer–into a cause of anxiety. After all, having a modicum of control means that women must constantly navigate the tensions between work and family. Should they stay late at their job? Or go home and help take care of the kids? This choice is so stressful that it appears to increase the risk of death.

For the full summary, see:
JONAH LEHRER. “HEAD CASE; Your Co-Workers Might Be Killing You; Hours don’t affect health much–but unsupportive colleagues do.” The Wall Street Journal (Sat., August 20, 2011): C12.
(Note: ellipsis added.)

The paper referred to in the quote from Lehrer’s summary is:
Shirom, Arie, Sharon Toker, Yasmin Alkaly, Orit Jacobson, and Ran Balicer. “Work-Based Predictors of Mortality: A 20-Year Follow-up of Healthy Employees.” Health Psychology 30, no. 3 (May 2011): 268-75.

Creative Destruction Creates as Many New Jobs as It Destroys

(p. 113) It was Joseph Schumpeter who pointed out that the competition which keeps a businessman awake at night is not that from his rivals cutting prices, but that of entrepreneurs making (p. 114) his product obsolete. As Kodak and Fuji slugged it out for dominance in the 35mm film industry in the 1990s, digital photography began to extinguish the entire market for analogue film – as analogue records and analogue video cassettes had gone before. Creative destruction, Schumpeter called it. His point was that there is just as much creation going on as destruction – that the growth of digital photography would create as many jobs in the long run as were lost in analogue, or that the savings pocketed by a Wal-Mart customer are soon spent on other things, leading to the opening of new stores to service those new demands. In America, roughly 15 per cent of jobs are destroyed every year; and roughly 15 per cent created.

Source:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.

You Have More Servants than the Sun King

(p. 36) The Sun King had dinner each night alone. He chose from forty dishes, served on gold and silver plate. It took a staggering 498 people to prepare each meal. He was rich because he consumed the work of other people, mainly in the form of their services. He was rich because other people did things for him. At that time, the average French family would have prepared and consumed its own meals as well as paid tax to support his servants in the palace. So it is not hard to conclude that Louis XIV was rich because others were poor.
But what about today? Consider that you are an average person, say a woman of 35, living in, for the sake of argument, Paris and earning the median wage, with a working husband and two children. You are far from poor, but in relative terms, you are immeasurably poorer than Louis was. Where he was the richest of the rich in the world’s richest city, you have no servants, no palace, no carriage, no kingdom. As you toil home from work on the crowded Metro, stopping at the shop on the way to buy a ready meal for four, you might be thinking that Louis XIV’s dining arrangements were way beyond your reach. And yet consider this. The cornucopia that greets you as you enter the supermarket dwarfs anything that Louis XIV ever experienced (and it is probably less likely to contain salmonella). You can buy a fresh, frozen, tinned, smoked or pre-prepared meal made with beef, chicken, pork, lamb, fish, prawns, scallops, eggs, potatoes, beans, carrots, cabbage, aubergine, kumquats, celeriac, okra, seven kinds of lettuce, cooked in olive, walnut, sunflower or peanut oil and flavoured with cilantro, turmeric, basil or rosemary . . . You may have no chefs, but you can decide (p. 37) on a whim to choose between scores of nearby bistros, or Italian, Chinese, Japanese or Indian restaurants, in each of which a team of skilled chefs is waiting to serve your family at less than an hour’s notice. Think of this: never before this generation has the average person been able to afford to have somebody else prepare his meals.
You employ no tailor, but you can browse the internet and instantly order from an almost infinite range of excellent, affordable clothes of cotton, silk, linen, wool and nylon made up for you in factories all over Asia. You have no carriage, but you can buy a ticket which will summon the services of a skilled pilot of a budget airline to fly you to one of hundreds of destinations that Louis never dreamed of seeing. You have no woodcutters to bring you logs for the fire, but the operators of gas rigs in Russia are clamouring to bring you clean central heating. You have no wick-trimming footman, but your light switch gives you the instant and brilliant produce of hardworking people at a grid of distant nuclear power stations. You have no runner to send messages, but even now a repairman is climbing a mobile-phone mast somewhere in the world to make sure it is working properly just in case you need to call that cell. You have no private apothecary, but your local pharmacy supplies you with the handiwork of many thousands of chemists, engineers and logistics experts. You have no government ministers, but diligent reporters are even now standing ready to tell you about a film star’s divorce if you will only switch to their channel or log on to their blogs.
My point is that you have far, far more than 498 servants at your immediate beck and call. Of course, unlike the Sun King’s servants, these people work for many other people too, but from your perspective what is the difference? That is the magic that exchange and specialisation have wrought for the human species.

Source:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.
(Note: ellipsis in original.)

Indian Middle Class: “The State Is Preventing Me from Doing What I Want to Do”

“Partho Nag, a childhood friend of Shubhrangshu Roy’s who lives in the same New Delhi suburb. Mr. Nag, who runs an IT service company out of his home, joined Mr. Roy and other friends as they volunteered at the Hazare protests. “We’ve been told since our childhoods, ‘Politics is bad, don’t get into politics,'” Mr. Nag said. “But the point is that somebody has to clean it up. We can’t just scold people.”” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) DWARKA, India — Shubhrangshu Barman Roy and his childhood friends are among the winners in India’s economic rise. They have earned graduate degrees, started small companies and settled into India’s expanding middle class. They sometimes take vacations together and meet for dinners or parties, maybe to celebrate a new baby or a new business deal.

Yet in August, Mr. Roy and his friends donned white Gandhi caps, boarded a Metro train in this fast-growing suburb of the Indian capital and rode into New Delhi like a band of revolutionaries to join the large anticorruption demonstrations led by the rural activist Anna Hazare. They waved Indian flags, distributed water to the crowds and vented their outrage at India’s political status quo.
“I could feel that people really wanted change,” Mr. Roy, 36, recalled proudly.
It may seem unlikely that middle-class Indians would crave change. They mostly live in rapidly growing cities and can afford cars, appliances and other conveniences that remain beyond the reach of most Indians. Theirs is the fastest growing demographic group in the country, and their buying power is expected to triple in the next 15 years, making India one of the most important consumer markets in the world.
But buying power is not political power, at least not yet in India. The wealthier India has become, the more politically disillusioned many of the beneficiaries have grown — an Indian paradox. The middle class has vast economic clout yet often remains politically marginalized in a huge democracy where the rural masses still dominate the outcome of elections and the tycoon class has the ear of politicians.
. . .
(p. 10) “This middle class is less about ‘what the state can do for me’ than ‘the state is preventing me from doing what I want to do,’ ” said Devesh Kapur, director of the Center for the Advanced Study of India at the University of Pennsylvania.
The Hazare movement rattled India’s political establishment because it offered a glimpse of what could happen if the middle class was mobilized across the country. Professionals and college students provided the organizational spine, and money, that brought hundreds of thousands of people of all backgrounds onto the streets in what many described as a political awakening.
. . .
Mr. Roy and his friends, including Mr. Nag, had grown up in New Delhi in the same government housing development. They were all the sons of government bureaucrats who would later offer similar advice: Get a government job.
“He always insisted,” Mr. Nag recalled of his father’s prodding. “But we had an idea that a government job was too lousy.”
They were teenagers in the early 1990s when Indian leaders embarked on the reforms that began dismantling the stifling licensing regulations that had choked the economy. Private enterprise, large and small, would steadily emerge as the engine of Indian growth and the delivery vehicle of growing aspirations. Mr. Nag would open a small IT service firm. Two other friends would start a textile trading company. Mr. Roy would earn graduate degrees and start a consulting firm.
. . .
On a recent afternoon, Mr. Roy pointed to a crude asphalt scar in the road where workers had installed an underground water connection. The scar extended along the road toward Mr. Roy’s house, only to abruptly turn left in the direction of another building.
“You see this?” he asked, angrily. “This is a connection that comes here, but it is illegal.”
For Mr. Roy, the scar in the street marks the corruption and collusion and the failure of the state to deliver on its end of India’s social contract. His family is supposed to get water from a legal connection for $4 a month. Except that water is unusable. For years, his father had paid a fee to fill large jugs from a private water tanker — until his father slipped while carrying one of them.
Mr. Roy then spent about $1,000 to build an underground water storage tank beside his home. Now, every week a tanker delivers a $30 shipment of water into the tank, while Mr. Roy also buys bottled water for drinking, bringing his monthly bill to about $160. Mr. Roy suspects that local officials, rather than correcting the situation, allow it to continue in exchange for kickbacks from the owners of the private water tankers. In the end, though, he pays.
These tales of petty graft proliferate across India, but especially in cities, analysts say, for the simple reason that cities now have more money.
McKinsey Global Institute, a consulting group, has estimated that India’s middle class could grow to nearly 600 million people by 2030. Today, nearly three-quarters of India’s gross domestic product comes from cities, where less than a third of India’s population lives, an imbalance that correlates with the divide between middle-class economic and political power.
“For politicians, the city has primarily become a site of extraction, and the countryside is predominantly a site of legitimacy and power,” Ashutosh Varshney, an India specialist at Brown University, wrote recently. “The countryside is where the vote is; the city is where the money is. Villages do have corruption, but the scale of corruption is vastly greater in cities.”

For the full story, see:
JIM YARDLEY. “INDIA’S WAY; Protests Help Awaken a Goliath in India.” The New York Times, First Section (Sun., October 30, 2011): 1 & 10.
(Note: ellipses added.)
(Note: the online version of the article is dated October 29, 2011 and has the title “INDIA’S WAY; Protests Awaken a Goliath in India.”)

Gentle Oshman Inspired Loyalty as He Made Work Fun in Silicon Valley

“M. Kenneth Oshman” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. 19) M. Kenneth Oshman, who helped create one of the early successful technology start-up firms in Silicon Valley, one that embodied the informal management style that came to set the Valley apart from corporate America, died on Saturday in Palo Alto, Calif. He was 71.
. . .
In the 1970s and ’80s, Rolm was the best example of an emerging Silicon Valley management style that effectively broke down the barrier between work and play. Setting out to recruit the most talented technical minds, Rolm became known as a great place to work, so much so that it was nicknamed “G.P.W.”
Early on as chief executive, Mr. Oshman took funds normally used for company Christmas parties and used them to help construct a company recreational center, consisting of swimming pools, racquetball courts, exercise rooms and other amenities to attract new employees and underline the image that Rolm was a fun place to work.
But there was a tradeoff, said Keith Raffel, who left a staff position on Capitol Hill to become an assistant to Mr. Oshman at Rolm before starting his own company.
“The quid pro quo was you would be driven and work really hard,” he said.
With a gentle, understated style, Mr. Oshman stood apart from other well-known leaders in Silicon Valley, many of whom were seen as capricious and even tyrannical. He was a mentor to a generation of Silicon Valley technologists and able to inspire a kind of loyalty in his employees not frequently seen in high-tech industries.

For the full obituary, see:
JOHN MARKOFF. “M. Kenneth Oshman, Silicon Valley Mentor, Dies at 71.” The New York Times, First Section (Sun., August 10, 2011): A10.
(Note: ellipsis added.)
(Note: the online version of the obituary is dated August 10, 2011 and has the title “M. Kenneth Oshman, Who Brought Fun to Silicon Valley, Dies at 71.”)