Cultural Capital and meritocratic circularity

Lauren A. Rivera has a new book out titled “Pedigree: How Elite Students Get Elite Jobs.” Coverage of the book (The Atlantic, New York Times) indicates that the author interviewed hiring managers at elite firms to understand how they made their hiring decisions. Of interest to me in this post is Rivera’s writing about “cultural fit.”

Across cultures and industries, managers strongly prize “cultural fit” — the idea that the best employees are like-minded. One recent survey found that more than 80 percent of employers worldwide named cultural fit as a top hiring priority.

When done carefully, selecting new workers this way can make organizations more productive and profitable. But cultural fit has morphed into a far more nebulous and potentially dangerous concept. It has shifted from systematic analysis of who will thrive in a given workplace to snap judgments by managers about who they’d rather hang out with. In the process, fit has become a catchall used to justify hiring people who are similar to decision makers and rejecting people who are not.

[…]

Crucially, though, for these gatekeepers, fit was not about a match with organizational values. It was about personal fit. In these time- and team-intensive jobs, professionals at all levels of seniority reported wanting to hire people with whom they enjoyed hanging out and could foresee developing close relationships with. Fit was different from the ability to get along with clients. Fundamentally, it was about interviewers’ personal enjoyment and fun. Many, like one manager at a consulting firm, believed that “when it’s done right, work is play.”

To judge fit, interviewers commonly relied on chemistry. “The best way I could describe it,” one member of a law firm’s hiring committee told me, “is like if you were on a date. You kind of know when there’s a match.” Many used the “airport test.” As a managing director at an investment bank put it, “Would I want to be stuck in an airport in Minneapolis in a snowstorm with them?”

To state the obvious, this is so-called cultural capital at play. To also state the obvious, this sort of thing advantages those from rich backgrounds over those from poor backgrounds regardless of their level of education and ability.

What’s interesting about this method of selecting candidates is that there is often a viable business justification for it. It’s not pure like-selecting-like cronyism, but rather people who display upper class tastes and behaviors and styles of communication will be more valuable to the company because they will better relate to other people in the company’s management as well as the company’s clients. The degree to which this matters is perhaps overstated, but to the extent that the upper echelon of commerce is about relationships, those that can relate better arguably have more merit, so long as we define merit in terms of how much one adds to the company’s bottom line.

However, there is something very circular about merit so defined. In other contexts, people often write about the non-cognitive “skills” of conducting yourself in a professional manner, but what this really amounts to is conducting yourself in the manner that happens to coincide with upper class norms at this moment in history. Yet, there is nothing objectively superior about the way upper class people prefer to relate to others or upper class tastes more generally.

For instance, in my experience, upper class people prefer styles of communication that are passive, subtle, and often insincere. Acting otherwise in a “professional” environment might make you less valuable because of the disruption it causes, but it only causes disruption because of the way upper class people happen to be. If they were less delicate and adopted other communication norms, such as the more aggressive and blunt ones common among working classes, then there would be no problem. Some object that more aggressive and direct communication is actually inherently less capable of facilitating successful coordination, but counterexamples abound in construction sites, saw mills, and other blue-collar workplaces across the country.

Under these weird meritocratic dynamics, bourgeois characteristics make you more valuable not because they are good characteristics in themselves, but merely because they are bourgeois characteristics, and therefore relatable to the top of the economic hierarchy that directs the resources top spots in top firms are competing to get. This poses obvious problems for social mobility, which is the direction people usually take it, but it poses even deeper problems for the idea of “skills” more generally. Where “skills” refers, not to some freestanding objective ability to produce, but rather to your ability to be chummy and familiar to those with the money, they don’t actually seem to be “skills” in the sense most people imagine the term. Upper crust professionals no longer appear to be geniuses, but instead people who went to boarding school and whose manner of conducting themselves shows it.

Wages and Child Poverty

EPI folks wrote a paper titled “Broad-Based Wage Growth Is a Key Tool in the Fight Against Poverty.” I wrote a response titled “If You Want Really Low Poverty, Market Income Is Not Going To Get You There.” In my piece, I point out that 2 in 3 poor people are either children, elderly, disabled, or students and therefore are not available for more work and, of the remaining third, a sizable chunk (8 percentage points) are people who do not work because they are caretakers and thus may also not realistically be available for work.

Today, EPI has furthered the dialogue one step further with a post titled “Strong Wage Growth Would Complement the Safety Net in Reducing Poverty.” As with the first post, I do not quibble with the idea that increasing market incomes (through higher hourly wages or otherwise) will reduce poverty. What I do quibble with is whether the magnitude of the anti-poverty effect is that impressive relative to what welfare programs typical elsewhere in the world could do.

In the EPI post, the authors focus primarily on child poverty. The point of this focus is to say that market income boosts for the few impoverished who can realistically expect to get them will have spillover effects for the non-working poor that live in the same households. This is true for all non-working poor — a disabled non-working person that lives with a low-wage worker will benefit if wages go up — but in the greatest degree for the non-working child poor.

Children might make up a disproportionate share of those in poverty, but they also make up a disproportionate share of those lifted out of poverty by stronger wage policies. Children make up 23.1 percent of those in market-based poverty (16.8 million out of 72.6 million). By growing wages with productivity and simulating a full employment economy, they would make up 36.6 percent of those pulled out of poverty (4.4 million out of 12.0 million). This represents a 26.1 percent reduction in child poverty. The entire tax-and-transfer system, meanwhile, represents a 37.8 percent reduction in child poverty, leading us to feel that our market income approaches are nothing to sneeze at.

So, under the wage simulation, there is a 26.1 percent reduction in child poverty. This is contrasted against status quo transfers, which on the same type of measure reduce child poverty by 37.8 percent. The transfer percent is still a considerably larger number than the wage percent, but since they are close-ish, that’s supposed to suggest that the wage number is at least somewhat impressive.

But the problem here is that the US welfare system has a remarkable dearth of child benefits. Here is family benefits as a percent of GDP across the OECD:

To be sure, we have other transfer programs that reach kids, and some like food stamps that even take the number of kids in the household into account when defining benefit levels. But this is also true of these other countries. The General Housing Allowance in Finland, for example, pays out housing benefits based upon how many kids you have, though this is scored as a housing benefit not a family benefit.

In any case, the point here is that transfer incomes in the US are not actually doing a lot to reduce child poverty, relative to elsewhere in the world. Thus saying that your wage simulation would cut child poverty by a similar (but actually still considerably lower) amount as our current weak transfer system is not actually that impressive.

Also, it’s important to note that spillovers go in both directions. Upping market incomes will of course improve the lives of those adjacent to those who get them. But, similarly, upping transfer incomes will improve the lives of those adjacent to those who get them. A child allowance of $300 per month per year would, under a very simple simulation, cut official child poverty by 6.8 million people, but also spill over (in a sense, obviously the parent receives the check) to cut official adult poverty by 4.7 million people.

Ultimately, everyone in this discussion is supportive of both income channels here and so there is not much of an argument going on. You can increase market and transfer income at the bottom and you should want to do both. With that said, I really do believe that there are severe limits on how far market income can get you and I think it is important to emphasize that capitalist markets are inherently and unsalvageably defective in this regard. This should be the Left’s standard position — poverty in rich countries is primarily due to structural problems in capitalism — and I fear that too much talking about jobs, wages, education, and so on sometimes leads people in the wrong diagnostic and consequently prescriptive direction.

Uber Surge Prices, Part III

I wrote twice previously about Uber jacking up prices in an emergency in Sydney, Australia (I, II). In both cases, I have pointed out that in addition to it being rational for many (and perhaps even the majority) to prefer non-surging in emergencies, it’s also totally plausible aggregate utility, measured in conventional ways, is maximized by not surging. This is true even if increasing prices causes significant supply increases (which nobody has demonstrated happens in snap emergencies like these). The reason people miss this is because their Econ 101 reasoning ignores the way diminishing marginal utility and inequality disrupt the analysis. Here, I want to give one last push to that with a concrete example.

Suppose that, in a given location, 10 people will normally hail an Uber cab, and 10 drivers will normally be cruising about to accept them. Now suppose that, because of an emergency, the number of people trying to hail a cab shoots to 100 people. In response, Uber jacks up prices very high, which has the effect of bringing 10 additional drivers on to the road. That means there are now 20 drivers (a doubling of supply) and 20 of the 100 people trying to hail an Uber cab succeeds in doing so.

Under Econ 101 analysis, you say that there was a welfare increase here. See, there were 20 people who got Uber cabs rather than 10 people. But, as I keep pointing out, this argument is not determinative if we assume the 100 people vying for Uber cabs have unequal economic resources. Further, the more unequal the resources are among those people, the more likely using prices like this actually decreases aggregate utility.

To see why, consider these two scenarios:

Non-Surge

  • Rider Demand: 100
  • Cab Supply: 10
  • Chance of Getting a Cab: 10% for all 100 riders

Surge

  • Rider Demand: 100
  • Cab Supply: 20
  • Chance of Getting a Cab: 100% for wealthiest 20 riders, 0% for other 80 riders

From a glance, you can immediately see that for the bottom 80 riders, the rational preference should be the Non-Surge. In Non-Surge, their odds of getting a cab are 10%. In Surge, their odds of getting a cab are 0%. Don’t let stupid journalists confuse you on this point.

As far as aggregate utility goes, we just have no idea whether Non-Surge or Surge maximizes aggregate utility in this situation. The argument that says it’s totally obvious that Surge maximizes aggregate utility is premised upon the assumption that the willingness of the 20 riders to pay that high amount shows that they are getting more utility out of the ride than the other 80 would. But that assumption does not hold where there is significant inequality between the 100 riders. If the top 20 riders are super-wealthy, it could be that they are willing to majorly outbid the other 80 even though they don’t really get that much utility out of the ride. It’s just that, because of the diminishing marginal utility of money, the amount that they spend isn’t really worth much to them.

You might think that, even with this inequality point noted, it’s clear utility is maximized because 20 rides always means more utility than 10 rides. But this too isn’t true. You’ve got to add up the utility each ride gives. It’s quite possible that the 10 lottery rides will produce twice as much utility per ride (because they aren’t all going to wealthy people who actually don’t get that much utility out of them) as the 20 wealthy rides. This is not only possibly true for a given lottery outcome, but is also possibly true on average over 1000 lottery simulations or whatever, meaning that using the 10% lottery could, even on average, maximize utility.

So even when you assume massive supply response (which is a big assumption), you still find yourself in a situation where the rational preference of the vast majority is to Non-Surge. You also find yourself in a situation where you have no idea whether Surge or Non-Surge maximizes aggregate utility and a situation where it is totally plausible (in an unequal society) that the Non-Surge lottery does so. Assuming away all of the realities of actual societies can make you feel like you are Super Rational Obvious Economics Man, but you’re really just doing bourgeois ritual dances.

Right to Own

Most major companies in this country are owned by capital unions whose members are called shareholders. The members of the capital unions cast votes in elections in order to guide the direction of the companies. Among other things, the members of each particular capital union help to select a Board of Directors, which is then responsible for selecting a Chief Executive Officer. The CEO serves as the capital union’s president.

Some capital union presidents opt to use the union’s resources to influence politics, e.g. through lobbying and campaign contributions. If the majority of the union members (weighted by equity) want to prevent this kind of spending, they theoretically can do so. Through shareholder proposals and other corporate governance mechanisms, the union’s members can influence the union president or even oust them altogether with enough effort. In practice, U.S. corporate governance laws make this a very difficult thing for capital union members to accomplish. In some capital unions, the majority of union members (weighted by equity) may even support the political spending, which has the effect of forcing the minority members to contribute to the political spending as well.

To protect these minority members (or in some cases majority members), it’s important that we pass a Right-to-Own law. Under this law, capital union presidents may only spend a member’s money on political spending if that member has voluntarily decided to permit it. Citizens should have the right to own stock equity without being forced by a capital union to pay dues towards political lobbying and campaigns that they don’t support.

A Right-to-Own law could be implemented elegantly. A company would be required to add up all of its political spending each quarter. Then, that total amount would be distributed across the capital union members who have opted in to the political spending dues. The dividends going to those opted-in shares would be reduced proportionately by an amount equal to the political spending. Where there is no dividend, those who opted in would be required to forfeit to the company a number of shares equal in value to the political spending amount (which has the same distributive effect, including for the other shareholders).

All of those committed to the abstract procedural justice principle of the Right to Own must support the Right-to-Own law.

Gentrification

I don’t write about gentrification, but I read about it often. Most of what I read about gentrification is less lucid than I’d prefer, generally because it is vague, myopic, or needlessly narrative. This has started to bug me, and so I figured I’d try my own hand at writing about the topic.

As far as I can tell, gentrification is not a sui generis problem. Rather, it is just a particular instance of a broader phenomenon that can be summed up as follows:

When (1) a rich person and a poor person (2) vie for (3) the same resources, the rich person gets them and the poor person does not.

The numbers in the above statement demarcate what I take to be the three significant elements of gentrification. Nearly all gentrification analysis focuses on one or more of these three elements. Potential mechanisms for preventing gentrification can be grouped into these three buckets as well.

(1) a rich person and a poor person
Gentrification, understood as the displacement of poorer residents by richer residents, is only possible because of economic stratification. This is true by definition: without stratification, any displacement would not be done against poorer residents by richer residents because there wouldn’t be such things as poorer and richer residents, just residents.

But the point here is more than mere tautology. Gentrification is driven by the fact that richer would-be residents are able to outbid incumbent residents for the housing units. With less or no economic stratification, a concerted effort to displace incumbent residents would fail because those residents would be able to match the bids of the would-be displacers.

Background economic stratification is the initial necessary condition of all gentrification. Naturally, then, one way of preventing gentrification is to reduce economic stratification. Making incumbent residents and would-be displacers more equal in income and wealth makes gentrification harder to pull off. For some reason, this potential solution is rarely mentioned in gentrification discussions.

(2) vie for
Gentrification is only possible when rich people vie for the housing units that incumbent poor people currently control. The vast majority of gentrification articles focus on this element of gentrification. That is, nearly all gentrification articles concern themselves with theorizing why rich people come to vie for housing units that they formerly did not vie for. The reasons that pop out of that analysis are then often called the “causes” of gentrification, which is only sort of true depending on what one means by “cause.”

There are many reasons given for why rich people come to vie for housing units that they formerly did not vie for. Some argue that waves of newcomers to areas — starting with bohemian and hipster types and ending with the vey rich — improve the image of the area to richer and richer people, causing them to vie for the housing units. Some argue that developers buy up land in an area and add private services and amenities that are more attractive to richer people, which causes the richer people to vie for the housing units. Some argue that public authorities provide public services and amenities to an area that are more attractive to richer people, which also then causes rich people to vie for the housing units. Some also argue that the residential preferences of (especially younger) rich people have shifted away from suburbs and towards urban centers, and that this has caused them to vie for urban housing units, which is where many poor people currently reside.

Analytical battles over gentrification seem to primarily focus on which one of the reasons in the above paragraph is the most true. As far as I can tell, they are all true to varying extents depending on which case of gentrification one is talking about.

As this is where most of the gentrification analyses focus, it is also where most of the gentrification solutions focus. Here are some common solutions people explicitly or implicitly offer to prevent richer people from vying for the housing units of poorer incumbents:

  • Reduce an area’s attractiveness to the rich. This means blocking rich-attracting development like Whole Foods stores. It also means blocking rich-attracting public services like good parks and transit options.
  • Educate richer people to not vie for the housing units. This involves telling richer people that it is morally wrong to decide to relocate to certain areas and convincing them to make the individual decision not to do so.
  • Provide advantages to incumbents that make it impossible for richer people to vie for the housing units. This can take the form of imposing rent controls that also force landlords to give incumbent residents the right to renew their lease before the landlord tries to replace them with someone else.

(3) the same resources
Finally, gentrification is only possible because rich people and poor people are vying for the same resources, which is to say the same housing units. Although this obvious observation is closely related to element (2), it gets at a slightly different point that suggests a significantly different solution. The suggested solution is that more housing units be created in the area that rich people are vying to live in so that rich people can vie for those housing units rather than the housing units of the poor. More generally, the point is that increasing the housing supply in an area reduces the extent to which rich people and poor people are bidding against each other for the same exact resources, and thereby cuts down on the displacement of incumbent residents.

Conclusion
Personally, I find this presentation of the issue much easier to get my head around than the kind of thing I usually see. I think it also makes it easier to contemplate ways to prevent gentrification-fueled displacement. I intend to write more on solutions better once I feel more confident in my research on that particular topic.