tag:theconversation.com,2011:/nz/topics/earnings-9860/articlesearnings – The Conversation2023-12-07T02:48:10Ztag:theconversation.com,2011:article/2185072023-12-07T02:48:10Z2023-12-07T02:48:10ZSexual orientation and earnings appear to be linked – but patterns differ for NZ men and women<p>New Zealand has made substantial progress on promoting LGBTQ+ rights over the past 20 years, including legalising same-sex civil unions in 2004, <a href="https://www.rnz.co.nz/news/political/133003/parliament-passes-same-sex-marriage-bill">legalising same-sex marriage</a> in 2013, and <a href="https://www.tengakaukahukura.nz/banning-conversion-practices">banning conversion practices</a> in 2022. </p>
<p>One thing missing, however, is a clear view of the employment prospects and experiences of the LGBTQ+ population.</p>
<p><a href="https://docs.iza.org/dp14496.pdf">Most studies</a> from overseas show varying income patterns, with gay men generally earning less than heterosexual men, and lesbian women paid more than heterosexual women. </p>
<p>Our new research provides the <a href="https://www.aut.ac.nz/__data/assets/pdf_file/0008/824930/working-paper-23_05.pdf">first empirical evidence</a> of the relationship between minority sexual orientation and the labour market earnings of New Zealand adults. And it looks like the patterns seen overseas are being replicated locally.</p>
<h2>Identifying LGBTQ+ couples</h2>
<p>One of the biggest challenges for empirical research such as ours is the lack of relevant data on the LGBTQ+ population. Barring a few <a href="https://www.stats.govt.nz/news/one-third-of-people-who-identify-as-lgbt-plus-hold-a-bachelors-degree-or-higher/">nationally representative surveys</a>, there aren’t many sources of economic data that allow identification of individuals belonging to the Rainbow+ community.</p>
<p>To address this information gap, we used various administrative data sets in Stats NZ’s <a href="https://www.stats.govt.nz/integrated-data/integrated-data-infrastructure/">Integrated Data Infrastructure</a>. Specifically, we used data from the 2013 and 2018 Censuses, which included a household roster with detailed information on relationships among individuals. </p>
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Read more:
<a href="https://theconversation.com/we-asked-same-gender-couples-how-they-share-the-mental-load-at-home-the-results-might-surprise-you-208667">We asked same-gender couples how they share the 'mental load' at home. The results might surprise you</a>
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<p>This allowed us to identify households with two adults of the same sex, where the second adult is described as the spouse or de-facto partner of the person completing the forms. We compared this with individuals in different-sex relationships (as opposed to heterosexual, as some partners may identify as bisexual). </p>
<p>Additionally, our analysis focused on full-time working adults aged between 25 and 64, who were unlikely to be pursuing further education during the period of our analysis.</p>
<h2>Earning profile by sexual orientation</h2>
<p>We linked our sample to the Inland Revenue’s individual tax records, which have detailed information on labour market earnings. </p>
<p>Individuals in same-sex couples appeared to be younger, more likely to have a bachelor’s degree, more likely to live in the urban areas of Auckland or Wellington, and less likely to be married than individuals in different-sex couples. We accounted for these differences in our main analysis.</p>
<p>We found that women in same-sex couples earn 6-7% more than similarly situated women in different-sex couples. For men, the opposite pattern emerged. Men in same-sex couples earned significantly less than otherwise similar men in different-sex couples by an average difference of 6-7%.</p>
<p>We also looked into different sub-groups, such as the marital status of the couple, the duration of cohabitation, or the location of residence and so on. </p>
<p>Importantly, there was no meaningful change in the earnings differences from 2013 to 2018, despite continued improvement in societal attitudes toward sexual minorities. </p>
<p>We also found the earnings differences were larger for married individuals than for people in de-facto relationships for both men and women in same-sex couples. </p>
<p>The earnings differences were smaller for younger individuals (under 45 years old) for both men and women in same-sex couples, compared to their counterparts in different-sex couples. The earnings deficit for men in same-sex couples was also significantly smaller in major cities like Auckland and Wellington, than in the rest of the country.</p>
<h2>Gaps in the data</h2>
<p>The gaps in available data mean our study has some limitations. Firstly, we do not have direct information about people’s sexual orientation. </p>
<p>Also, we were unable to identify single or non-partnered sexual minorities whose labour market experiences may differ. Hopefully, results from the 2023 Census will provide new insights. For the first time, this year’s census included questions about gender and sexual identity.</p>
<p>Finally, the data used to identify same-sex couples depends on individuals reporting they are in a same-sex romantic relationship, which may be under-reported due to stigma.</p>
<h2>The road ahead</h2>
<p>Empirical research documenting the wellbeing of Aotearoa’s LGBTQ+ population is important from a policy perspective. For example, there is <a href="https://static1.squarespace.com/static/5bdbb75ccef37259122e59aa/t/629e7d2d64349d3b11b08919/1654553906843/Same+and+Multiple+Sex+Attracted_030622.pdf">ample evidence</a> of significant disparities in the mental health and wellbeing of Aotearoa’s Rainbow+ youth. There have been <a href="https://www.stats.govt.nz/news/2023-census-first-to-collect-gender-and-sexual-identity-from-everyone-in-aotearoa-new-zealand/">recent efforts</a> to address the common data-related challenges that will help inform these policies. </p>
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Read more:
<a href="https://theconversation.com/how-parenthood-continues-to-cost-women-more-than-men-97243">How parenthood continues to cost women more than men</a>
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<p>Our study is part of a much wider ongoing international collaboration with the <a href="https://www.vanderbilt.edu/lgbtq-policy-lab/">LGBTQ+ Policy Lab</a> at Vanderbilt University. </p>
<p>The aim is to understand the experiences and life outcomes of individuals belonging to the Rainbow+ community. We hope to develop a knowledge base that taps into the social, economic, physical and mental wellbeing of sexual and gender minorities in Aotearoa New Zealand. </p>
<p>Understanding the experiences of this community will help us build on the progress of the past two decades to create a more inclusive Aotearoa New Zealand.</p><img src="https://counter.theconversation.com/content/218507/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Plum received funding from the Health Research Council (HRC). </span></em></p><p class="fine-print"><em><span>The views here are the authors' own and do not reflect those of the Federal Reserve Board of Governors, Federal
Reserve System, or Statistics New Zealand.</span></em></p>Why do gay men generally earn less than heterosexual men, and lesbian women more than heterosexual women? New research aims to find out why, and how LGBTQ+ inclusivity can be improved.Alexander Plum, Senior Research Fellow in Applied Labour Economics, Auckland University of TechnologyKabir Dasgupta, Research associate, Auckland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2153892023-10-19T13:18:25Z2023-10-19T13:18:25ZFootball and big money: what some professional players in Ghana told us about handling their finances<p>Footballers are among the best paid sportsmen in most parts of the world. </p>
<p>The unfortunate reality, however, is that the retirement <a href="https://www.theghanareport.com/top-5-players-who-went-broke-after-making-millions-in-football/">experiences</a> of many former professional footballers have been awful. Within the sports media landscape, there have been <a href="https://www.moneynest.co.uk/bankrupt-footballers/">reported cases</a> of once-wealthy footballers who have gone bankrupt soon upon retirement. Notable examples in Ghana are former Black Stars players Sammy Adjei, John Naawu, Joe Odoi, Prince Addu Poku and Amusa Gbadamoshie. </p>
<p>According to some <a href="https://scholar.google.com/scholar?output=instlink&q=info:0Ha1K3SHR4kJ:scholar.google.com/&hl=en&as_sdt=0,5&scillfp=13443085754161180526&oi=lle">academics</a> this unfortunate situation stems in part from the fact that the danger of falling into a professional void is high. This is because, like most sports, football confers skills that are not easily transferable to non-sporting occupations. The availability of jobs in football is also very limited. So most footballers earn a very high income during their active career period and face a high degree of income uncertainty upon retirement.</p>
<p>The lifestyle of footballers (during the active playing period and upon retirement) has also been highlighted by several <a href="https://scholar.google.com/scholar?output=instlink&q=info:cxNwMuOE4DsJ:scholar.google.com/&hl=en&as_sdt=0,5&scillfp=5439326496234156066&oi=lle">reports</a> as a key driver of the financial mess that some footballers have got themselves into. </p>
<p>Again, there have been reported cases of footballers engaging in irresponsible financial behaviour. Examples include gambling, spending on luxurious brands, lavish parties and generally maintaining an expensive and unsustainable lifestyle. A lack of financial knowledge has often been associated with this kind of financial behaviour.</p>
<p>I am a <a href="https://ugbs.ug.edu.gh/ugbsfaculty/profile-faculty_member/godfred-matthew-yaw">professor</a> of accounting who, with others, has conducted a <a href="https://www.tandfonline.com/doi/pdf/10.1080/23750472.2023.2248150">study</a> to investigate the level of financial literacy of professional footballers in Ghana and ascertain its impact on their financial behaviour and financial wellbeing. </p>
<p>We found low levels of financial literacy, and poor financial behaviour, among footballers. The results suggest that to promote responsible financial behaviour among footballers, enhancing their financial literacy is key. We found very strong support for the argument that responsible financial behaviour, proxied in this study by savings and investment behaviour, is key to attaining financial wellness in life.</p>
<h2>The study design</h2>
<p>Financial literacy has been described as the ability to use the needed knowledge and skills to manage one’s financial resources effectively to improve welfare in the future. </p>
<p>Financial behaviour, on the other hand, can be <a href="https://www.grin.com/document/934971">described</a> as the “ability to regulate planning, budgeting, checking, managing, controlling, searching and storing daily funds”. It covers spending and saving habits, borrowing patterns, budgeting and access to financial products. </p>
<p>Using questionnaires, we surveyed 300 footballers who competed in the 2020 Ghana Premier League.</p>
<p>The questionnaire had two sections: one on the demographic details of the respondents; the other on their financial literacy, financial behaviours and financial wellbeing.</p>
<p>Currently, the Ghana Premier League has 18 registered clubs. At the time of the study, these clubs employed 480 registered footballers. Compared with clubs in Europe, England, Asia and even many other parts of Africa, the net worth of Ghanaian clubs is very <a href="https://www.fifa.com/en/media-releases/fifa-publishes-global-transfer-report-2021">low</a>. Revenues from international transfers – an important funding source for most Ghanaian clubs – have been very low over the years. For instance, the Federation of International Football Associations (FIFA) in its 2021 report on international transfers <a href="https://www.fifa.com/en/media-releases/fifa-publishes-global-transfer-report-2021">recorded</a> that Ghanaian football clubs together made a net profit of only US$50 million in the last decade.</p>
<h2>Footballers’ finances</h2>
<p>Our study revealed that the population of footballers was largely youthful. Nearly 90% were 30 years old or below, which is similar to footballers in other countries. This is expected as footballers are mostly active in their prime years. About 86% had some form of education, mainly up to senior high school level. The majority of the respondents were married and close to 58% of them had three or more dependants aside from their nuclear family. Thus, most of the footballers were providers for families although 39% said they lived with their parents or friends. On average, these footballers earned GHS2,000 net monthly income (US$177 at the time of the study), which, compared to other professionals, is low. </p>
<p>Overall, we found that the footballers had a low level of financial literacy. They ranked setting of long-term goals high but their interest in seeking financial knowledge was very low. It was therefore not surprising that most of the footballers seemed uncertain about where their money was spent.</p>
<p>We found that the footballers, generally, did not exhibit responsible financial behaviour. Very few had any interest in products such as bonds, stocks, mutual funds and insurance policies. But they seemed diligent in comparing prices when purchasing a product or service in a shop.</p>
<p>Interestingly, footballers were optimistic about their financial wellbeing. Most of those surveyed were confident in their capacity to meet current financial needs, had a very positive outlook on their future financing needs and made choices to enjoy life. The average footballer is always hopeful of securing lucrative contracts in future. </p>
<h2>Better performance</h2>
<p>Efforts to enhance the financial wellbeing of footballers can begin with investing in training programmes to make them financially literate. Second, football clubs can engage financial coaches to provide practical guidance to players during their active playing days to help shape their financial behaviour. </p>
<p>Given that financial wellbeing is closely <a href="https://www.emerald.com/insight/content/doi/10.1108/JHASS-05-2021-0101/full/pdf">associated</a> with psychological wellbeing, such initiatives could have a positive effect on the performance of players on the field.</p><img src="https://counter.theconversation.com/content/215389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Godfred Matthew Yaw Owusu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Most Ghanaian footballers have poor levels of financial literacy and financial behaviour.Godfred Matthew Yaw Owusu, Professor of Accounting, University of GhanaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1832562022-12-05T16:32:15Z2022-12-05T16:32:15ZWhy married mothers end up doing more housework when they start out-earning their husbands<figure><img src="https://images.theconversation.com/files/497407/original/file-20221125-3308-1oz66i.jpg?ixlib=rb-1.1.0&rect=593%2C0%2C6116%2C4355&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/lazy-husband-sitting-couch-using-phone-1779932177">Shutterstock/ronstik</a></span></figcaption></figure><p>The idea of a male “breadwinner” in married heterosexual couples might seem old fashioned. But as a social construct, the view that a husband’s primary role is to earn money has proved to be exceptionally durable. </p>
<p>Research shows that in many countries there is still a <a href="https://journals.sagepub.com/doi/full/10.1177/00031224211012442">strong expectation</a> that men will be the main income provider in the family – and that perceptions of masculinity are linked to this being the case. </p>
<p>So what happens when a woman earns more money than her husband? <a href="https://www.journals.uchicago.edu/doi/full/10.1086/378341">Studies indicate</a> that couples which move away from the traditional role of a male breadwinner may be seen (by themselves and others) as deviating from the norm. And as this has become more common over recent decades, a theory has emerged that these couples seek to adjust their domestic roles to compensate. </p>
<p>Known as “<a href="https://www.utpjournals.press/doi/abs/10.3138/jcfs.44.3.311">gender deviance neutralisation</a>”, it suggests that when the man earns less than the woman, couples respond to their “non-traditional” income arrangement by becoming decidedly more traditional about who does what in terms of housework. Put simply, higher earning wives end up doing more of the chores.</p>
<p>This is the opposite of what <a href="https://www.britannica.com/topic/economic-rationality">rational economic theories</a> predict, that the partner with lower earning potential will focus more on domestic chores to maximise the overall household standard of living. </p>
<p>So we have two established – and competing – ideas about what happens when wives earn more than their husbands. This is further complicated by a lack of empirical consensus when these theories have been tested using household data on income and time use. </p>
<p>But <a href="https://researchportal.bath.ac.uk/en/publications/gendered-housework-spousal-relative-income-parenthood-and-traditi">my research</a> now reveals a key factor when it comes to which theory better applies to housework division and the effect of different earning levels within a couple. And that factor is parenthood.</p>
<p>As most parents will recognise, the birth of a child increases both the domestic workload and the pressure on household income. Babies bring joy, but also a considerable amount of work and expense.</p>
<p>And surprisingly, it is the first of the theories (as wives earn more they also start doing more of the housework) which better describes the time spent on housework – excluding childcare – when a couple become parents. </p>
<h2>Domestic bliss</h2>
<p>Children have a significant impact on how their parents deal with time, money and chores. According to one <a href="https://ifstudies.org/blog/what-couples-with-children-argue-about-most">study</a>, the most common area of contention among couples with children is precisely the division of domestic duties and responsibilities. It goes on to suggest that this is primarily due to the clash between the traditional division of labour along gender lines and the modern reality of working mothers often earning more than their male partners do. </p>
<p>But while parenthood could theoretically lead to a more efficient division of labour, in my research I found it crystallised that traditional gendered separation. </p>
<p>Using data gathered over 18 years from over 6,000 dual-income heterosexual couples in the US by the <a href="https://psidonline.isr.umich.edu/">Panel Study of Income Dynamics</a>, I examined the impact of having children on the relationship between how much time both partners spent on housework, and the difference in income between them. </p>
<p>When it came to domestic arrangements, parents showed a marked tendency towards gender deviance neutralisation. For childless couples, the division of housework wasn’t related to how much each partner earned.</p>
<p>In fact, these effects are so sizeable that as a mother’s relative income increases, so too does her share of the housework.</p>
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<img alt="Woman with baby in sling chops vegetables." src="https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&rect=83%2C66%2C5476%2C3625&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/496179/original/file-20221118-9492-hzn3fw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Hands full.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-mother-baby-boy-doing-housework-744572824">Shutterstock/Ground Picture</a></span>
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<p>The striking result of this study was that the woman taking on more of the housework happens not when wives out-earn husbands, but when mothers out-earn fathers. This is not necessarily an intuitive result, as you might expect that the increased financial and domestic demands that come with having children would lead to an efficient, and not necessarily gendered, division. Specifically, for a wife who earns more than her husband, taking on more domestic duties as well after becoming a mother may not maximise the household’s quality of life.</p>
<p>How couples divide the increased domestic workload after becoming parents is an important factor in the earning inequality between women and men <a href="https://www.jstor.org/stable/3069609">over their lifetimes</a>. A pattern once settled upon is often difficult to renegotiate, and even wives who initially earn more than their husbands could see a long-term reduction in their future earnings potential. </p>
<p>And through passing on norms and beliefs to the next generation, these couples’ children may well repeat them as adults. One expectation of the “gender revolution” of the 1960s and 70s was that women’s increased presence in the workplace and earning potential would be accompanied by men’s greater participation in domestic activities. But my research suggests that many parents still have a long way to go.</p><img src="https://counter.theconversation.com/content/183256/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joanna Syrda does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New research suggests parenthood strengthens a ‘traditional’ approach to home life.Joanna Syrda, Assistant Professor in Business Economics, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1943212022-12-05T12:28:35Z2022-12-05T12:28:35ZWhy you’re less likely to get rich these days if your parents aren’t already wealthy<figure><img src="https://images.theconversation.com/files/497414/original/file-20221125-34343-wo3crj.jpg?ixlib=rb-1.1.0&rect=17%2C17%2C5971%2C3968&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Younger generations are finding it harder to meet traditional financial milestones.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stressed-financial-owe-asian-young-couple-2149463023">Kmpzzz / Shutterstock</a></span></figcaption></figure><p>Improvements in living standards over generations have been taken for granted in recent history, but these days young people are looking worse off than their parents in one major area: wealth.</p>
<p>Income and wealth have evolved at very different rates in the UK in recent decades, mostly due to sky-rocketing house prices. As a result, millenials and those in younger age groups are much less likely to be on the property ladder by their thirties than their parents. This has significantly restricted younger people’s prospects for future social mobility.</p>
<p>The last 60 years have seen large increases in income inequality in the UK, but most of this change occurred in the 1980s, and on most measures income inequality has been relatively steady over the three decades since. House prices and other assets have been growing in value for decades, but this has benefited all property owners and so inequalities in the relative amounts of wealth held by rich and poor have not changed drastically as a result.</p>
<p>But, as recent findings from the <a href="https://ifs.org.uk/inequality/trends-in-income-and-wealth-inequalities/">Institute for Fiscal Studies Deaton Review of Inequality</a> show, the key change in economic inequality in the UK has been the rising importance of wealth relative to income. This has significantly shifted the balance of economic power between the generations.</p>
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<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series about issues affecting those of us in our twenties and thirties. From the challenges of beginning a career and taking care of our mental health, to the excitement of starting a family, adopting a pet or just making friends as an adult. The articles in this series explore the questions and bring answers as we navigate this turbulent period of life.</em></p>
<p><em>You may be interested in:</em></p>
<p><em><a href="https://theconversation.com/the-last-two-recessions-hit-young-people-hardest-heres-how-you-can-protect-yourself-for-the-next-one-184783?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">The last two recessions hit young people hardest – here’s how you can protect yourself for the next one</a></em></p>
<p><em><a href="https://theconversation.com/entrepreneurs-know-that-failure-is-sometimes-necessary-heres-what-we-can-learn-from-them-192438?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Entrepreneurs know that failure is sometimes necessary – here’s what we can learn from them</a></em></p>
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<hr>
<p>Since 1995, average house prices in the UK have risen from £56,000 to over <a href="https://landregistry.data.gov.uk/app/ukhpi">£290,000</a> by August 2022. This huge growth (which went into a temporary reverse after the 2008 global financial crisis) has far outpaced general price inflation. The price of other assets, such as equities, has also risen during this time, boosted in part by a period of <a href="https://www.bankofengland.co.uk/boeapps/database/fromshowcolumns.asp?Travel=NIxAZxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=2007&TD=31&TM=Dec&TY=2022&FNY=Y&CSVF=TT&html.x=66&html.y=26&SeriesCodes=CFMHSDE&UsingCodes=Y&Filter=N&title=CFMHSDE&VPD=Y">very low interest rates</a> over the last decade. This has allowed large proportions of the population to build up significant wealth because around 65% of UK households are homeowners.</p>
<p>On the other hand, a sizeable minority of the population – those that do not own property or other assets – has almost no wealth at all, and will have gained nothing from this period of huge wealth accumulation. As a result, even though the proportion of wealth owned by richer people hasn’t changed much, the size of the gap between the haves and the have-nots has grown.</p>
<h2>Earnings have stagnated</h2>
<p>But while wealth has soared, earnings from work have stagnated since the Great Recession of 2008. The average worker’s real (inflation-adjusted) earnings haven’t increased at all during this time, which means their nominal earnings (not adjusted for inflation) have not risen any more than prices. Total household disposable income has also grown slowly, which makes it harder for people to become more wealthy by earning and saving. </p>
<p>The gap between the middle and the top of this wealth distribution grew from 10 years’ worth of earnings to almost 16 years in the decade after 2008, making it harder to climb the wealth ladder. And even before that, earnings were growing more slowly than house prices. Since the mid 1990s, average earnings (adjusted for inflation) grew by around 37%, while average house prices grew by 188%, meaning they almost tripled in value.</p>
<p><strong>The growing gap between earnings and house prices</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Line graph showing the growing gap between earnings and house price growth. Fairly steady earnings growth since April 1995 versus rising average house prices." src="https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=341&fit=crop&dpr=1 600w, https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=341&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=341&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=428&fit=crop&dpr=1 754w, https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=428&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/498247/original/file-20221130-14-q5rw62.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=428&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Author’s chart using land registry data and ONS average weekly earnings series. Earnings and house prices have been adjusted for inflation.</span>
<span class="attribution"><span class="source">Land Registry, ONS</span></span>
</figcaption>
</figure>
<p>This means that saving for a deposit and earning enough to qualify for a mortgage has become much harder for recent generations, for reasons unrelated to <a href="https://www.theguardian.com/lifeandstyle/2017/may/15/australian-millionaire-millennials-avocado-toast-house">excessive consumption of avocado on toast</a>. More than 60% of those born in the 1950s and 1960s were homeowners by age 30, but only 36% of those born in the 1980s were.</p>
<h2>Addressing the wealth gap</h2>
<p>The combination of rising wealth and stagnating and unequal incomes means older people own increasingly larger shares of wealth, threatening the historic pattern of each generation being financially better off (on average) than the last. Younger generations must rely more on inherited wealth, rather than climbing the wealth ladder with their own earnings. This puts those whose parents and grandparents have little wealth to pass on at an increasing disadvantage. It also risks creating a crisis of worsening social mobility.</p>
<p>The need to tackle inequalities in income and wealth has been <a href="https://ifs.org.uk/articles/have-poor-got-poorer-under-labour">a key dividing line</a> in British politics in recent years, both <a href="https://progressiveeconomyforum.com/blog/new-labour-inequality-and-the-1/">within</a> and between the <a href="https://www.ft.com/content/b017ae0c-36ba-11ea-ac3c-f68c10993b04">main parties</a>. But people are likely to find these income and wealth inequalities far more worrying as they become more entrenched and start to threaten <a href="https://www.britannica.com/topic/social-mobility">social mobility</a>.</p>
<p>The economic outlook has become increasingly uncertain. Without fundamental improvements to <a href="https://ifs.org.uk/articles/productivity-problem">productivity</a> to facilitate greater earnings growth, and an increase in the <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-7671/">supply of housing</a>, it is difficult to see the recent trends of a growing wealth gap and stagnating incomes coming undone any time soon.</p><img src="https://counter.theconversation.com/content/194321/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Wernham works for the Institute for Fiscal Studies. </span></em></p>Owning a home by age 30 is increasingly a distant dream thanks to a growing generational wealth gap.Tom Wernham, Research Economist, Institute for Fiscal StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1866112022-08-12T15:21:58Z2022-08-12T15:21:58ZHow to fix the pensions triple lock but still protect pensioners from high inflation<figure><img src="https://images.theconversation.com/files/478044/original/file-20220808-12-2l3tdk.jpg?ixlib=rb-1.1.0&rect=47%2C20%2C4457%2C3174&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The triple lock increases some benefits payments by inflation, earnings or 2.5%, whichever is highest.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/three-woman-hands-different-keys-try-2171072465">Max_Z / Shutterstock</a></span></figcaption></figure><p>Plans to increase state pension payments in line with inflation have been reinstated by the UK government and are supported by <a href="https://www.bbc.co.uk/news/uk-politics-61894368">both</a> of the <a href="https://www.express.co.uk/finance/personalfinance/1649693/state-pension-payment-liz-truss-triple-lock-leadership-election">contenders</a> for the Conservative party leadership.
But even if inflation was not always at the <a href="https://www.itv.com/news/2022-07-20/inflation-hits-new-40-year-high-at-94#:%7E:text=Weather-,Inflation%20hits%20new%2040%2Dyear%20high%20at%209.4,amid%20cost%2Dof%2Dliving%20squeeze">40-year high</a> we are currently seeing, a more sustainable way of calculating pensioners’ state income is needed.</p>
<p>The pensions triple lock was first introduced in the June 2010 budget.
It means annual increases in payments are made in line with the highest out of earnings growth (<a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/july2022">6.2%</a> as of May 2022), price inflation (currently <a href="https://www.bankofengland.co.uk/monetary-policy/inflation">9.4%</a>) or 2.5%. </p>
<p>The triple lock was <a href="https://www.bbc.co.uk/news/business-58476547">suspended</a> for one year in April 2022 as the end of the COVID-19 furlough scheme inflated average earnings growth. The government is now <a href="https://www.ftadviser.com/pensions/2022/05/26/sunak-confirms-return-of-triple-lock-next-year/">bringing it back</a> in time for the annual update in pension and other state payments, which will come into effect in April 2023. The annual increase will be set by the government in the autumn. With inflation high and rising (the Bank of England expects it to reach <a href="https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/august-2022">13% by October</a>), it will be the measure used for the increase.</p>
<p>Inflation of more than 10% will see the value of a full basic state pension climb past £155 a week, while that of the new state pension – available to those reaching the state pension age since April 2016 – will increase to more than £200 a week. Since earnings are currently growing less quickly than inflation, a rise in pension income will be greater than any increase in average earnings. In other words, people receiving state pension payments will typically see stronger income growth than those relying on earned income. </p>
<p>As a result, the current period of higher growth in prices than in earnings has brought the triple lock into question. This is because it protects the value of state pensions when earnings growth is weak (as it is now) but will also continue to increase with any subsequent recovery in earnings.</p>
<p>A <a href="https://obr.uk/frs/fiscal-risks-and-sustainability-july-2022/">recent report</a> from the Office for Budget Responsibility (OBR) shows why this approach is unsustainable. While inflation is spiking at the moment, the OBR believes it will average 2% over the long term and that average earnings growth will be around 3.8%. But it also thinks the triple lock will imply an average annual increase of 4.3% for pensions. This is because of volatility in the two sets of figures: while often earnings will grow faster than prices, on occasion that is not the case.</p>
<h2>Unexpected expense</h2>
<p>As such, maintaining the triple lock would see the value of the basic state pension and new state pension continue to grow faster than average earnings, pushing up government spending on state pensions. Overall, the OBR report projects that state pension spending will increase from 4.8% of national income in 2021–2022 to 8.1% in 50 years time, an increase of 3.2% of national income, which is equivalent to more than £80 billion a year in today’s terms. This is despite further rises in the state pension age. And the use of the triple lock will be a key driver of this increase, not average earnings growth. </p>
<p>When the triple lock was first introduced in the <a href="https://www.theguardian.com/uk/2010/jun/22/emergency-budget-full-speech-text#:%7E:text=by%20our%20new-,triple%20lock,-which%20will%20guarantee">June 2010 Budget</a> it was not expected to be this expensive. If the triple lock had been used over the 19 years prior to its launch, from 1991 to 2009, it would only have been more generous than increases in line with average earnings growth on three occasions. And so, overall, it would have caused state pension increases averaging just 0.1% a year more than if it was calculated using average earnings indexation. </p>
<p>In contrast, over the 12 years from 2010 to 2021, since the policy was first implemented, triple lock indexation would have been more generous than average earnings indexation on eight occasions, according to my calculations based on ONS figures. This would have caused state pension increases averaging 1% a year faster than average earnings indexation.</p>
<p>As such, the triple lock has already been significantly more expensive than
expected. It was initially estimated to have cost £450 million in 2014–15, but subsequent <a href="https://obr.uk/wtr/welfare-trends-report-june-2015/">OBR analysis</a> suggests that it actually cost six times more – or £2.9 billion. This is clearly not sustainable, particularly amid the current economic downturn. </p>
<figure class="align-center ">
<img alt="Older man at laptop with phone" src="https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/478046/original/file-20220808-20-g0rcqf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">There are more sustainable ways to calculate state pension payments in the current economic environment.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/old-african-american-man-sitting-his-2080766281">astarot / Shutterstock</a></span>
</figcaption>
</figure>
<h2>Finding more sustainable solutions</h2>
<p>One solution put forward in the Conservatives’ 2017 general election manifesto was to move to a <a href="https://ucrel.lancs.ac.uk/wmatrix/ukmanifestos2017/localpdf/Conservatives.pdf">double lock</a>, where the pension would increase by the greater of growth in prices or earnings. So the 2.5% underpin would no longer exist. In recent years inflation has been greater than earnings or 2.5%, and sometimes both earnings and inflation have been below 2.5%. So the triple lock has been more generous than earnings indexation, and a double lock would also have been more generous than earnings indexation (but not as generous as a triple lock). </p>
<p>But over the period from 2010 to 2021, a double lock still would still have seen the state pension increase by an average of 0.7% a year more than average earnings growth, according to my calculations. So while it would not be as expensive as the triple lock, it’s still not fiscally sustainable over the longer term. </p>
<p>Another option is to move to directly link pensions to average earnings. This was <a href="https://www.legislation.gov.uk/ukpga/2007/22/contents">legislated</a> by the Labour government in 2007 following the recommendations of the Pensions Commission. Such a policy could be fiscally sustainable over the long term, if implemented alongside state pension age increases due to rising longevity. But it would mean that in periods where earnings growth was running below inflation (such as now) there would be a real squeeze on pensioners’ incomes. </p>
<p>There is an alternative that would both be as generous as (but not more generous than) earnings indexation over the long term, but that would also preserve the real (inflation-adjusted) value of state pensions in years in which earnings were not keeping pace with prices. Instead of a triple lock, the government could set a target level for the state pension relative to average earnings – let’s say that pensions should be worth 25% of average earnings every year. If this target was 10% more than current pension payments, for example, the government could set a longer-term strategy for meeting that target by increasing payments in smaller annual increments. If prices grow faster than earnings one year, the government could make pension payments price-indexed and then adjust in subsequent years to remain on track for the target, if needed.</p>
<p>This would preserve the real value of state pensions without locking in unsustainable increases at times when earnings are growing faster than prices (as happens under a triple or double lock). It would protect pensioners from inflation while following a target. For whoever ends up being chancellor in the autumn, this could be a way to help improve long-term public finances.</p><img src="https://counter.theconversation.com/content/186611/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>
The support of the Economic and Social Research Council (ESRC) is gratefully acknowledged (grant reference ES/W001594/1), as co-funding from the Centre for the Microeconomic Analysis of Public Policy (ES/T014334/1) at the Institute for Fiscal Studies.
Over the last three years, I have also received research grants from the following parties, who may be interested in the topic and findings but who have had no material interest in this work nor any engagement with it:
• Centre for Ageing Better
• Department for Work and Pensions
• Social Security Administration
• Nuffield Foundation
• As part of a consortium of funders of research into retirement and savings: Age UK, Aviva UK, Association of British Insurers, Association of Consulting Actuaries, Canada Life, Chartered Insurance Institute, Department for Work and Pensions, Interactive Investor, Investment Association, Legal and General Investment Management, Money and Pensions Service, and Pensions and Lifetime Savings Association.
I am Deputy Director at the Institute for Fiscal Studies. In addition I am a member of the Social Security Advisory Committee and of the advisory panel of the Office for Budget Responsibility.</span></em></p>The reintroduction of the pensions triple lock means the increase in weekly payments could vastly outpace earnings growthCarl Emmerson, Deputy Director, Institute for Fiscal StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762892022-03-24T14:11:49Z2022-03-24T14:11:49ZFour ways pensions still fail to support staff who are young, low paid and part time<figure><img src="https://images.theconversation.com/files/454132/original/file-20220324-13-2u2jms.jpg?ixlib=rb-1.1.0&rect=93%2C79%2C4712%2C3004&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/UZe35tk5UoA">Unsplash/Helena Lopes</a></span></figcaption></figure><p>Financial advisers often say it’s never too early to start thinking about your pension. And with good reason. As recently as ten years ago, less than half of all UK employees were <a href="https://www.gov.uk/government/statistics/workplace-pension-participation-and-savings-trends-2009-to-2020/workplace-pension-participation-and-savings-trends-of-eligible-employees-2009-to-2020">saving</a> into a workplace scheme, leaving many at risk of poverty in retirement. </p>
<p>Then in 2012, <a href="https://www.gov.uk/government/news/what-is-auto-enrolment">automatic enrolment</a> was introduced. This meant employers were obliged to enrol eligible employees (aged over 22 and earning more than £10,000 a year) into a pension plan, with contributions from both sides. </p>
<p>Since then, pension savings have boomed, with 78% of employees (19.4 million people) actively saving in 2020, up from <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">47% in 2012</a>. </p>
<hr>
<figure class="align-right ">
<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><em>Working to make a difference in the world but struggling to save for a home. Trying to live sustainably while dealing with mental health issues. For those of us in our twenties and thirties, these are the kinds of problems we deal with every day. <strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series that explores those issues and comes up with solutions.</em></p>
<p><em>More articles:</em></p>
<p><em><a href="https://theconversation.com/would-you-bring-your-dog-to-a-shop-why-retailers-should-be-more-pet-friendly-178112?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Would you bring your dog to a shop? Why retailers should be more pet-friendly</a></em></p>
<p><em><a href="https://theconversation.com/news-of-war-can-impact-your-mental-health-heres-how-to-cope-178734?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">News of war can impact your mental health — here’s how to cope</a></em></p>
<p><em><a href="https://theconversation.com/body-image-issues-affect-close-to-40-of-men-but-many-dont-get-the-support-they-need-179046?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Body image issues affect close to 40% of men – but many don’t get the support they need</a></em></p>
<hr>
<p>But the vast majority of those new savers are still doing so at levels unlikely to provide an adequate income later in life. While income needs vary, <a href="https://www.gov.uk/government/publications/automatic-enrolment-review-2017-analytical-report">evidence suggests</a> that up to 12 million people are currently not saving enough for their retirement.</p>
<p>And because pension entitlements are accumulated through the workplace, they tend to mirror the continuing inequalities of the labour market. Here are four ways in which workplace pensions are not as fair as they could be.</p>
<h2>1. Earnings and status</h2>
<p>Many people are excluded from workplace pension saving because they do not meet the criteria for automatic enrolment. <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">Recent data</a> found that in 2020, full-time employees earning between £100 to £199 a week had the lowest workplace pension coverage at 41%, compared with 65% of those earning £200 to £299 a week. </p>
<figure class="align-center ">
<img alt="Child placing coin into a piggy bank." src="https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&rect=86%2C57%2C6293%2C4112&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453833/original/file-20220323-17-1e93c6i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Never too young to save.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kid-putting-coin-into-pink-piggy-2066780159">Shutterstock/fizkes</a></span>
</figcaption>
</figure>
<p>Overall, women, ethnic minority groups, people with disabilities, carers and service workers are less likely to have access to workplace pensions due to <a href="http://www.pensionspolicyinstitute.org.uk/uploaded/documents/Briefing%20Notes/201601-BN87-PhD1-Impact-of-Auto-Enrolment-as-at-2016-final.pdf">underemployment and low wages</a>.</p>
<p>Part-time employees were also disadvantaged compared to full-time workers, who were 1.5 times <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">more likely</a> to be part of a pension scheme. People with multiple part-time, low-paid jobs are likely to miss out on access to workplace pensions, even if they earn more than the £10,000 threshold in total. </p>
<h2>2. Costly breaks</h2>
<p>For most workplace pension savers, retirement income depends on the level of contributions made, as well as the investment returns over the lifetime of the pension. Not making regular contributions forgoes not just the amount in the pot, but the cumulative investment gains. </p>
<p>This means any breaks from work will have a significant affect on pension pot size at retirement. Research has found that not participating in a pension between the ages of 30 and 40 can reduce that pot <a href="https://www.pensionspolicyinstitute.org.uk/media/2168/20120209-ppi-closing-the-gap-report-for-napf.pdf">by up to 32%</a>. </p>
<p>Women are particularly affected. Not only do they take breaks to have children, but also a lack of affordable childcare often reduces their opportunities to return to work, which affects their eligibility for automatic enrolment. In 2019, almost 30% of mothers said they had reduced their working hours because of childcare, compared with just <a href="https://www.ons.gov.uk/releases/uklabourmarketnovember2019">5% of fathers</a>. </p>
<p>Even where they are eligible for automatic enrolment, many women opt out because of high childcare costs. <a href="https://doi.org/10.1080/17530350.2021.1927146">My research</a> argues for better financial solutions that account for all experiences of employment and caring responsibilities.</p>
<h2>3. Regressive tax relief</h2>
<p>Workplace pension savers benefit from tax relief on contributions made by themselves and their employer. They also benefit from a tax-free lump sum of up to a quarter of their pension pot. These tax breaks are widely held to be an incentive to encourage people to save. </p>
<p>But these forms of tax relief are regressive, as those with higher salaries benefit to a greater extent. About half of all tax relief on workplace pensions goes to those in the top 10% of earners; a tenth of that relief goes to <a href="http://doi.org/10.1017/S147474642000010X">the bottom 50%</a> of earners. </p>
<figure class="align-center ">
<img alt="Green shoots growing from small sack of coins." src="https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/453843/original/file-20220323-19-16ez28p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Unequal growth.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/coins-sack-small-plant-tree-pension-1451010170">Shutterstock/TimeShops</a></span>
</figcaption>
</figure>
<p>The tax regime for workplace pensions is effectively subsidising retirement security for those who are already well off. Given that the cost of foregone tax on workplace pensions is estimated to be worth over <a href="https://www.gov.uk/government/statistics/registered-pension-schemes-cost-of-tax-relief">£20 billion</a>, the money could be better targeted to those who need it. </p>
<h2>4. Challenges for young people</h2>
<p>As automatic enrolment only applies to people aged 22 and over, many young people are excluded from workplace pension saving. In 2020, <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2020provisionaland2019finalresults">only 20%</a> of those aged 16-21 had a workplace pension compared with 80% among those aged 22-29. </p>
<p>Despite the positive effect of automatic enrolment on participation rates among the 22-29 age group, the lack of defined benefit coverage among younger groups means they need to save more or save for longer than older groups to provide for an adequate retirement. Up to 36% of younger groups are thought to be <a href="https://www.gov.uk/government/publications/automatic-enrolment-review-2017-analytical-report">under-saving</a> for their retirement needs. </p>
<p><a href="https://doi.org/10.1080/17530350.2021.1927146">My research</a> shows that many young people decide to opt out of pension saving – or save at minimum levels – to focus on other essential financial goals such as paying off debts and bills or saving to buy a house. </p>
<p>Only after achieving these goals do they feel ready to invest in pensions. Yet again, certain groups are more likely to get to this point, usually when they are able to rely on family support (financial or otherwise). And because they are able to think about pensions earlier, they are also more likely to achieve an adequate income in retirement – projecting present-day inequalities into the future.</p><img src="https://counter.theconversation.com/content/176289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hayley James has received research funding from the Economic and Social Research Council (ESRC), the UK's leading research and training agency addressing economic and social concerns (grant number ES/J500094/1) and the Pensions Policy Institute, an educational, independent research organisation with a charitable objective to inform the policy debate on pensions and retirement income provision. </span></em></p>Savings are up, but inequality remains rife.Hayley Louise James, Postdoctoral Research Fellow, University College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1675522021-09-08T15:28:49Z2021-09-08T15:28:49ZNational insurance: a UK tax which is complex and vulnerable to political intervention<p>The UK government has <a href="https://www.bbc.co.uk/news/uk-politics-58476632">announced plans</a> to raise the rate of national insurance by 1.25% to fund increased spending on health and social care. The move has <a href="https://news.sky.com/story/pmqs-starmer-says-johnsons-national-insurance-hike-for-social-care-reform-will-see-care-workers-receive-tax-rise-but-no-pay-increase-12402081">divided opinion</a> – and also brought attention to a tax that is one of the largest in terms of treasury revenue (second only to income tax), but probably one of the least understood.</p>
<p>Introduced in 1911, the expansion of national insurance to its current position as a pillar of the UK tax system was in 1948, as part of the <a href="https://www.nationalarchives.gov.uk/films/1945to1951/filmpage_cmot.htm">creation of the welfare state</a>. Then, as now, it was a tax on working income, with contributions made by both employees and employers (the self-employed also make contributions at a different rate to employees). </p>
<p>Previously, employees received stamps in exchange for their contributions, which would entitle them to benefits when they were needed. Originally there was one stamp for health and pension benefits, and another for unemployment benefits, but from 1948 one stamp covered everything. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1435268292168531972"}"></div></p>
<p>Until 1975, the contribution was at a flat rate before it switched to being based on a percentage of earnings. The initial standard rate for employees was 6.5% but this has risen over time to the current rate of 12%, and will <a href="https://www.which.co.uk/news/2021/09/national-insurance-tax-to-be-hiked-by-1-25-to-fund-social-care-crisis-how-much-more-will-you-pay/">go up to 13.25%</a> in April 2022. The other major change in 1975 was the introduction of a system which saw the contribution deducted through the Pay As You Earn (PAYE) scheme, as it is today. </p>
<p>Subsequent overhauls of the welfare system have resulted in the link between contributions and benefits becoming less clear. So while national insurance contributions still count towards a person’s state pension for example, other benefits (including Universal Credit and Housing Benefit) can still be claimed by those who do not contribute. </p>
<p>Also, unlike the relative simplicity of income tax rates, the intricacies of the current national insurance system may be less established and understood. In 2011, even the then shadow chancellor Alan Johnson <a href="https://metro.co.uk/2011/01/10/alan-johnson-forgets-national-insurance-rate-live-on-sky-news-624519/">appeared unsure</a> of what the rate was during a TV interview. </p>
<p>This lack of clarity could have a significant effect on the public’s perception of NI as a part of their tax payments. It may appear to be needlessly complicated and totally unaligned with the income tax system, as shown in this graph.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/420016/original/file-20210908-25-1ltcqx.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Combined marginal rates.</span>
<span class="attribution"><span class="source">Institute of Fiscal Studies,</span></span>
</figcaption>
</figure>
<p>In a progressive tax system one would expect the marginal rate of deductions paid to gradually increase as earnings increase. Yet in reality, the marginal increases and decreases occur at seemingly arbitrary thresholds. </p>
<p>The complexity of the system badly affects its transparency and people’s understanding of what they are paying and why. It even arguably allows politicians to take advantage of this situation with tax changes by stealth. This occurred in 2001 when a Labour government pledged to not raise income taxes but <a href="http://news.bbc.co.uk/1/hi/uk_politics/1934690.stm">later increased</a> the national insurance rate from 10% to 11% in their post-election budget (again to fund the NHS). </p>
<p>A further increase was <a href="https://www.theguardian.com/politics/2010/apr/05/national-insurance-labour-tories">announced by Labour</a> in early 2010 to its current rate of 12%. Despite criticism of this proposal at the time from the Conservatives, they did not scrap the increase when they took power (with the Liberal Democrats) <a href="https://www.britannica.com/topic/British-general-election-of-2010">later that year</a>. </p>
<h2>Rates of change</h2>
<p>The combination of the weak link between contributions and benefits as well as the complexity of the national insurance system means that <a href="https://www.theguardian.com/money/2020/feb/22/a-truly-bold-chancellor-would-scrap-national-insurance-patrick-collinson">some analysts</a> believe it would be much simpler to combine income tax and national insurance into one direct tax. </p>
<p>The main argument is that it would simplify the tax system, making it easier for the public to understand, and more difficult to hide rate changes. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-national-insurance-is-and-where-it-goes-74387">What national insurance is – and where it goes</a>
</strong>
</em>
</p>
<hr>
<p>But the key obstacle to making this change would be how employers’ contributions would be collected. Introducing an employers’ tax may be one option, but would no doubt be controversial.</p>
<p>Other hurdles include working out how a new system could be implemented across the UK, as there are currently differences between the four nations. Certainly no government in recent times has shown any appetite for making such substantial changes. </p>
<p>But if controversies over this (or any future) government’s handing of national insurance continue, it may give the opposition party a chance to find favour among voters for promising simplification and reform.</p><img src="https://counter.theconversation.com/content/167552/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gavin Midgley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some economists think it should be replaced.Gavin Midgley, Senior Teaching Fellow in Accounting, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1664462021-08-20T13:40:09Z2021-08-20T13:40:09ZWomen may not be more pessimistic than men after all – why that matters for the gender pay gap<figure><img src="https://images.theconversation.com/files/417217/original/file-20210820-13-1r3zyjk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">'Who are you calling pessimistic?'</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/ybPJ47PMT_M">Clarke Sanders/Unsplash</a></span></figcaption></figure><p>We live in a world largely designed by men, <a href="https://www.evoke.org/articles/july-2019/data-driven/deep_dives/the-dangers-of-gender-bias-in-design?linkId=70880874">for men</a>, and according to a particular limited view of what it is to be a man. This has had a lot of unfair consequences, one of which is that women are paid less than men. It’s vital that we address this. </p>
<p>First we need to understand the causes of this inequality. Otherwise, a well-intentioned attempt to redress one inequality can exacerbate others. For example, <a href="https://www.journals.uchicago.edu/doi/pdf/10.1086/715835?casa_token=P3yiWvAiAtMAAAAA:0BRvpNiOjepxrHu-7e5Bi6Sb8Gh0Qcsq2GGm_Jgk2xoamCmQcF9hbJ93jfqEH2_NzZ_OgEjcPtwE">two recent</a> papers <a href="https://web.stanford.edu/%7Ediamondr/UberPayGap.pdf">analysed the</a> gender pay gap in terms of data from jobs that involve driving, where in many cases, men earn more. Neither paper found evidence to suggest that the employers were discriminating against the women. Instead, they explained the gap in terms of the choices and behaviours of the workers. </p>
<p>For instance, <a href="https://web.stanford.edu/%7Ediamondr/UberPayGap.pdf">male Uber drivers</a> were found to choose gigs closer to their current location, spend less time waiting for customers and drive faster than female drivers. <a href="https://www.journals.uchicago.edu/doi/pdf/10.1086/715835?casa_token=P3yiWvAiAtMAAAAA%3A0BRvpNiOjepxrHu-7e5Bi6Sb8Gh0Qcsq2GGm_Jgk2xoamCmQcF9hbJ93jfqEH2_NzZ_OgEjcPtwE&">Male transit drivers</a> were found to be more likely than females to choose to work antisocial shifts that pay a premium.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Male transit driver at night" src="https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417219/original/file-20210820-17-1ac1dug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Men are more likely to work the night shift.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/dK0Bjy7XwRI">Alexander Schimmeck/Unsplash</a></span>
</figcaption>
</figure>
<p>This means that a law requiring equal pay could be treating a symptom rather than the underlying problem. Additionally, a law to “level up” the take-home pay of female drivers would increase labour costs for the employers. All else being equal, this would reduce the number of drivers that these firms employ.</p>
<p>Society may decide that these costs are worth incurring to reduce the gender wage gap, but it is important to recognise the trade-off. In the example, reducing inequality in drivers’ pay could exacerbate other inequalities, such as reducing transport provision for those who cannot afford a car. </p>
<h2>Optimists vs pessimists</h2>
<p>This highlights the importance of understanding the root causes of why men and women make different choices at work. A follow-up question is whether there are any innate differences between men and women that would explain these choices. </p>
<p>Optimism is one candidate. <a href="https://www.tandfonline.com/doi/full/10.1080/00036846.2019.1610714?casa_token=QTorTePr3MkAAAAA%3AiIczFHtNqzHGVIgRclDNtfsKkjK_giRmUk1uMh_UP2HOQTXEox-HlK2ITjzA3pkjk2A97BKfp4FYUQ">Three</a> recent <a href="https://www.nzae.org.nz/wp-content/uploads/2011/08/nr1215387911.pdf">papers</a> claimed <a href="https://www.ingentaconnect.com/content/sbp/sbp/2010/00000038/00000001/art00006">that optimism</a> – defined as estimating a high likelihood of a positive outcome – was more prevalent among men than women. Men were found to be more positive than equivalent women regarding their expected <a href="https://www.timeshighereducation.com/news/males-more-optimistic-but-to-their-detriment/408208.article">college results</a> and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0272775711000598?casa_token=pnb4-WFZMeEAAAAA:7JBpvP7HED-m3zh9bOdgPqiEpjXCg0H8SygjCTqp9NjBljw7vz25RgZCE6TBXcClhBwOhf6m8bc">expected earnings</a>. They are also more likely than women to participate in the <a href="https://www.sciencedirect.com/science/article/pii/S0165176515004115?casa_token=5pv9G2I9Mm4AAAAA:MKeReyPcQVkJpY_OlCpyZ6VL4V23unPl-PmqawRXlfMYhs7B2eUTi0vLV0K-w42FBUWV7bwms-0">stock market</a> and <a href="https://link.springer.com/article/10.1007%252FBF02109939">betting</a>. And it has been reported that women in the <a href="https://read.dukeupress.edu/demography/article/45/1/95/170027/Using-subjective-expectations-to-forecast">US</a>, <a href="https://www.econstor.eu/handle/10419/200303">England</a>, <a href="https://www.sciencedirect.com/science/article/pii/S0165188915000512?casa_token=Lpwz3_koRmgAAAAA:paHSLdESdrkXFIfQUx-e8NJ4iHtibqNveDeSxkQRxAKU0g7bHhWoyMXMJ9waRnt6OWPNVflxyYg">Australia</a> and <a href="https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0229975">nine EU countries</a> underestimate their survival to a greater degree than men do. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two older women laughing on a bench" src="https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417221/original/file-20210820-19-vjxxm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Women live longer, but don’t expect to.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/PAGBeJrLiDA">Dario Valenzuela/Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>The relevance in relation to the gender gap is that higher levels of optimism predict higher <a href="https://journals.sagepub.com/doi/abs/10.1177/0149206307305562?casa_token=wC5TyJY0p4QAAAAA:BHaO_o0pxIJ9FFBWRwkvwwJ6Kb-KaaZlKgGa4BRrNKb55K-MNHOqRQgDmEI1S1JKa-6hqQDFFEKp2g">job performance</a>. Steve Jobs might represent an extreme example of this phenomenon. The “reality distortion field” of the former driving force behind Apple has <a href="https://jhargrave.medium.com/how-steve-jobs-created-the-reality-distortion-field-and-you-can-too-4ba87781adba">been described</a> by the writer and entrepreneur John Hargrave as “his personal refusal to accept limitations that stood in the way of his ideas, to convince himself that any difficulty was surmountable. This ‘field’ was so strong that he was able to convince others that they, too, could achieve the impossible.” </p>
<p>This phenomenon of optimistic beliefs that engender enthusiasm in oneself and others might explain the result of a <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1465-7295.2010.00295.x?casa_token=lzDFfs3RRm4AAAAA%3Au07G3M4M-aW8yyJnHuduFozKZheLnC2LKW_9J9mZTI5emrVPcy1xr_UHpt-IXg0P6PSwT--kTYKj_No">2012 experiment</a> that found that more optimistic leaders evoke better team performance. Groups showed greater cooperation if they were led by people who made more positive predictions about the outcome of the game.</p>
<h2>A different perspective</h2>
<p>But consider again the data invoked to support the claim that men are more optimistic than women. Each of those three recent papers that I referred to relied on data from surveys that asked men and women for predictions about the future state of the economy. </p>
<p>But men own a <a href="https://www.huffpost.com/entry/women-make-only-1-percent-wealth_n_969439">disproportionate</a> share of economic resources and hold a disproportionate number of <a href="https://www.fca.org.uk/insight/financial-services-senior-jobs-are-still-mostly-for-boys">finance jobs</a>. Their expectations about the economy probably draw on particular information. Differences in economic expectations might be explained by differences in information across men and women rather than anything innate.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Men gambling in a cafe" src="https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1000&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1000&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1000&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1257&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1257&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417220/original/file-20210820-21-136c6k0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1257&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Eyes down.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/UY_AihWLfm4">Laura Thonne/Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>The other ways in which men are supposedly more optimistic than women can also be called into question. Expectations about exam results and future earnings <em>might</em> measure optimism but might alternatively be explained as differences in self-confidence. As for men being more likely to participate in the stock-market or gamble, this might be because they have a greater appetite for risk. </p>
<p><a href="https://journals.co.za/doi/abs/10.4102/sajip.v46i0.1704">Self-confidence</a> and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0167268111001521?casa_token=ElGxhEPsTNYAAAAA:AEUKy_cbaCf8eKWDsZh1n9FD4fvqAiZiygcYM-rToqDLM2OSmH2nOfTUwl7Ps6eTJMybOaAQoBY">risk-taking</a> are indeed higher among males than females. But unlike optimism, both are often detrimental to workplace <a href="https://www.sciencedirect.com/science/article/pii/S1048984311000609?casa_token=BTRvsRLhBakAAAAA:tqZ-_zc9C7Gq0ngfhILqSOp9DdMaXed8jjKZNjG6tojo4CqiBd1Q3EBkx1A97D08hiZIUO1ATgE">productivity</a> – not to mention <a href="https://academic.oup.com/qje/article-abstract/116/1/261/1939000">profitability</a>.</p>
<p>But if all these supposed measures of optimism are arguably confusing it with different characteristics, how do we measure it? I would argue that the best evidence is data on how long men and women think they will live. After all, there is no reason to suspect that the average man has access to richer information regarding his own lifespan than the average woman. Additionally, we can compare survival beliefs against excellent objective data – statistics agencies do a thorough job of recording deaths.</p>
<p>But even in the domain of survival beliefs, <a href="http://journal.sjdm.org/21/210219/jdm210219.pdf">my research</a> shows that the purported higher optimism among males is illusory, stemming from a reporting bias. Survival beliefs are measured by asking respondents for the percentage chance they will live to some given age, such as 85. But a lot of people make mistakes when <a href="https://www.sciencedirect.com/science/article/pii/S0165176519301259?casa_token=zeqAkxYEIt4AAAAA:OP1qyEdnkONaG33PIE16mHBY9nlYZc5tnrPHUjoaCQOw0ujhJDLzfvoi9uDaoqOe5ka--P-Lm4M">reporting their beliefs</a> as a percentage chance. These mistakes are larger and more systematic as beliefs diverge from 50% towards 100%. </p>
<p>Because women on average live longer than men, they are being asked about events that are closer to 100% likely. As a result, females appear to under-report the true probability of their survival to a greater extent than do men. Once we account for the reporting bias, females and males are equally accurate in predicting their survival. In other words, men are not more optimistic than women after all. </p>
<p>So what to take from all this? Be optimistic. Gender differences in optimism seem illusory and, to that extent, there is one less excuse for women to be paid less than men.</p><img src="https://counter.theconversation.com/content/166446/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Comerford receives funding from UKRI for research on response to Covid-19. </span></em></p>Superior optimism is often given as the reason why men earn more than women.David Comerford, Senior Lecturer of Economics and Behavioural Science, University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1643822021-08-02T12:39:12Z2021-08-02T12:39:12Z4 ways extreme heat hurts the economy<figure><img src="https://images.theconversation.com/files/414001/original/file-20210730-19-1v35wkw.jpg?ixlib=rb-1.1.0&rect=307%2C0%2C4574%2C3249&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Corn yields can suffer in high heat. </span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/WholesalePrices/8c2c2c03df9f41298d1e7624bb1de30b/photo?Query=heat%20wave%20farm&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=101&currentItemNo=34">AP Photo/Seth Perlman</a></span></figcaption></figure><p>Summer 2021 <a href="https://weather.com/news/climate/news/2021-07-22-americas-hottest-summer-2021">will likely be one of the hottest on record</a> as dozens of cities in the West <a href="https://www.climate.gov/news-features/event-tracker/astounding-heat-obliterates-all-time-records-across-pacific-northwest">experience all-time high temperatures</a>. The extreme heat being felt throughout many parts of the U.S. is <a href="https://www.npr.org/2021/07/17/1016415960/as-extreme-heat-kills-hundreds-oregon-steps-up-push-to-protect-people">causing hundreds of deaths</a>, <a href="https://www.nytimes.com/live/2021/07/27/us/climate-change">sparking wildfires</a> and <a href="https://droughtmonitor.unl.edu">worsening drought conditions</a> in over a dozen states. </p>
<p>How does all this broiling heat affect the broader economy?</p>
<p>As an <a href="https://www.dereklemoine.com">economist who has studied</a> the <a href="http://scholar.google.com/citations?user=614D6AEAAAAJ">effects of weather and climate change</a>, I have examined a large body of work that links heat to economic outcomes. Here are four ways extreme heat hurts the economy – and a little good news. </p>
<h2>1. Growth takes a hit</h2>
<p>Research has found that extreme heat can directly hurt economic growth. </p>
<p>For example, a 2018 study found that the economies of U.S. states <a href="https://doi.org/10.1111/jmcb.12574">tend to grow at a slower pace</a> during relatively hot summers. The data shows that annual growth falls 0.15 to 0.25 percentage points for every 1 degree Fahrenheit that a state’s average summer temperature was above normal. </p>
<p>Laborers in weather-exposed industries such as construction <a href="https://doi.org/10.1086/671766">work fewer hours</a> when it’s hotter. But higher summer temperatures reduce growth in many industries that tend to involve indoor work, including retail, services and finance. Workers are less productive when it’s hotter out.</p>
<h2>2. Crop yields drop</h2>
<p>Agriculture is obviously exposed to weather: After all, crops grow outdoors. </p>
<p>While temperatures up to around 85 F to 90 F (29-32 C) can benefit crop growth, <a href="https://doi.org/10.1073/pnas.0906865106">yields fall sharply</a> when thermostats rise further. Some of the crops hit hard by extreme heat include corn, soybeans and cotton. These reductions in yields could be costly for U.S. agriculture.</p>
<p>For example, a recent study I conducted found that an additional 2 degrees Celsius of global warming <a href="https://www.nber.org/papers/w25008">would eliminate profits</a> from an average acre of farmland in the Eastern U.S. </p>
<p>A prominent example of this was the <a href="https://www.reuters.com/article/us-russia-heat-fires/russia-swelters-in-heatwave-many-crops-destroyed-idUSTRE66F2LX20100716">collapse of the Russian wheat harvest</a> in response to the country’s 2010 heat wave, which raised wheat prices throughout the world.</p>
<h2>3. Energy use soars</h2>
<p>Of course, when it’s hot, <a href="https://www.washingtonpost.com/posteverything/wp/2016/07/22/your-air-conditioner-is-making-the-heat-wave-worse/">energy use goes up</a> as <a href="https://www.eia.gov/todayinenergy/detail.php?id=48796">people and businesses run their air conditioners</a> and other cooling equipment at full blast. </p>
<p>A <a href="https://doi.org/10.1257/app.3.4.152">2011 study found</a> that just one extra day with temperatures above 90 F increases annual household energy use by 0.4%. <a href="https://doi.org/10.3386/w24397">More recent research</a> shows that energy use increases the most in places that tend to be hotter, probably because more households have air conditioning. </p>
<p>This increase in electricity use on hot days stresses electric grids right when people depend on them most, as seen in <a href="https://www.vox.com/2020/8/15/21370128/california-blackouts-rolling-power-outage">California</a> and <a href="https://www.nytimes.com/2021/06/15/climate/texas-heat-wave-electricity.html">Texas</a> during recent heat waves. Blackouts can be quite costly for the economy, as inventories of food and other goods can spoil and many businesses either have to run generators or shut down. For instance, the 2019 California blackouts <a href="https://www.energy.senate.gov/public/index.cfm/files/serve?File_id=93BBC3A5-E6FA-4053-A1A0-532A9714BFC4">cost an estimated $10 billion</a>. </p>
<h2>4. Education and earnings suffer</h2>
<p>A long-term impact of increasingly hotter weather involves how it affects children’s ability to learn – and thus their future earnings. </p>
<p>Research has shown that hot weather during the school year reduces test scores. <a href="https://doi.org/10.1086/694177">Math scores decrease more and more</a> as the temperature rises beyond 70 F (21 C). Reading scores are more resistant high temperatures, which this research claims is consistent with how different regions of the brain respond to heat.</p>
<p>One study suggested that students in schools that lack air conditioning <a href="https://doi.org/10.1257/pol.20180612">learn 1% less</a> for every 1 degree Fahrenheit increase in the school year’s average temperature. It also found that minority students are especially affected by hotter school years, as their schools are especially likely to lack air conditioning. </p>
<p>Lost learning results in <a href="https://doi.org/10.1016/S1573-4463(99)03011-4">lower lifetime earnings</a> and <a href="https://www.aeaweb.org/articles?id=10.1257/jel.39.4.1101">hurts future economic growth</a>.</p>
<p>The impact of extreme heat on development, in fact, begins before we’re even born. <a href="https://doi.org/10.1073/pnas.1702436114">Research has found</a> that adults who were exposed to extreme heat as fetuses <a href="https://doi.org/10.1016/j.jeem.2018.10.001">earn less during their lifetimes</a>. Each extra day with average temperature above 90 F (32 C) reduces earnings 30 years later <a href="https://doi.org/10.1073/pnas.1702436114">by 0.1%</a>. </p>
<h2>Air conditioning can help – to a point</h2>
<p>Air conditioning can offset some of these effects. </p>
<p>For example, studies have found that having a working air conditioner means <a href="https://doi.org/10.1086/684582">fewer people die</a>, <a href="https://doi.org/10.1257/pol.20180612">student learning isn’t compromised</a> and <a href="https://doi.org/10.1073/pnas.1702436114">extreme heat outside during pregnancy doesn’t hurt fetuses</a>. </p>
<p>Not everyone has air conditioning, however, especially in normally cooler areas like Oregon, Washington and Canada that have experienced unusually extreme temperatures this year. And many people <a href="https://www.wnyc.org/story/life-new-york-public-housing-no-air-conditioning/">can’t afford</a> to own or operate them. Survey data from 2017 found that <a href="https://www.eia.gov/todayinenergy/detail.php?id=31312">around half of homes in the Pacific Northwest</a>
lacked air conditioning. And <a href="https://doi.org/10.1257/pol.20180612">about 42% of U.S. classrooms</a> lack an air conditioner. </p>
<p>While heat waves are shown to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3892429">induce more households</a> to install air conditioning, it’s hardly a panacea. By 2100, higher use of air conditioning could <a href="https://www.pnas.org/content/112/19/5962.short">increase residential energy consumption by 83% globally</a>. If that energy comes from fossil fuels, it could end up amplifying the heat waves that caused the higher demand in the first place.</p>
<p>[<em>Over 100,000 readers rely on The Conversation’s newsletter to understand the world.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=100Ksignup">Sign up today</a>.]</p>
<p>And in the U.S. South, where air conditioning is omnipresent, hotter-than-usual summers <a href="https://doi.org/10.1111/jmcb.12574">take the greatest toll</a> on states’ economic growth.</p>
<p>In other words, as temperatures rise, economies will continue to suffer.</p><img src="https://counter.theconversation.com/content/164382/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Derek Lemoine does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Much of the US has been experiencing heat waves in recent weeks. An economist explains how the often record-high temperatures can affect the economy.Derek Lemoine, Associate Professor of Economics, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1631482021-07-21T11:33:21Z2021-07-21T11:33:21ZWhen companies massage the books, the environment takes a hit<figure><img src="https://images.theconversation.com/files/411918/original/file-20210719-15-13nmwff.jpg?ixlib=rb-1.1.0&rect=0%2C890%2C5000%2C2432&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A woman uses a scarf to cover her mouth to protect against air pollution as she walks on street in Beijing in 2016. </span> <span class="attribution"><span class="source"> (AP Photo/Andy Wong) </span></span></figcaption></figure><p><a href="https://www.investopedia.com/terms/e/earnings-management.asp">Managing earnings</a> involves the manipulation of financial reporting by publicly traded companies in order to misrepresent how well they’re really doing. Companies might insert a low-ball estimate of bad debt or delay the announcement of a <a href="https://marketbusinessnews.com/financial-glossary/capital-project/">capital project</a> — anything that can help a struggling public company report an extra cent or two of earnings per share in its quarterly or annual statement and avoid negative buzz and a <a href="https://www.investopedia.com/terms/s/sell-off.asp">stock sell-off</a>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Under Armour hoodies hang on a rack." src="https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/411974/original/file-20210719-15-10tmaeu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Under Armour clothes are displayed at a California store. The company settled with the SEC to pay $9 million in fines related to misleading its revenue growth to investors.</span>
<span class="attribution"><span class="source">(AP Photo/Jeff Chiu)</span></span>
</figcaption>
</figure>
<p>Lots of firms engage in it; rarely are they punished. A recent exception was Under Armour, the American sports equipment manufacturer that recently <a href="https://www.sec.gov/news/press-release/2021-78">settled an enforcement action</a> with the United States Securities and Exchange Commission.</p>
<p>Earnings management may be a form of financial fraud, but there are plenty of defenders who say accounting standards <a href="https://sfmagazine.com/post-entry/november-2018-the-ethicality-of-earnings-management/">allow for managerial discretion</a> in reporting earnings. Besides, when firms manipulate their books, aren’t they hurting themselves more than anyone else? </p>
<p>It’s this seeming lack of an identifiable victim that has led many accounting professionals and researchers to conclude that it’s no big deal. New research, however, reveals a darker story.</p>
<p>Two recent studies show how a company’s obsession in meeting earnings expectations can victimize vulnerable employees. One documented <a href="https://doi.org/10.1016/j.jacceco.2016.12.002">higher workplace injury and illness rates</a> in firms that meet or just beat analyst forecasts — the result of increases in employee workloads and out-of-the-ordinary reductions of discretionary expenses. A second study connected earnings management to <a href="https://dx.doi.org/10.2139/ssrn.3307594">corporate wage theft</a>, which happens when firms fail to pay employees for overtime or force them to under-report the number of hours worked.</p>
<h2>Increase in air pollution</h2>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3800156">A new study</a> we conducted with Hongtao Shen and Yang Zhao of Jinan University in China and Zheng Liu, a doctoral student at Smith School of Business at Queen’s University, showed an even wider fallout from earnings management — an increase in air pollution, with <a href="https://doi.org/10.1016/j.jpubeco.2021.104440">long-term health consequences</a>.</p>
<p>We based our study on a hunch that pollution reduction costs would be a prime target for struggling firms feeling pressure to meet earnings targets. Most emission reduction expenditures are variable costs that can be reduced by switching off abatement technology, such as <a href="https://cfpub.epa.gov/si/si_public_record_Report.cfm?Lab=NRMRL&dirEntryId=65468">sulphur dioxide scrubbers</a>, and switching them to full power when inspections are imminent.</p>
<figure class="align-center ">
<img alt="A man wearing a mask walks in smog." src="https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&rect=1040%2C0%2C3952%2C3315&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/411916/original/file-20210719-23-7iuvl0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A man wearing a mask for protection against air pollution walks in Beijing as the capital of China is shrouded by heavy smog in 2016. Research shows manipulating earnings reports in China resulted in an increase in air pollution.</span>
<span class="attribution"><span class="source">(AP Photo/Andy Wong)</span></span>
</figcaption>
</figure>
<p>From the perspective of a company looking for a quick fix, cutting pollution abatement expenses is often a better alternative than cutting <a href="https://opsway.com/blog/understanding-why-rd-so-important">research and development</a> or advertising, which could damage its mid- or long-term interests. By switching off the scrubbers, the firm passes on the long-term costs of a dirtier environment to the community where it operates.</p>
<p>We focused our study on a selection of publicly traded manufacturers in China, where there have been a <a href="https://www.nationalgeographic.com/science/article/china-air-pollution-solutions-environment-tangshan">variety of efforts</a> to control sulphur dioxide emissions that cause acid rain and air pollution. </p>
<p>To identify those firms feeling pressured to engage in earnings management, we turned to previous research that showed companies just meeting or exceeding analyst forecasts as prime suspects for engaging in accounting manipulation.</p>
<p>When we analyzed the data, they told a convincing story. Manufacturers that just met or beat analyst earnings forecasts had higher-intensity sulphur dioxide emissions — they released, on average, 0.26 kilograms more sulphur dioxide per 1,000 CNY (Chinese yuan renminbi) of output, almost 27 per cent higher than the average for emission-releasing establishments.</p>
<h2>Regulations were weak</h2>
<p>This unethical corporate behaviour was most evident when environmental regulation and monitoring were weak. In China, <a href="https://www.mondaq.com/china/clean-air-pollution/955486/china39s-evolving-environmental-protection-laws">the environmental regulator is a local agency dependent on local government</a>, which in turn depends on tax revenue from companies in its jurisdiction. The study revealed that suspect firms that were key contributors to the local economy emitted more sulphur dioxide. The same held true for state-owned enterprises aligned with the central government and protected from environmental monitoring and enforcement.</p>
<p>The opposite was also true — companies were less likely to surreptitiously cut back on their abatement expenses when monitoring was tight and regulations were enforced.</p>
<p>This was evident among firms located in designated acid-rain control zones and in cities that hosted events like the <a href="https://chicagopolicyreview.org/2016/02/12/the-2008-beijing-olympic-games-spillover-effects-on-air-quality-and-health/">2008 Beijing Summer Olympics</a> — occasions when China increased environmental monitoring in order to polish its image on the world stage. This was also evident among firms mandated to disclose data relating to corporate social responsibility.</p>
<figure class="align-center ">
<img alt="Fireworks explode over a stadium." src="https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/411970/original/file-20210719-15-97btjc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fireworks explode over the National Stadium during the opening ceremony for the Beijing 2008 Olympics in Beijing.</span>
<span class="attribution"><span class="source">(AP Photo/Itsuo Inouye)</span></span>
</figcaption>
</figure>
<p>Our findings and those of other studies carry a message for directors of public companies who oversee their firms’ financial reporting. <a href="https://doi.org/10.1287/orsc.2016.1056">Research shows</a> that companies with more long-term-oriented investors and CEOs with incentives that reward a longer-term perspective are less likely to engage in any sort of financial sleight of hand. To some extent, that means earnings management can by mitigated by people management.</p>
<p>It’s time that the accounting profession, researchers and capital market regulators take earnings management more seriously. We need to know what companies are doing just to find a few pennies of earnings per share to meet quarterly or annual targets — and who ends up paying for such practices.</p><img src="https://counter.theconversation.com/content/163148/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Earnings management is one of those genteel business terms that looks a lot less innocent the more you study it.Michael Welker, Professor, Financial Accounting, Queen's University, OntarioNing Zhang, Associate Professor, Financial Accounting, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1580882021-04-01T15:32:14Z2021-04-01T15:32:14ZWhy Pakistani students benefit the most from going to university<p>In the UK, people from all ethnic minority groups are now <a href="https://explore-education-statistics.service.gov.uk/find-statistics/widening-participation-in-higher-education">more likely to go to university</a> than white British people. But does university education pay off when it comes to their future earnings?</p>
<p>I looked at this question in a <a href="https://www.ifs.org.uk/publications/15383">recent report</a>, co-authored with Jack Britton at the Institute for Fiscal Studies and Lorraine Dearden at <a href="https://theconversation.com/institutions/ucl-1885">UCL</a>. We found that the financial benefits from university are positive on average for all ethnic groups even after accounting for taxes and student loans. Gains are highest for South Asian students, middling for white students, and mostly lower for black students.</p>
<p>The benefits are especially large for Pakistani students, with an estimated boost to average earnings of more than a third by age 30. Adding up predicted gains over the whole life cycle and taking into account taxes and student loans, we found that doing a degree is worth around £200,000 for Pakistani students – around twice the average return for all students we <a href="https://www.ifs.org.uk/publications/14729">calculated in previous work</a>. </p>
<p>This is not because Pakistani graduates have especially high earnings. In fact, the opposite is true: Pakistani graduates have the lowest graduate earnings of all ethnic groups, with typical earnings at age 30 of £23,000 for men and £19,000 for women.</p>
<p>Instead the reason is that – based on comparing similar people who did and didn’t go to university – Pakistani graduates would have earned much less had they not gone to university. Typical earnings at age 30 of Pakistani men and women who did not go to university are only £13,000 for men and £11,000 for women.</p>
<p>An important factor explaining the large earnings gains for Pakistani graduates (compared to not attending university) appears to be that Pakistani students are more likely than White British students to choose subjects with good job prospects at university, such as business, law, or pharmacology. They are also less likely to choose degrees with low or negative financial returns, such as creative arts. </p>
<p>This reflects a more general pattern. All Asian groups are more likely to study “high-return” subjects at university, which appears to be a major factor behind the comparatively large gains for these groups.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1375353319112241154"}"></div></p>
<p>These findings appear to contradict a claim in the government’s recent <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/974507/20210331_-_CRED_Report_-_FINAL_-_Web_Accessible.pdf">race commission report</a>. According to the report, an explanation for the low graduate earnings of many ethnic minority groups is that “ethnic minority students, and especially Black students, from lower social status backgrounds are not being well advised on which courses to take at university”. </p>
<p>Our findings suggest that the opposite is true for South Asian students, as they tend to study more lucrative subjects than white students. We also find no evidence that black students choose lower-return subjects than white students. This does not mean that poor career advice is not a problem – but it doesn’t seem to affect ethnic minorities disproportionately.</p>
<p>The government’s report also suggests that ethnic minorities have low graduate earnings because they attend less selective universities. It is true that students from ethnic minorities – especially black students – are more likely to attend lower tariff universities, and that graduates of these institutions earn less than other graduates. </p>
<p>But importantly, this does not mean that these universities offer low returns. Many graduates of these institutions would have had much lower earnings still if they had not gone to university at all. Overall, we found no evidence that ethnic minorities’ institution choices lower their gains from attending university.</p>
<h2>Differences by socio-economic background</h2>
<p>We also looked at differences in gains from having a degree by socio-economic background. We found that those who went to private schools – especially men – benefit much more from university than state school graduates. Among the state-educated, returns vary relatively little by socio-economic background, but if anything, those from the poorest families benefit the most. </p>
<figure class="align-center ">
<img alt="Black, South Asian and East Asian students laughing while studying together" src="https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393084/original/file-20210401-21-mg2asm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">University education can to some extent level the playing field between different groups.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/multiethnic-students-do-school-assignment-together-1536299741">fizkes/Shutterstock</a></span>
</figcaption>
</figure>
<p>Again, this is not because graduates from poor families earn a lot: typical earnings at age 30 for this group are relatively low at £25,000 for men and £21,000 for women. Instead, it’s because they would likely have earned much less had they not gone to university. For state-educated 30-year-olds from these families who did not go to university, typical earnings are only £20,000 for men and £11,000 for women. </p>
<h2>What explains differences between groups?</h2>
<p>All of the analysis above compares students who did or did not go to university within each ethnic or socio-economic group. When looking across groups, we found that some but not all of the differences in earnings are explained by differences in school attainment and other background characteristics such as special educational needs or English as an additional language. Unexplained earnings differences are smaller among graduates than among non-graduates, suggesting that university can to some extent level the playing field between different groups.</p>
<p>Strikingly though, even among graduates, white British men earn significantly more on average than men from all non-white ethnicities after controlling for all observable background characteristics. Similarly, among the state-educated, those from wealthier families earn more than those from poorer families even after controlling for the full range of factors. </p>
<p>These unexplained differences could reflect the effects of discrimination in hiring, promotion and pay. But they may also point to other differences between groups, such as differences in geographical mobility or access to professional networks. </p>
<p>The race commission report rightly highlights that a large share of racial disparities is explained by economic disparities, leading to gaps in school attainment. But our research shows that there are also unexplained gaps between ethnic groups, as well as gaps between socio-economic groups that can’t be explained by attainment gaps. </p>
<p>Even if some of the race commission’s particular conclusions won’t ultimately stand up to scrutiny, its distinction between explained and unexplained disparities is helpful for pinpointing the sources of earnings differences between ethnicities. Getting to the bottom of what causes unexplained disparities will be an important task for further research.</p><img src="https://counter.theconversation.com/content/158088/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research was comissioned by the Department of Education and co-funded by the Department of Education and the Economic and Social Research Council (grants ES/S010718/1 and ES/T014334/1). </span></em></p>The government’s race report suggests ethnic minority graduates gain less from university because of poor course choices. Our findings show that’s not quite true.Ben Waltmann, Senior Research Economist, Institute for Fiscal StudiesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1320752020-02-27T14:02:28Z2020-02-27T14:02:28ZDon’t fear a ‘robot apocalypse’ – tomorrow’s digital jobs will be more satisfying and higher-paid<figure><img src="https://images.theconversation.com/files/317435/original/file-20200226-24651-1nu56vr.jpg?ixlib=rb-1.1.0&rect=12%2C82%2C2105%2C1327&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tomorrow's good jobs will require digital skills like programming. </span> <span class="attribution"><span class="source">alvarez/Getty Images</span></span></figcaption></figure><p>If you’re concerned that <a href="https://www.doi.org/10.1086/705716?mobileUi=0&">automation</a> and <a href="https://www.aeaweb.org/articles?id=10.1257/pandp.20181019">artificial intelligence</a> are going to disrupt the economy over the next decade, join the club. But while policymakers and academics agree there’ll be significant disruption, they differ about its impact. </p>
<p>On one hand, techno-pessimists like Martin Ford in “<a href="https://www.basicbooks.com/titles/martin-ford/rise-of-the-robots/9780465097531/">Rise of the Robots</a>” argue that new forms of automation will displace most jobs without creating new ones. In other words, <a href="https://www.motherjones.com/politics/2017/10/you-will-lose-your-job-to-a-robot-and-sooner-than-you-think/">most of us will lose our jobs</a>.</p>
<p>On the flip side of the debate are techno-optimists such as Erik Brynjolfsson and Andy McAfee. In “<a href="https://wwnorton.com/books/The-Second-Machine-Age/">The Second Machine Age</a>,” they contend that continued investments in education and research and development will offset the job losses and generate many new human tasks that complement AI. </p>
<p>While I can’t predict who will turn out to be right, I do have some good news based on <a href="https://scholar.google.com/citations?user=KKQXJ_8AAAAJ&hl=en&oi=ao">my own research</a> and the work of others: Tomorrow’s digital jobs will likely <a href="https://doi.org/10.1016/j.jmoneco.2018.05.005">pay better</a> and be <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3518104">more satisfying</a> than today’s. And, as Brynjolfsson and McAfee noted, education holds the key to ensuring there are enough to go around. </p>
<h2>Bigger paychecks</h2>
<p>Researchers have been studying jobs that involve digital skills for years to try to understand their value. But what does it really mean for a job or skill to be “digital”? </p>
<p>In earlier research, <a href="https://economics.mit.edu/files/11566">all it meant</a> was that a worker used a computer. Since <a href="https://www.cnbc.com/2017/11/15/technology-is-dramatically-invading-nearly-all-us-jobs-even-lower-skilled-occupations.html">nearly all workers use a PC</a> today, we need a more refined definition of digital skills that takes into account how much a job depends on doing things like programming, crunching data in Excel spreadsheets and even using a smartphone.</p>
<p>In research conducted with economist Giovanni Gallipoli at the University of British Columbia, <a href="https://www.sciencedirect.com/science/article/pii/S0304393218301351">we created a new way</a> to measure digital or information technology skills in the labor market based on how frequently they’re used in an occupation. For example, how much time does a financial adviser spend analyzing data or an event planner use a computer?</p>
<p>We <a href="https://doi.org/10.1016/j.jmoneco.2018.05.005">found</a> that workers in occupations that rank higher in IT intensity earn more than demographically similar peers in other occupations – and that this earnings gap has been growing. </p>
<p>Not only that, but we also found something interesting on the impact of a college degree on the lifetime earnings of different occupations. Historically, workers with a college degree have earned a lot more than peers without one. Recent research has shown that this so-called college premium <a href="https://www.frbsf.org/economic-research/files/wp2016-17.pdf">has been flattening</a>. </p>
<p>The main cause, according to our analysis, is that the college premium for occupations requiring fewer digital skills has been declining, while it has been rising for those we identified as digital jobs such as software developers, programmers and aerospace engineering. At least some of the flattening in the college premium is due to the <a href="https://thehill.com/opinion/education/482644-free-college-wont-revive-the-liberal-arts?rnd=1581460242">increasing number</a> of bachelor’s degrees that convey few skills that are valued in the marketplace. </p>
<h2>Higher quality</h2>
<p>Higher pay is one thing. What about job quality? </p>
<p>Fortunately, a <a href="https://www.gallup.com/education/267590/great-jobs-lumina-gates-omidyar-gallup-quality-report-2019.aspx">recently released survey</a> from Gallup provides some answers. </p>
<p>The survey, which came out in October, compares measures of job quality – such as a sense of purpose, enjoyability and career advancement – with income, occupations and a range of demographic characteristics. I then connected the survey results with my IT intensity data.</p>
<p>I found that jobs that require greater interaction with technology tended to score higher in quality, particularly in terms of measures like career advancement. </p>
<h2>The role of education</h2>
<p>The fact that these jobs not only pay more but also provide greater levels of employee satisfaction and engagement paints a more optimistic picture about the future of work. And that gives me hope, particularly since the digital economy <a href="https://www.bea.gov/system/files/papers/WP2018-4.pdf">is growing at a pace nearly four times faster</a> than the broader economy. </p>
<p>The key is making tomorrow’s jobs “<a href="https://mitpress.mit.edu/books/robot-proof">robot-proof</a>” by designing them in a way that takes advantage of the digital skills described above. And universities must play a big role in this by <a href="https://goodjobsinstitute.org/about-us">identifying what a good job looks like</a> and ensuring future generations learn the necessary skills. </p>
<p>But I believe higher education needs a different approach to teaching skills than the one that supported the jobs of the 20th century. <a href="https://newamericanuniversity.asu.edu/home">Some</a> <a href="https://www.nytimes.com/2020/02/20/education/learning/education-technology.html">are already innovating</a>, such as Arizona State University, Purdue and Georgia State, by <a href="https://edplus.asu.edu/sites/default/files/BCG-Making-Digital-Learning-Work-Apr-2018%20.pdf">leveraging technology</a> in new ways to accelerate the learning process for their students. </p>
<p>I believe this is how we not only survive the “<a href="https://www.google.com/search?client=safari&rls=en&q=robot+apocalypse&ie=UTF-8&oe=UTF-8">robot apocalypse</a>” but thrive as well.</p>
<p>[<em>Get the best of The Conversation, every weekend.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybest">Sign up for our weekly newsletter</a>.]</p><img src="https://counter.theconversation.com/content/132075/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christos A. Makridis is a Research Assistant Professor at Arizona State University, Digital Fellow at the MIT Sloan School of Management's Initiative on the Digital Economy, a Non-resident Fellow at the Harvard Kennedy School's Cyber Security Project, a Non-resident Fellow at Baylor University's Institute for Religious Studies, a Senior Adviser at Gallup, and a Senior Research Adviser at the Department of Veterans Affairs' National Artificial Intelligence Institute.</span></em></p>What’s more, higher education holds the key to ensuring humans are equipped with the necessary skills to work alongside AI.Christos A. Makridis, Professor/Economist, Massachusetts Institute of Technology (MIT)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1266202019-11-20T16:45:03Z2019-11-20T16:45:03ZMen feel stressed if their female partners earn more than 40% of household income – new research<figure><img src="https://images.theconversation.com/files/302647/original/file-20191120-474-4s0rcr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/golden-wedding-rings-on-one-hundred-344695853?src=eec0101d-a579-4da6-a46f-4fc793790bf3-1-0">Shutterstock/5 second Studio</a></span></figcaption></figure><p>The best marriages are probably based on teamwork. But it seems individual contributions do matter – specifically, who earns how much of the household income. </p>
<p><a href="https://journals.sagepub.com/doi/10.1177/0146167219883611">My research</a> shows that in, heterosexual couples, men are happier when both partners contribute financially – but much prefer to be the main breadwinners. </p>
<p>With stress levels high when they are sole breadwinners, men appear to be more relaxed when their wives or partners earn anything up to 40% of the household income.</p>
<p>But their distress levels increase sharply as their spouse’s wages rise beyond that point. And they find it most stressful when they are entirely economically dependent on their partners. </p>
<p>The findings are based on an <a href="https://psidonline.isr.umich.edu/">analysis</a> of over 6,000 married or cohabiting heterosexual couples over a period of 15 years. Levels of distress are calculated based on feeling sad, nervous, restless, hopeless, worthless, or that day to day life is an effort. </p>
<p>Men who are the only earners are relatively unhappy but they were not as stressed as men whose partners are the principal earners. Neither of the extreme scenarios is good for male mental health. </p>
<p>The exception is men who knowingly partner with a high-earning woman. These men do not appear to suffer from higher psychological distress when their partners earn more. People do not pick their partners at random, so if the woman was the higher earner before marriage, then the potential income gap was already clear to the man – perhaps even a reason to partner with them.</p>
<h2>Balance of power</h2>
<p>There are a variety of reasons which may explain why husbands who are “outearned” by their partners may suffer from psychological distress. </p>
<p>When one person in a couple earns a much greater proportion of the joint income, it may create a relationship imbalance. For example, if the relationship deteriorates significantly, the possibility of divorce or separation can make the lower earner feel more vulnerable, financially speaking. These effects are larger among cohabiting couples, possibly due to the <a href="https://ifstudies.org/blog/less-stable-less-important-cohabiting-families-comparative-disadvantage-across-the-globe">higher probability of break up</a>. </p>
<p>Even if breaking up is not on the cards, money that comes into the household predominantly through one partner also affects the balance of power. This is important if partners have a different view on what is best for their family, how much to save, what to spend their money on, and various plans and big decisions. </p>
<h2>Traditional gender identity norms</h2>
<p>Another theory involves the historic effect of social, psychological and cultural norms when it comes to gender roles. The social construct of a male breadwinner has been highly durable in the past. </p>
<p>For generations, in many cultures, there has been an expectation that men will be the primary income provider in the family, and masculinity is highly linked to <a href="https://www.jstor.org/stable/1389781?seq=1#page_scan_tab_contents">fulfilling this expectation</a>. Faced with a change in this outcome by being outearned by their partners, means men are likely to experience high levels of psychological distress.</p>
<p>But the reality is that things are changing. In places like the US, the percentage of wives outearning their husbands <a href="https://muse.jhu.edu/article/630326/pdf">is growing</a>. In 1980, only 13% of married women earned about as much or more than their husbands. In 2000, that figure almost doubled to 25%, and in 2017 it was 31%. This trend is likely to continue into the future and similar patterns <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1136176">have been observed</a> in other countries.</p>
<h2>The stress of being a sole bread winner</h2>
<p>On average, men in my study said they experienced the lowest levels of psychological distress when their partners earned no more than 40 percent of household income. </p>
<p>But for men, being the sole breadwinner may also come at a psychological price. For even if social gender norms support this situation, being the only income earner in a household comes with a lot of responsibility and pressure and so may result in significant anxiety and distress. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=438&fit=crop&dpr=1 600w, https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=438&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=438&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=551&fit=crop&dpr=1 754w, https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=551&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/302676/original/file-20191120-524-40h5dt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=551&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">How perceived stress levels vary.</span>
<span class="attribution"><span class="source">Joanna Syrda</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>And while the emerging profile of a female breadwinner and its possible consequences has been <a href="https://www.researchgate.net/publication/225702056_The_Female_Breadwinner_Phenomenological_Experience_and_Gendered_Identity_in_WorkFamily_Spaces">widely researched</a>, very little attention has been devoted to the psychological hurdles faced by male primary breadwinners. </p>
<p>This lack of research is perhaps symptomatic of the strength of the male bread-winning tradition. Health and wellbeing research is typically devoted to new phenomena, rather than widely accepted norms in society. </p>
<p><a href="https://academic.oup.com/qje/article/130/2/571/2330321">Gender identity norms</a> clearly still induce a widely held aversion to a situation where the wife earns more than her husband. And as the number of women outearning their male partners grows, the traditional social norm of the male breadwinner may begin to adjust.</p><img src="https://counter.theconversation.com/content/126620/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joanna Syrda does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Traditional expectations can be a problem in relationships.Joanna Syrda, Lecturer in Business Economics, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1250302019-10-30T18:59:28Z2019-10-30T18:59:28ZWhat a boycott that never happened can reveal about blame, consumer psychology and the free-market system<figure><img src="https://images.theconversation.com/files/298778/original/file-20191025-173542-5b3mfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">United Airlines officials testify after United physically forced a customer off a Chicago flight.</span> <span class="attribution"><a class="source" href="https://pictures.reuters.com/CS.aspx?VP3=SearchResult&VBID=2C0FCIMD31DA0&SMLS=1&RW=1302&RH=744#/SearchResult&VBID=2C0FCIMD31DA0&SMLS=1&RW=1302&RH=744&PN=2&POPUPPN=89&POPUPIID=2C0FQE30ZMQWF">Reuters/Kevin Lamarque</a></span></figcaption></figure><p>Imagine that a passenger is asked to leave an overbooked flight. When the passenger refuses, saying he is needed for important work, he is physically assaulted and dragged off the flight.</p>
<p>Imagine that the American public directed its anger not at the airline, but at the passenger.</p>
<p>The above incident happened in <a href="https://time.com/4738429/david-dao-united-airlines/">real life</a>. <a href="https://www.businessinsider.com/united-airlines-passenger-dragged-from-flight-name-2017-4">David Dao</a>, a doctor, was <a href="https://www.forbes.com/sites/michaelgoldstein/2017/12/20/biggest-travel-story-of-2017-the-bumping-and-beating-of-doctor-david-dao/#388ba701f61f">flying United Airlines</a> when this took place in 2017.</p>
<p><a href="https://business.uoregon.edu/sites/business1.uoregon.edu/files/faculty/cv/troy-campbell-cv.pdf">We are scholars</a> <a href="https://www.pdx.edu/sba/sites/www.pdx.edu.sba/files/BrandonReichCV%20(June%202019).pdf">of marketing and consumer psychology</a>, and <a href="https://onlinelibrary.wiley.com/doi/full/10.1002/jcpy.1124">we’ve researched</a> how the U.S. culture of victim blaming <a href="https://www.businessinsider.com/united-airlines-ceo-passenger-dragging-never-blamed-employees-2017-9">prevents punitive action</a>, <a href="https://www.nytimes.com/2017/07/27/business/how-united-weathered-a-firestorm.html">such as a boycott</a>, against companies.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Dk2Y_VL5e7s?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The video showing David Dao getting dragged off the plane went viral.</span></figcaption>
</figure>
<h2>Consumers are angry – but not at United</h2>
<p>Initially, <a href="https://www.cnn.com/2017/04/11/travel/united-customer-dragged-off-overbooked-flight/index.html">consumers were outraged</a>. How could United possibly justify violence to enforce this unfair – and <a href="https://www.inc.com/cynthia-than/the-controversial-united-airlines-flight-was-not-overbooked-and-why-that-matters.html">arguably illegal</a> – practice?</p>
<p>But as quickly as they were ignited, the flames of outrage seemed to be partly doused with <a href="https://abc7chicago.com/news/who-is-the-kentucky-doctor-dragged-from-the-united-plane/1861682/">new information</a> about the victim of the incident. Dao had allegedly <a href="https://www.courier-journal.com/story/news/local/2017/04/11/david-dao-passenger-removed-united-flight-doctor-troubled-past/100318320/?hootPostID=d36ec6c0be57d7c0080839c4936d4285">traded prescription drugs</a> for <a href="https://www.dailymail.co.uk/news/article-4401980/Dr-dragged-United-swapped-drugs-secret-gay-sex.html">sex with one of his patients</a>. Dao was <a href="https://fox13now.com/2017/04/11/doctor-dragged-off-flight-previously-lost-medical-license-for-drug-crimes/">convicted of several charges, though he denies others</a>.</p>
<p>And it seemed like for some, United was off the hook. In fact, <a href="https://www.nytimes.com/2017/07/18/business/united-airlines-profit-earnings.html">United’s earnings even went up</a> in that fiscal quarter.</p>
<p>Some consumers <a href="https://www.tandfonline.com/doi/full/10.1080/1047840X.2014.877340">shifted the blame</a> for the incident away from United and toward the victim. The new information about Dao’s past behavior had no logical bearing on the cause of the United incident, and so should have no impact on consumers’ judgments of blame.</p>
<p>“Should,” of course, is the operative word.</p>
<p>A <a href="https://brill.com/view/journals/jocc/8/1-2/article-p179_10.xml">large body of research</a> in psychology has consistently shown that people don’t always assign blame rationally. In fact, we often use <a href="https://psycnet.apa.org/buy/2000-08364-007">irrelevant information</a> about someone’s personal characteristics when making blame judgments.</p>
<h2>Polling the public</h2>
<p>With this background in mind, we conducted some <a href="https://onlinelibrary.wiley.com/doi/full/10.1002/jcpy.1124">research of our own</a>.</p>
<p>A self-regulating <a href="https://repository.uchastings.edu/cgi/viewcontent.cgi?article=1023&context=traynor_scholarship_pub">free-market system</a> works when consumers punish companies that deliver faulty products or services, especially when this failure causes physical harm to other consumers. Our core prediction was that consumers would fail to live up to this obligation in situations like the one we described.</p>
<p>We posed as pollsters asking passersby for their opinion about events in the news. We gave those who obliged a synopsis of the David Dao incident and asked whether or not they were familiar with a few of the related details. For half of the participants, one of those details related Dao’s past immoral behavior. For the other half, this detail was omitted.</p>
<p>We then asked each participant if they’d be willing to sign a petition against United, effectively punishing the company for its wrongful actions. Sure enough, a subtle mention of Dao’s unrelated transgression was enough to reduce the signing rate by almost 20%.</p>
<p>While a majority signed the petition in both groups – 66% when Dao’s alleged transgression was mentioned and 85% when it was not – it did seem that consumers used this information to decide whether or not to take action.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=422&fit=crop&dpr=1 600w, https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=422&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=422&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=531&fit=crop&dpr=1 754w, https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=531&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/298776/original/file-20191025-173579-13uh0hx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=531&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">United’s earnings went up in the same fiscal quarter as the Dao incident.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Earns-Airlines/7deff0405e6f4a58b71b4546894a6c90/60/0">AP Photo/Julio Cortez</a></span>
</figcaption>
</figure>
<h2>Playing the blame game</h2>
<p>This initial field experiment supported our hypothesis, but we also wanted to know why this pattern might be emerging, and if it would hold in other product-failure contexts.</p>
<p>In a series of follow-up experiments, we created a number of scenarios about product-failure situations and tested consumers’ responses to them. The contexts ranged from burn-related injuries caused by a faulty travel mug to a car accident resulting from failed brakes. In all of these scenarios, we made it explicitly clear that the product was faulty. </p>
<p>Much like in our field experiment, we manipulated whether the victim – a fictional character – was a good or bad person in a completely unrelated way.</p>
<p>For example, in the travel mug scenario, the coffee-burn victim was a bank employee who found extra money in his bank drawer. He decided to either keep the money for himself or tell his manager about it. We then described the victim’s experience with the faulty travel mug.</p>
<p>We used rating scales to measure consumers’ judgments of blame for the incident and their intentions to punish the company, either through spreading negative word-of-mouth or supporting a lawsuit. In every scenario, the “bad” victim was blamed to a significantly greater degree than the “good” victim, which in turn reduced consumers’ stated intentions to punish the company.</p>
<p>So it does seem that blame, based on irrelevant personal characteristics, is at the root of the David Dao incident and others like it.</p>
<p>But there’s one more wrinkle to the story.</p>
<h2>A just world</h2>
<p>A prominent theory in social psychology is that most humans have a fundamental <a href="https://www.springer.com/gp/book/9780306404955">need to believe that the world is just</a>. It is too frightening for most people to believe that bad things can happen to good people and vice versa.</p>
<p>Combined with what psychologists know about blame, this suggests that if someone is a morally bad person, we’re more likely to tell ourselves that they deserve to suffer and therefore blame them for things that aren’t their fault.</p>
<p>In our follow-up experiments, we used an additional rating scale containing questions about the extent to which the victim seemed like someone who deserves to suffer in general or deserves bad luck.</p>
<p>Perhaps unsurprisingly, in all of our follow-up scenarios, the “bad” victim was seen as more deserving of suffering than the “good” victim. But more interestingly, our analysis showed that these deservingness ratings predicted blame, explaining why consumers blamed “bad” victims for faulty products in all of our follow-up experiments.</p>
<p>As consumers, it’s difficult to change our psychological responses to people, companies, and other events in the world. But hopefully our research and <a href="https://journals.sagepub.com/doi/abs/10.1177/0886260509354503">that of others</a> can serve as a reminder that blame should be about causality, and that victims rarely – if ever – are the true cause of their own suffering.</p><img src="https://counter.theconversation.com/content/125030/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>United Airlines faced a public relations nightmare when they dragged a man off a flight in 2017 – until the blame shifted back to the victim.Brandon Reich, Assistant Professor of Marketing, Portland State UniversityTroy Campbell, Assistant Professor of Marketing, University of OregonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1231342019-09-30T11:24:05Z2019-09-30T11:24:05ZFor male students, technical education in high school boosts earnings after graduation<figure><img src="https://images.theconversation.com/files/294465/original/file-20190926-51405-11q406e.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students in the electrical program at H.C. Wilcox Technical High School in Meriden, Connecticut practice their skills.</span> <span class="attribution"><span class="source">Connecticut Technical Education and Career System</span></span></figcaption></figure><p>Job prospects for young men who only have a high school diploma are particularly <a href="https://www.bls.gov/emp/chart-unemployment-earnings-education.htm">bleak</a>. They are even worse for those who have <a href="https://www.bls.gov/opub/mlr/2018/beyond-bls/mens-declining-labor-force-participation.htm">less education</a>. When young men experience joblessness, it not only threatens their financial well-being but their <a href="https://www.brookings.edu/blog/up-front/2019/02/12/why-are-out-of-work-men-so-unhappy-in-the-us/">overall well-being</a> and <a href="https://www.rwjf.org/en/library/research/2012/12/how-does-employment--or-unemployment--affect-health-.html">physical health</a>.</p>
<p>Could a high quality and specialized technical education in high school make a difference?</p>
<p>Based on a <a href="http://www.edworkingpapers.com/ai19-112">study</a> I co-authored with 60,000 students who applied to the Connecticut Technical High School System, the answer is: yes.</p>
<p>To reach this conclusion, we studied two groups of similar students: Those who barely were admitted to the Connecticut Technical High School System and those who just missed getting in. Students apply to these high schools and submit things such as test scores, attendance and discipline records from middle school. Then, applicants are ranked on their score and admitted in descending order until all seats are filled. We compared those whose score helped them get the last space in a school, to those who just missed being admitted because the school was out of space.</p>
<p>This enabled us to determine whether there was something special about Connecticut’s Technical High School System education that gave students an advantage over peers who also applied, but didn’t get into one of the system’s 16 technical schools across the state. </p>
<h2>Widespread appeal</h2>
<p>Connecticut Technical High School System is a popular choice for students - about 50% more students <a href="http://www.cttech.org/admissions.html">apply</a> than can be admitted.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294464/original/file-20190926-51463-ipmcs5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Students in the Precision Machining program at Vinal Technical High School in Middletown, Conn., gather around their teacher for instruction.</span>
<span class="attribution"><span class="source">Connecticut Technical Education and Career System</span></span>
</figcaption>
</figure>
<p>The system functions such that students can apply to attend a school in the tech system instead of their assigned public school. Statewide, the system schools – which offer specialized instruction in a variety of career fields – serve about 10% of the high school students. Most students who don’t get into the tech schools stay in their public high school.</p>
<p>What we found is that students who were admitted to the Connecticut Technical High School System went on to earn 30% more than those who didn’t get admitted. We also found that the tech school students were 10 percentage points more likely to graduate from high school than applicants who didn’t get in – a statistically significant finding.</p>
<p>Our research suggests that expanding a technical high school system like the one in Connecticut would benefit more students. I make this observation as <a href="https://peabody.vanderbilt.edu/bio/shaun-dougherty">one who examines</a> outcomes associated with career and technical education.</p>
<h2>The track record</h2>
<p>Career and technical education has already been shown – at least on an individual or small scale level – to positively impact <a href="https://www.mdrc.org/publication/career-academies-long-term-impacts-work-education-and-transitions-adulthood">earnings</a> and <a href="https://www.sciencedirect.com/science/article/pii/S0272775718300876">high school graduation rates</a>. </p>
<p>Career and technical education does this without taking away from <a href="https://www.mitpressjournals.org/doi/10.1162/EDFP_a_00224">general learning</a> in traditional subjects like math and English. But based on my experience, it has never been clear as to whether career and technical education makes a difference on a system-wide level rather than at just one or among a few select schools.</p>
<p>Our recent study finally answers that question because we studied an entire state technical high school system. Specifically, it shows that, yes, career and technical education can give students the same benefits that it has already been shown to give on a smaller level even if it’s scaled up. This has implications for school districts and states, especially as <a href="https://thehill.com/opinion/education/429661-is-career-and-technical-education-more-than-another-fad">growing interest</a> in what works in career and technical education.</p>
<h2>The appeal of technical education in Connecticut</h2>
<p>Once admitted into the Connecticut technical high school system, all students take career and technical education coursework instead of other electives, such as world languages, art or music. Typically, coursework is grouped into one of 10 to 17 programs of study, such as information technology, health services, cosmetology, heating ventilation and air conditioning, and production processes, among others. Traditional public high schools in the state, on the other hand, tend to offer at most four career and technical programs through elective courses.</p>
<p>In the Technical High School System schools in Connecticut, students explore various programs of study during their first year. Then – with help from an adviser – students select a program of study. Within these programs, students take at least three aligned courses and often more. They also have more opportunity to align academic and technical coursework materials, so that math and English content can often be integrated into technical courses. Chances for work-based learning and job exposure can also be enhanced in these settings, which may contribute to their impact.</p>
<h2>Better outcomes</h2>
<p>To figure out if these technical schools were making a difference, we looked at admissions from 2006-2007 through 2013-2014 for 60,000 students.</p>
<p>We found that – compared to students who just missed being admitted – technical high school students <a href="http://www.edworkingpapers.com/ai19-112">had</a>:</p>
<p>• Better 9th grade attendance rates; absenteeism rates fell by 14%</p>
<p>• Higher 10th grade test scores (like moving from the 50th to the 57th percentile, which is a <a href="https://scholar.harvard.edu/files/mkraft/files/kraft_2019_effect_sizes.pdf">significant jump</a> for high school test scores)</p>
<p>• A greater likelihood of graduating from high school, about 85% versus 75% for those who just missed being admitted</p>
<p>• Higher quarterly earnings, over 30% higher</p>
<p>• While we found a lower likelihood of attending college initially, no differences were seen by age 23</p>
<p>As educators, elected officials and parents search for more effective ways to give young men in high school a better shot at being able to earn a living, our study suggests that Connecticut might have already figured it out.</p>
<p>[ <em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123134/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shaun M. Dougherty receives funding from the Institute of Education Sciences, U.S. Department of Education, through Grant R305A180511 to Vanderbilt University. The study team and project are part of the CTE Research Network, which seeks to expand the evidence base on the impact of CTE programs on student outcomes. The network is supported by the Institute of Education Sciences at the U.S. Department of Education with funds provided under the Carl D. Perkins Career and Technical Education Act through Grant R305N180005. The study was conducted in cooperation with the State of Connecticut Departments of Education and Labor through the P20Win Process.</span></em></p><p class="fine-print"><em><span>Stephen L Ross receives funding from receives funding from the Institute of Education Sciences, U.S. Department of Education, through Grant R305A180511 to Vanderbilt University. The study team and project are part of the CTE Research Network, which seeks to expand the evidence base on the impact of CTE programs on student outcomes. The network is supported by the Institute of Education Sciences at the U.S. Department of Education with funds provided under the Carl D. Perkins Career and Technical Education Act through Grant R305N180005. The study was conducted in cooperation with the State of Connecticut Departments of Education and Labor through the P20Win Process.</span></em></p>Students who get admitted to Connecticut’s career and technical education high schools are more likely to graduate and earn significantly more than peers who barely missed the cut.Shaun M. Dougherty, Associate Professor of Public Policy & Education, Vanderbilt UniversityStephen L Ross, ProfessorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1191492019-08-20T11:21:34Z2019-08-20T11:21:34ZStudents who plan to seek more education than needed for their career earn more money<figure><img src="https://images.theconversation.com/files/288380/original/file-20190816-192250-qqjrm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Extra education has been shown to pay off in the long run.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/44340128@N03/34887431355/in/photolist-V9TcTa-2euDUnv-9LG9jX-UCSSgR-28mZjVn-26ZpzxV-nv5N29-25ng6GH-28mY3Q8-KnaXj-27gvEnL-RyVeR-27B4FGu-9JJVwy-YKqRET-nPmpwT-W8SJgT-26ZoqUz-V9zTKv-UQp41p-V6dvDY-26QCVKq-25ng72k-TKsxrs-JyqBPW-28hHW71-25AZVRd-26Zos5k-KKijUL-27RSpkU-293Pdv8-nCez5G-2fP29rm-27gwPpm-Uyy94y-27gvEQu-27gv37Q-25AYRZN-26KHty7-26yM5eR-ejvHZY-GQpvMS-28Rzzzr-U4eBhh-26QSrAw-TAQ1Vn-Le94Hy-26Zog2Z-c1cMqj-nBX688">John O'Boyle/Flickr</a></span></figcaption></figure><p>When it comes to career success, it pays to aim for more education than what you need for the job you want.</p>
<p>That is the key finding of a new study that I and several colleagues did by analyzing the salaries of high school students who expected to get more education than needed for their desired job. We compared their salaries to the salaries of students who planned to get only as much or less education than needed for their desired job.</p>
<p>Prior research had already shown that high school students who have a profession in mind and know what sort of education they need for that profession – what is sometimes referred to as <a href="https://yalebooks.yale.edu/book/9780300082753/ambitious-generation">“aligned ambitions”</a> – secured more stable careers and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6237.2011.00799.x">higher wages</a> early in their careers. </p>
<p>As a researcher who studies the <a href="https://scholar.google.com/citations?user=2tUKvb0AAAAJ&hl=en&oi=ao">impact</a> college enrollment has on future earnings, I’ve discovered an additional payoff when students have what we might call “over-aligned” ambitions – that is to say, they expect to get more education than what they need for their desired career. </p>
<p>For example, suppose a student aspired to become a police officer or a banker. At the time the students in our study were in high school – 1979 – those careers required only a high school diploma, which is still pretty much the case <a href="https://www.bls.gov/ooh/a-z-index.htm#B">today</a>. However, students who planned on those careers and planned to go to a four-year college ended up making substantially more money per year than others who aspired to the same occupation but did not plan as much education.</p>
<h2>Long-term payoffs</h2>
<p>To reach this conclusion, we used data from a <a href="https://www.bls.gov/nls/nlsy79.htm">national sample</a>. Starting in 1979, the survey asked young people how much education they expected to finish and what career they aspired to have at age 30, then followed them into their careers over the next few decades.</p>
<p>In analyzing these data, we identified three groups: Students who planned to get less education than they needed for the job they wanted; students who planned to get enough education for the job they wanted; and those whose educational goals were bigger than they needed to be.</p>
<p>What we discovered is that students whose educational goals were too low in relation to their career goals earned the least. By age 33 to 45, those whose education goals were well aligned with their career goals earned 4% more than this first group. But students who were overly ambitious – planning to take on studies that weren’t required by the jobs they wanted – actually did best, earning 11% more than the least educationally minded peers. This is based on an <a href="https://usa.ipums.org/usa-action/variables/SEI#description_section">index</a> used to measure wages and occupational prestige.</p>
<p>These benefits extend through a person’s mid-40s.</p>
<p>You might wonder if those who planned to get more education actually did so. In our analysis, we found that 75% of those who planned to get more education than needed for their planned careers actually got it. We also found that high school students who planned to have more education than required for their aspired job are more likely to graduate from four-year colleges.</p>
<h2>Aspiring for more</h2>
<p>These findings show the importance of high school students having information about how much education is necessary for certain careers, as well as aiming for more education than is necessary.</p>
<p>Do these findings about high school students from 1979 apply to today’s high school students? In my opinion, the answer is yes. </p>
<p>Students with high educational ambitions are more likely to <a href="https://www.tandfonline.com/doi/full/10.1080/15427609.2017.1305811?scroll=top&needAccess=true&">attend and complete college</a> than those with low educational ambitions, and college completion is <a href="https://www.nber.org/papers/w19053">likely to increase a student’s future earnings</a>. </p>
<p>In addition, as the <a href="https://www.sciencedirect.com/science/article/pii/S0169721811024105">education requirements of the workplace have risen</a>, students are more in danger of finding themselves lacking the necessary skills and credentials for the careers they want. Students who complete more education than is needed still get the skills they need, while leaving themselves open to more lucrative and prestigious career options.</p>
<p>Students can get job information from parents or other relatives. Or it could come from school counselors and teachers. School counselors, however, are often <a href="https://www.schoolcounselor.org/asca/media/asca/Publications/ratioreport.pdf">stretched thin</a> and <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.543.5670&rep=rep1&type=pdf">have more responsibilities</a> than just helping students figure out their education and career options.</p>
<p>Students should also have access to the high school coursework they need to pursue the college major they choose. However, students in schools that serve high proportions of minority students sometimes lack access or aren’t counseled, encouraged or prepared to enroll in <a href="https://www2.ed.gov/about/offices/list/ocr/docs/stem-course-taking.pdf">STEM or advanced math coursework</a>, which is likely to <a href="http://jhr.uwpress.org/content/44/1/171.abstract">increase a student’s chances of going to college</a>. Even when schools do offer a wide array of courses, <a href="https://journals.sagepub.com/doi/10.1177/003804070908200103">minority students are often placed in lower-track courses</a>.</p>
<p>This is especially problematic because we found that minority students reap some of the largest benefits from having high educational and career ambitions. For example, we found that Hispanic students saw 13% higher wages when they expected to obtain more education than needed for their desired career.</p>
<p>Planning coursework is a process that schools and parents should start early. This is because the courses students take in middle school and early high school can determine if they are able to get into higher-level and more specialized classes. For instance, research has shown that taking more advanced math and science <a href="https://journals.sagepub.com/doi/full/10.3102/0162373719834067">increases the likelihood</a> of going to college. It also leads to <a href="http://jhr.uwpress.org/content/44/1/171.abstract">higher wage earnings</a>.</p>
<p>Finally, <a href="https://mindsetscholarsnetwork.org/learning-mindsets/purpose-relevance/">mindset programs</a> can help students envision their futures and <a href="http://mindsetscholarsnetwork.org/wp-content/uploads/2015/09/What-We-Know-About-Purpose-and-Relevance-.pdf">persist through setbacks</a>. This is important so that students who have higher expectations for education can actually realize them.</p>
<p>Getting students to want more education is not just something that will make them better educated. My research shows that it will lead them to earn more money as well.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/119149/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This work was supported by the National Science Foundation (#1316702) and Office of the John A. Hannah Chair in the College of Education at Michigan State University.</span></em></p>Students who plan to get more education than is required for the career they hope to have end up earning higher salaries as a result, a new analysis shows.Soobin Kim, Post-doctoral Research Fellow, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1123882019-03-17T17:05:15Z2019-03-17T17:05:15ZBoys’ attention and prosocial behaviour linked to earnings 30 years later<figure><img src="https://images.theconversation.com/files/260542/original/file-20190224-195870-1t2bpyk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Behaviours identified as early as kindergarten are clues about larger contexts that have lifelong consequences for individuals and society.
</span> <span class="attribution"><span class="source">(Shutterstock) </span></span></figcaption></figure><p>New research, published in the medical journal <em>JAMA Pediatrics</em>, shows that <a href="https://jamanetwork.com/journals/jamapediatrics/fullarticle/2724382">boys from low-income backgrounds who were inattentive in kindergarten had lower earnings at age 36 while boys who were prosocial earned more</a>.</p>
<p>The study was based on analysis of nearly 1,000 boys from low-income neighbourhoods of Montréal. The boys were assessed by kindergarten teachers at age six for inattention, hyperactivity, aggression, opposition and prosocial behaviours (such as being kind, helpful and considerate) and followed up for 30 years. The childhood behavioural assessments were then linked to their tax return records in adulthood. </p>
<p>Boys ranked in the highest one-quarter for inattention at age six later earned around US$17,000 less a year than those in the lowest quarter. Those ranked in the highest one-quarter for prosociality earned on average US$12,000 more than those ranked in the lowest quarter. </p>
<p>The study controlled for factors known to influence earnings including other problem behaviours and the children’s intelligence and family background.</p>
<p>Although previous studies have linked childhood <a href="https://www.ncbi.nlm.nih.gov/pubmed/22116171">disruptive behaviour</a> <a href="https://doi.org/10.1073/pnas.1010076108">and low</a> <a href="https://www.ncbi.nlm.nih.gov/pubmed/23800484">self-control</a> to lower earnings, this study is the first to measure earnings using tax records and to show that these behaviours can be identified as early as kindergarten with effects persisting across three decades.</p>
<p>Crucially, the study shows that after accounting for other disruptive behaviours at age six — including hyperactivity, aggression and opposition — only inattention and prosocial behaviours were associated with later earnings.</p>
<h2>Why behaviour matters for earnings</h2>
<p>Longitudinal studies like this one cannot prove that early behaviours cause lower earnings; they only show that they are associated. A large number of events from kindergarten onwards could have influenced earnings at age 36.</p>
<p>One of the most important factors may be educational attainment. There is a well-documented link between childhood inattention and <a href="https://www.ncbi.nlm.nih.gov/pubmed/27017347">education underachievement</a> including <a href="https://www.ncbi.nlm.nih.gov/pubmed/21799065">failure to complete high school</a>. These represent important barriers to obtaining more complex and often better-paid jobs.</p>
<p>Childhood inattention has also been linked with <a href="https://www.ncbi.nlm.nih.gov/pubmed/22331455">poor peer relations</a>, <a href="https://www.ncbi.nlm.nih.gov/pubmed/16523253">anti-social behaviour in adolescence</a> and <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3954095/">substance dependence</a>, all of which could lower educational attainment and harm occupational attainment and performance.</p>
<p>The link between childhood prosocial behaviour and higher earnings is perhaps more intuitive. Children who are prosocial tend to have <a href="https://www.ncbi.nlm.nih.gov/pubmed/14959804">better peer relations</a>, fewer <a href="https://www.ncbi.nlm.nih.gov/pubmed/26236108">adolescent behavioural problems</a> and better <a href="https://www.ncbi.nlm.nih.gov/pubmed/11273389">educational attainment</a>, which should positively influence employment opportunities, performance and earnings.</p>
<p>In the long term, childhood behaviours like inattention and prosociality can nudge children towards social and educational pathways that lead to distinct social and economic outcomes decades later.</p>
<h2>Changing behaviour</h2>
<p>Our study does not imply that we should push children to be attentive and prosocial in the hope that they later make more money — although there are many other good reasons to support and promote these behaviours. </p>
<p>Rather, we suggest that children at the behavioural extremes, who are frequently the most disadvantaged, should be provided with early monitoring and support to maximize their chances of success. </p>
<p>Early identification and intervention for problem behaviours is <a href="https://www.ncbi.nlm.nih.gov/pubmed/17978321">critical because it reduces the accumulation of negative life events</a>, such as substance abuse and school failure, and is <a href="http://science.sciencemag.org/content/312/5782/1900">more likely to succeed</a> in the long run. </p>
<p>Prosociality can be developed through <a href="https://theconversation.com/new-research-shows-quality-early-childhood-education-reduces-need-for-later-special-ed-112275">quality early childhood education which is shown to pre-emptively reduce the need for later special education</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/263363/original/file-20190312-86682-6nmkn2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Early identification and intervention for problem behaviours is critical because it reduces the accumulation of negative life events.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>There are a range of interventions for children aged five to eight years designed to improve attention and promote prosocial behaviours. </p>
<p>School-based interventions emphasize <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8624.2010.01564.x">social and emotional learning including self-awareness, self-management, relationship skills and responsible decision making</a>.</p>
<p>Programs that reduce inattention include those <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3159917/">targeting self-control and executive functions</a>, such as mental flexibility and impulse control, and <a href="https://www.ncbi.nlm.nih.gov/pubmed/19318991">drug treatments in severe cases</a>. </p>
<p>One of the limitations of this study is that it focused on boys from low-income backgrounds in a large North American city, so it is unclear how findings will apply to girls or children living in other contexts. Future studies — currently under way — will help address these questions.</p>
<h2>Lifelong consequences</h2>
<p>This study adds to an <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3954095/">accumulating</a> <a href="https://www.ncbi.nlm.nih.gov/pubmed/16523253">body of</a> <a href="https://www.ncbi.nlm.nih.gov/pubmed/21799065">evidence</a> showing that inattention is one of the most important early behavioural risk factors for a range of adverse life outcomes, including <a href="http://eprints.lse.ac.uk/20206/">lower earnings</a>. </p>
<p>Early monitoring and support for children with high inattention and low prosocial behaviours could have a positive impact on social integration and economic participation.</p><img src="https://counter.theconversation.com/content/112388/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francis Vergunst is funded by a Fonds de Recherche du Québec Santé (FRQS) postdoctoral fellowship</span></em></p>Inattention is one of the most important early behavioural risk factors for a range of adverse life outcomes, including lower earnings.Francis Vergunst, Postdoctoral Fellow in Developmental Public Health, Université de MontréalLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1032762018-10-25T10:49:03Z2018-10-25T10:49:03ZFirst-generation college students earn less than graduates whose parents went to college<figure><img src="https://images.theconversation.com/files/240950/original/file-20181017-165891-1ylpr14.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">First-generation college students face uneven prospects well after college.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/graduates-wear-graduation-gownsceremonies-university-1007276779?src=eRQTGXFqNha6UtcR8TVrtg-1-0">Nirat.pix/www.shutterstock.com</a></span></figcaption></figure><p>When discussions take place about first-generation college students, often the focus is on how <a href="https://www.insidehighered.com/news/2018/10/04/institutional-change-required-better-serve-first-generation-students-report-finds">disadvantaged</a> they are in comparison to their peers whose parents went to college.</p>
<p>Research we <a href="https://link.springer.com/article/10.1007/s11162-018-9523-1">recently conducted</a> shows that first-generation college students experience another form of disadvantage that lasts long after they graduate – and that is: how much they earn.</p>
<p>We are sociologists who focus on topics of <a href="https://scholar.google.com/citations?user=DE8cCDAAAAAJ&hl=en&oi=ao">career progression</a> and <a href="https://scholar.google.com/citations?user=iGlfsJcAAAAJ&hl=en&oi=ao">class inequality</a>.</p>
<p>Using data from the federal <a href="https://nces.ed.gov/surveys/b&b/">Baccalaureate and Beyond Longitudinal Study</a> for 1992-93 graduates, we found that first-generation college students earn substantially less 10 years after graduation than college graduates whose parents went to college. This is the most recent data available that follows young people for 10 years after they graduate – a time when young adults’ incomes typically become more stable.</p>
<h2>Substantial wage gaps</h2>
<p>Our research found that first-generation men and women go on to earn, respectively, 11 percent and 9 percent less per year – or US$7,500 for men and $4,350 for women – than their peers whose parents also graduated from college.</p>
<p>Even when we compare students who have the same characteristics and experiences – such as socio-demographic background, having children or not, the type of institution they attended, major and grade-point average – first-generation men and women still earn, respectively, 6 percent and 3 percent less than men and women college graduates whose parents went to college. This second comparison rules out the possibility that differences observed in the first comparison are due to differences in the individual attributes of the two groups.</p>
<p>The wage gaps are uneven across universities and majors. Colleges and universities that are somewhat selective show the largest wage advantage for graduates whose parents went to college. More elite and less selective schools report smaller gaps.</p>
<p>When it came to majors most associated with subjective criteria, such as arts and humanities, we found a wage gap among men as high as 17 percent. In other words, men who are first-generation and study arts and humanities don’t earn as much as their peers who study the same thing and whose parents went to college. However, for men with STEM, vocational and education majors, the gap is between 3 and 4 percent and not significant.</p>
<p>So, what drives wage differences between first-generation college graduates and graduates whose parents went to college? It is mostly labor market factors. First-generation graduates more often landed in jobs in the public and not-for-profit sectors, which tend to pay less than jobs in the private and for-profit sector. They were also less likely to work in urban areas, where wages are higher.</p>
<p>It is also interesting what won’t do much to change the wage gap between first-generation college graduates and their peers whose parents went to college: getting first-generation students to attend more elite colleges. Our research shows that elite college attendance would only lower the wage gap between first-generation college graduates and their peers among men, and even then only about 8 percent, or $600 annually. </p>
<p>Our findings suggest that <a href="https://www.jkcf.org/research/opening-doors-how-selective-colleges-and-universities-are-expanding-access-for-high-achieving-low-income-students/">well-intentioned efforts</a> to push first-generation students to attend the most prestigious colleges or to pursue higher-paying majors may not do much to change the wage gap that we discovered. First-generation students are already well-represented in several high-paying majors, such as business and health, so changing what first-generation students major in would not reverse the wage gap.</p>
<p>We also do not find much evidence of post-hiring discrimination by employers. In other words, first-generation college graduates with the same traits as their peers are paid the same amount when they enter the same occupations. </p>
<h2>Taking different jobs</h2>
<p>The issue is first-generation college students are not getting the same kind of jobs as their peers whose parents went to college. </p>
<p>Compared to their peers whose parents got a college degree, first-generation men are 4 percent less likely to be in the for profit sector and 3 percent more likely to be in state and local government. First-generation men are 4 percent more likely to be in clerical jobs and 3 percent more likely be in blue-collar jobs. They are 7 percent less likely to be in STEM professions. </p>
<p>This could be because first-generation college graduates are not familiar with the same types of jobs or don’t have the same kinds of networks as their peers whose parents went to college. It could also arise from where the jobs are located – first-generation graduates may live in different areas where there are fewer or worse job opportunities. They may also have a lower ability to relocate.</p>
<p>The difference in the kinds of jobs that first-generation graduates get could also arise from how employers in each field hire. For instance, <a href="https://www.scholars.northwestern.edu/en/publications/class-advantage-commitment-penalty-the-gendered-effect-of-social-">prior research</a> has shown that that <a href="https://www.sociologicalscience.com/articles-v5-24-562/">elite employers value</a> elite attributes more than working class attributes. One example is putting sailing on a resume versus track and field – elite employers are <a href="http://www-2.rotman.utoronto.ca/facbios/file/RiveraTilcsik.pdf">more likely to hire someone who sails</a>.</p>
<p>Though the gap is small for first-generation students with the same bachelor’s degrees, labor market sectors, jobs, locations, hours worked and demographic traits as their peers whose parents went to college, we still believe that this gap deserves attention, especially for those concerned with creating a meritocracy. While meritocracy means equal rewards for individuals who have reached the same colleges or jobs, we cannot ignore the fact that inequality by social origin plays a role in who reaches those colleges and jobs in the first place.</p>
<h2>Will wage gaps continue?</h2>
<p>One of the shortcomings of our research is that we look at students who graduated over 25 years ago. Data is currently being collected for how much those who graduated in 2008 are earning 10 years after graduation, but it will be a couple of years before it becomes available.</p>
<p>This more recent data will be key to understanding how the wage gap has changed over time. If it shows that a wage gap still exists 10 years later for both groups, it means that colleges, researchers and others concerned with fairness for first-generation college students must look at more than what kind of experience those students have in college. They will need to look at changing what happens after college – that is, what kind of jobs students get and how much money they earn.</p><img src="https://counter.theconversation.com/content/103276/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>First-generation college students earn substantially less than their peers whose parents went to college, new research shows.Anna Manzoni, Associate professor, North Carolina State UniversityJessi Streib, Assistant Professor of Socoilogy, Duke UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1045182018-10-08T10:33:16Z2018-10-08T10:33:16ZAmazon and other ‘superstar’ companies could give all American workers a raise<figure><img src="https://images.theconversation.com/files/239621/original/file-20181008-72113-1m2dlsa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An Amazon employee applies tape to a package before shipment.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Amazon-Wages-Backlash/9f9364c105ca46599accf26a9cb125fd/12/0">AP Photo/Patrick Semansky</a></span></figcaption></figure><p>The <a href="https://www.bls.gov">latest employment data</a>, released on Oct. 5, point to a persistent economic puzzle: The unemployment rate is the lowest in nearly half a century yet wages have been very slow to react. </p>
<p>In the past, such low unemployment levels <a href="https://research.stlouisfed.org/publications/economic-synopses/2015/06/19/the-relationship-between-labor-market-conditions-and-wage-growth/">have driven up</a> wages. Yet, apart from a relatively <a href="https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx">recent acceleration</a>, real wages have barely budged since the Great Recession and in fact are <a href="http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/">little changed</a> from the 1980s. </p>
<p>This puzzle can be even more confounding when you consider some of the biggest American companies have been boosting the minimum wages they pay their employees to levels way above the federal minimum of US$7.25 an hour. Amazon became the latest this month, <a href="https://www.cnbc.com/2018/10/02/amazon-raises-minimum-wage-to-15-for-all-us-employees.html">promising</a> to pay all workers no less than $15 an hour, following similar raises for employees of <a href="https://www.businessinsider.com/costco-raises-its-minimum-wage-2018-6">Costco</a>, <a href="https://www.forbes.com/sites/laurengensler/2018/01/11/walmart-raises-minimum-wage-after-tax-reform/">Walmart</a>, <a href="https://money.cnn.com/2017/09/25/news/companies/target-minimum-wage/index.html">Target</a> and others. </p>
<p>I believe there’s good reason to be skeptical that these sporadic pay hikes will solve the problem of stagnant wages. In fact, it is the rise of such superstar companies as Amazon that has contributed to the problem in the first place. </p>
<h2>Stagnant wages</h2>
<p>Wages typically <a href="https://fredblog.stlouisfed.org/2018/08/has-wage-growth-been-slower-than-normal-in-the-current-business-cycle/">need to rise</a> 3.5 to 4 percent a year following an economic recession in order to help workers recoup their losses from the downturn. </p>
<p>But <a href="https://www.epi.org/nominal-wage-tracker/#chart3">average hourly earnings growth</a> for private sector nonfarm workers has been significantly below that, and most of the gains <a href="https://www.washingtonpost.com/business/2018/08/10/america-wage-growth-is-getting-wiped-out-entirely-by-inflation/?utm_term=.f89306b2666a">have been wiped out</a> by inflation. </p>
<p>As a result, workers are getting an <a href="https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/2015/q3/brq315_a_bit_of_a_miracle_no_more.pdf">ever-shrinking share</a> of U.S. national income, which declined from about 65 percent in the 1960s to as low as 56 percent in 2014. </p>
<p>Everything from <a href="https://www.huffingtonpost.ca/2017/06/18/wage-growth-automation_n_17195292.html">robots</a> and <a href="https://www.nytimes.com/interactive/2018/02/01/business/economy/wages-salaries-job-market.html">global competition</a> to the erosion of unions has been blamed. While there’s certainly truth to each explanation, a new one has been gaining traction: superstar companies.</p>
<h2>Superstars rise</h2>
<p>Amazon, Google, Uber, Federal Express and a few other exceptional companies have gobbled up an increasing share of their industry’s markets to a point where small companies just can’t compete. </p>
<p><a href="http://www.nber.org/papers/w23108.pdf">In retail</a>, for example, the top four companies <a href="https://www.nytimes.com/2017/03/08/business/economy/labor-share-economic-output.html">controlled</a> 30 percent of sales in 2012, up from 15 percent in 1982. In finance, the share rose to 35 percent from 24 percent. And in the service sector, it climbed to 15 percent from about 10 percent. </p>
<p>The industry concentration, along with inexpensive <a href="https://fred.stlouisfed.org/series/NCBDBIA027N">loans</a> engineered by the Federal Reserve’s ultra-low interest rate policy, has allowed a select few companies to make <a href="https://hbr.org/2015/08/productivity-is-soaring-at-top-firms-and-sluggish-everywhere-else">significant investments in productive</a> technologies, such as in artificial intelligence and automation. This has <a href="https://www.competitionpolicyinternational.com/wp-content/uploads/2018/06/CPI-Bessen.pdf">helped them increase</a> their market shares even further. And in turn, this is what is making it easier for <a href="http://workforcereport.adp.com">these companies</a> to lift wages, whether by setting higher minimum wage floors for their workers or simply paying more across the board. </p>
<p>While that’s all fine and good, the problem is that <a href="https://www.bls.gov/web/cewbd/table_f.txt">more than half</a> of American workers in the private sector are employed by companies with fewer than 500 employees. These small businesses have suffered as a result of the superstars’ growing dominance and also can’t take advantage of the record-low borrowing costs because they do not have access to the stock and bond markets.</p>
<p>Because small- and mid-size employers do most of the hiring in the U.S., it is their wages that dominate the industry standards. And they are having a hard time increasing pay for their workers.</p>
<p>The rise of superstar companies is also what is driving <a href="https://money.cnn.com/2017/09/27/news/economy/inequality-record-top-1-percent-wealth/index.html">widening income inequality</a> today. While we usually think about inequality in terms of the gap between higher and low earners, <a href="https://www.competitionpolicyinternational.com/wp-content/uploads/2018/06/CPI-Bessen.pdf">researchers</a> have found that the bigger issue is the gap between rich and poor companies, which in turn reinforces the gap in pay between individuals. </p>
<p>It is a good thing that the likes of Amazon are setting a much higher floor under their workers’ wages, but the slimmer profit margins at their smaller rivals make it virtually impossible for them to do the same. This will cement the superstars’ market power even further.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/239626/original/file-20181008-72110-16mvtet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Superstar companies like Google have been able to make significant investments in productive technologies like AI.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Google-Showcase/2ca870adbfc144dfbdafc5ea56c36593/1/0">AP Photo/Jeff Chiu</a></span>
</figcaption>
</figure>
<h2>An incentive to act</h2>
<p>Fortunately, superstar companies have an incentive to do something about this because a situation in which wage growth is below par is bad for business as well as for the workers.</p>
<p>That’s because low wages <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3128441/">threaten</a> the physical and mental health of a large swath of the workforce as increasing numbers of workers can’t afford to invest in good food, preventative health care, continuing education and skills training. And in a vibrant economy, workers must stay healthy and <a href="https://www.mckinsey.com/industries/social-sector/our-insights/the-economic-cost-of-the-us-education-gap">educated</a> to remain productive. Besides, low wages also reduce consumption and economic growth. </p>
<p>As such, stagnant wages are one of the main reasons overall <a href="https://www.businessinsider.com/wage-growth-america-slow-explanation-2018-9">U.S. productivity growth</a> has also been sluggish in recent years and declining toward zero. This is very bad for the U.S. economy and companies, both large and small, since high rates of productivity <a href="https://opentextbc.ca/principlesofeconomics/chapter/20-2-labor-productivity-and-economic-growth/">are vital</a> to a country’s long-term growth rates – and to higher wages as well.</p>
<p>The solution is in thinking about worker productivity as a collective resource. Companies certainly have an incentive to keep labor costs low, but they also have a strong incentive to ensure, collectively, that worker productivity grows over time. </p>
<p>The trickier part is getting a bunch of hotshot companies to act in concert to solve a problem they all suffer from. It’s basically a “<a href="https://www.investopedia.com/terms/t/tragedy-of-the-commons.asp">tragedy of the commons</a>” scenario in which a shared resource is spoiled because participants’ self-interest causes them to behave against the common good. </p>
<p>But political economist <a href="https://www.cambridge.org/us/academic/subjects/politics-international-relations/political-theory/governing-commons-evolution-institutions-collective-action-1?format=PB&isbn=9781107569782">Elinor Ostrom has shown</a> – in research that <a href="https://www.nobelprize.org/prizes/economics/2009/ostrom/facts/">won her a Nobel</a> – that organizations, communities and other stakeholders have frequently found ways to govern the “commons” without tragedy.</p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3262295">My own soon-to-be-published research</a> is on how groups of companies can organize themselves to preserve shared resources. The <a href="https://www.fsb-tcfd.org/">Taskforce on Climate-Related Financial Disclosures</a>, for example, is collaborating with some companies like Unilever and JPMorgan Chase to engage in collective action on climate change. </p>
<p>So while I applaud that Amazon and others are lifting their own employees’ pay, the problem they’re trying to solve will remain until the majority of the workforce gets a raise too.</p><img src="https://counter.theconversation.com/content/104518/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carolin Schellhorn does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The rise of superstar companies that dominate their industries may be partly to blame for the lack of wage growth in the US in recent years. It could also suggest a solution.Carolin Schellhorn, Assistant Professor of Finance, St. Joseph's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992622018-07-12T10:24:53Z2018-07-12T10:24:53ZDoes thinking you look fat affect how much money you earn?<figure><img src="https://images.theconversation.com/files/227240/original/file-20180711-27027-9hsswi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is the scale telling the truth?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/cropped-image-woman-feet-standing-on-604196501?src=sFopdWh9s_6XEvAb68uQrA-1-71">VGstockstudio/Shutterstock.com</a></span></figcaption></figure><p>Two things people often think about are <a href="https://www.nbcnews.com/better/money/americans-think-about-money-work-more-sex-survey-finds-n424261">money</a> and <a href="https://www.allure.com/story/national-judgement-survey-statistics">their appearance</a>. Past research has shown that there is a correlation between the two: <a href="https://www.uni-muenster.de/imperia/md/content/psyifp/aeechterhoff/wintersemester2011-12/vorlesungkommperskonflikt/hamermesh_beautylabormarket_amereconrev1994.pdf">People subjectively considered attractive earn more</a>.</p>
<p>And body weight plays a major role in attractiveness. A person’s body mass index – which adjusts a person’s weight for their height – and their success in the workplace <a href="https://wol.iza.org/articles/obesity-and-labor-market-outcomes/long">are linked</a>. Put simply, thin people, especially women, are rewarded more than their larger colleagues. But those studies only considered how other people perceive you. </p>
<p>In <a href="http://www.sciencedirect.com/science/article/pii/S1570677X17302617">our research</a>, we looked at the flip side: Does our own perception of our bodies, even when incorrect, make a difference? In other words, does thinking you look fat or skinny affect your wages? </p>
<p>Knowing if a worker’s own perception of his or her weight makes a difference – rather than only the employer’s – could help determine the best way to mitigate the impact of weight discrimination on earnings. In addition, a better understanding of gender differences in weight perception might help explain the persistent <a href="https://theconversation.com/us/topics/gender-wage-gap-11006">gender wage gap</a>. </p>
<h2>Pressure to ‘look good’</h2>
<p>Americans spend billions of dollars each year on making minor changes to their appearance with <a href="http://www.npd.com/wps/portal/npd/us/news/press-releases/2017/us-prestige-beauty-industry-adds-1-billion-in-sales-grows-6-percent-in-2016/">makeup, hair dye and other cosmetics</a>. We also spend billions trying to change our weight with diets, <a href="http://www.clubindustry.com/studies/ihrsa-reports-57-million-health-club-members-276-billion-industry-revenue-2016">gym memberships</a> and <a href="http://www.plasticsurgery.org/documents/News/Statistics/2016/cosmetic-procedures-average-cost-2016.pdf">plastic surgery</a>.</p>
<p>Trying to live up to the pervasive images of “perfect” models and movie heroes has a dark side: body-shaming, anxiety and depression, as well as unhealthy strategies for weight loss or muscle gain. For example, anorexia nervosa involves the extreme over-perception of weight and <a href="http://www.nationaleatingdisorders.org/statistics-research-eating-disorders">claims the lives of roughly 10 percent of its victims</a>. It also has a financial cost. Having an eating disorder boosts annual health care costs <a href="http://www.sciencedirect.com/science/article/pii/S2211335514000230">by nearly US$2,000</a> per person.</p>
<p>Why is there both external and internal pressure to look “perfect”? One reason is that society rewards people who are thin and healthy looking. Researchers have shown that body mass index is related to wages and income. Especially for <a href="https://wol.iza.org/articles/obesity-and-labor-market-outcomes/long">women</a>, there is a clear penalty at work for being overweight or obese. Some studies have also found an <a href="https://www.forbes.com/sites/freekvermeulen/2011/03/22/the-price-of-obesity-how-your-salary-depends-on-your-weight/#431b14393d9a">impact for men</a>, though a less noticeable one.</p>
<h2>Does weight perception matter?</h2>
<p>While the research literature is clear that labor market success is partly based on how employers and customers perceive your body image, no one had explored the other side of question. Does a person’s own perception of body image matter to earnings and other indicators of success in the workplace?</p>
<p>In simple terms, does it change your wages if you think of yourself as overweight when you are not? Or if you think of yourself as skinny, when in reality you are not, does this misperception affect your ability to find and keep a job?</p>
<p>We were interested in answering these questions because it is often easier to fix your own view of yourself than to fix the entire world’s.</p>
<p><a href="http://www.sciencedirect.com/science/article/pii/S1570677X17302617">Our study</a> answered this question by tracking a large national random sample of the first wave of U.S. millennials, born in the early 1980s. We followed about 9,000 of them starting in 1997 when they were teenagers and ending 15 years later when the oldest was 31. Our research followed these respondents over a critical time period when bodies change from teenage shape into adult form and when people build their identities.</p>
<p>The survey asked respondents to report their actual weight and height. It also asked each to classify themselves each year as “very overweight,” “overweight,” “about the right weight,” “slightly underweight” or “very underweight.” This enabled us to compare each person’s clinically defined BMI category, such as being underweight, with his or her perception. </p>
<p>As in other research, women in our sample tend to over-perceive weight – they think they’re heavier than they are – while men tend to under-perceive theirs.</p>
<h2>What other people think matters more</h2>
<p>While self-perceived weight, especially when incorrect, can influence <a href="http://www.ncbi.nlm.nih.gov/pubmed/20919592">self-esteem</a>, <a href="http://www.emeraldinsight.com/doi/abs/10.1108/JPMH-11-2013-0071">mental health</a> and health behaviors, we found no relationship between the average person’s self-perception of weight and labor market outcomes like wages, weeks worked and the number of jobs.</p>
<p>In other words, it’s not what you think about your appearance that matters in the workplace, it’s just what other people think. Worrying if eating another cookie will make you look fat may harm your self-esteem, but thinking you’re overweight likely will not affect your earnings.</p>
<p>Because we find that women earn lower wages than men do even when accounting for weight perception differences, it appears the well-known gender pay gap is not due to differences in self-perceived weight.</p>
<p>While the continued gender penalty in the labor market is frustrating, <a href="https://www.sciencedirect.com/science/article/pii/S1570677X17302617">our finding</a> that misperceived weight does not harm workers is more heartening. Weight misperception is common, but thinking you’re heavier or lighter than you are doesn’t dampen earnings.</p>
<p>At the same time, it’s important to remember that although self-perceived weight doesn’t appear to affect wages, it still takes a toll on mental and physical health.</p>
<p>Passing over heavier workers to hire or promote less productive but thinner workers is inefficient and unfair. Our results indicate that expanding efforts to reduce discrimination on the basis of body weight in the workplace is important. </p>
<p>Since employers’ perception of weight is what matters in the labor market, policies to reduce the social stigmatization of body weight, such as curbing <a href="https://www.cnn.com/2016/04/15/health/fat-shaming-feat/index.html">body-shaming</a>, make sense. Changing discrimination laws to include body type as a category would also help. For example, <a href="http://time.com/4883176/weight-discrimination-workplace-laws/">Michigan is the only state</a> that prohibits discrimination on the basis of weight and height. </p>
<p>We believe expanding such protections would make the labor market more efficient and fair.</p><img src="https://counter.theconversation.com/content/99262/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new study explores whether how we perceive our body weight affects our prospects in the job market and at work.Patricia Smith, Professor of Economics, University of MichiganJay L. Zagorsky, Senior lecturer, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/755322017-03-31T03:02:58Z2017-03-31T03:02:58ZMore low-paid work is part of the problem, not the solution<p>Employer organisations such as the <a href="http://retail.org.au/news-posts/ara-proposes-1-2-percent-minimum-wage-increase/">Australian Retailers Association</a>, <a href="https://www.fwc.gov.au/documents/sites/wagereview2017/submissions/ausgovsub.pdf">supported</a> by the federal government, have recently argued that wages for Australia’s lowest-paid workers should be increased by less than inflation. This would mean a cut in real wages. But none of their assertions are sustained by evidence or research. </p>
<p>Three arguments have been put forward to cut the minimum wage. First, that the cut will ensure employers <a href="https://www.fwc.gov.au/documents/sites/wagereview2017/submissions/ausgovsub.pdf">create more low-paid jobs</a>, thereby reducing unemployment. Second, that low wages are not a problem anyway, as low-paid workers are “<a href="http://www.afr.com/news/economy/employment/excessive-minimum-wage-rise-will-hurt-young-jobless-say-economists-20170329-gv9jx2">often found in high-income households</a>”. Finally, that there have <a href="https://www.fwc.gov.au/documents/sites/wagereview2017/submissions/ausgovsub.pdf">not been sufficient productivity improvements</a> to support wage increases for the low-paid. </p>
<p>This is counter to the current thinking on wages. After advocating for decades that Australia needed more (downward) “wage flexibility” to solve unemployment, key international agencies – including the World Bank, IMF and the OECD – <a href="https://www.oecd.org/g20/topics/employment-and-social-policy/G20-labour-markets-outlook-key-challenges-and-policy-responses.pdf">now recognise</a> this misses the point. Australia’s award wages for our lowest-paid workers are <a href="http://www.tradingeconomics.com/country-list/minimum-wages">among the highest in the world</a> and this is now recognised as a good thing.</p>
<p>Meanwhile, deepening inequality, much of it originating in the labour market, is retarding the demand necessary to sustain output and employment growth. If people’s real earnings fall, then they have less to spend. When people spend less, demand for goods and services falls, and in turn so does the demand for labour (i.e. jobs). This is why a cut in wages for low-paid workers will not create jobs; rather it will reduce living standards for those earning them. </p>
<p>In Australia, there is modest alarm at just how low wages growth has become. Wages are growing at <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0">only 1.9% per annum</a>, which is significantly down on the rate <a href="http://www.tradingeconomics.com/australia/wage-growth">over the last decade</a>. </p>
<p>The RBA <a href="https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu-0317-2-insights-into-low-wage-growth-in-australia.pdf">recently released research</a> noting workers now have too little bargaining power in wage setting. Even the federal treasurer <a href="http://www.abc.net.au/news/2017-03-13/scott-morrison-low-wage-growth-biggest-challenge-economy/8350032">has said</a> slow wage growth is one of the economy’s biggest problems. It could also cause issues for the budget, as it means less income tax for the government. </p>
<p>Cutting wages for the lowest-paid will only make these problems worse, not better.</p>
<h2>The facts on low wage earners</h2>
<p>While wages are growing only slowly, the average Australian worker produces approximately <a href="http://www.tradingeconomics.com/australia/productivity">twice as much</a> as he or she did three decades ago. This echoes a <a href="http://journals.sagepub.com/doi/abs/10.1177/0950017013479829">world-wide disconnect</a>. The ILO, OECD and IMF have all <a href="https://www.oecd.org/g20/topics/employment-and-social-policy/G20-labour-markets-outlook-key-challenges-and-policy-responses.pdf">noted</a> that there is a deep problem in the wage-productivity nexus – wages have not kept up with productivity! </p>
<p>The key challenge today is not “productivity” per se, but rather how gains from increasing productivity are distributed and used. Given the <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2013/Economic-Roundup-Issue-2/Economic-Roundup/Income-inequality-in-Australia">increasing inequality</a>, it is clear the gains have not been well distributed or deployed. This has resulted in huge gains for upper income earners. That, in turn, has driven inflation for assets like property and shares. </p>
<p>The productive performance of the economy or quality of social services has suffered commensurately. In short, the 30-year experiment in neoliberal policies – including attacks on labour standards like award wages – has failed. This, and not the alleged “unproductive” performance of low-paid workers, is the problem. </p>
<p>While shareholder value may have been maximised, the gains for society at large have been modest. Worse, things like <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0">job quality</a> have fallen as a result.</p>
<p>Further, while some low-paid workers do live in high-income households, we should keep <a href="https://www.fwc.gov.au/documents/sites/wagereview2017/submissions/ausgovsub.pdf">some facts</a> in mind.</p>
<p>The first is that in the bottom 20% of households hardly anyone works – they are either on income support or retirees. When this sub-population is included, then low-paid workers are, by definition, in the “top 80%”. But when the data for households with working earners are considered separately, the majority of low- and middle-wage workers <a href="http://trove.nla.gov.au/work/10215750?selectedversion=NBD25084709">live with other low- and middle-wage earners</a>.</p>
<p>The rest of the low- and middle-wage earners who live in wealthy households are often wives with well-paid spouses, and young people, many of whom are students. But cutting wages for these groups will also deepen well-known problems. Marriages break up and women can become totally dependent on their low-paid jobs. Many young people are living at home longer because housing is becoming unaffordable.</p>
<h2>Enough with the failed experiment</h2>
<p>The government has <a href="https://www.fwc.gov.au/documents/sites/wagereview2017/submissions/ausgovsub.pdf">argued</a> that targeted income support provided through the social welfare system is better for “meeting the needs of low-paid households”. This argument is flawed on two grounds. </p>
<p>First, it would support a wages policy that makes things worse and not better. Second, there are no budget submissions to increase social policy expenditure by the billions of dollars necessary to compensate for any cut in the wages of low-paid workers. </p>
<p>The recent decision to <a href="https://theconversation.com/au/topics/penalty-rates-3725">cut Sunday penalty rates</a> for low-paid hospitality and retail employees has created a lot of indignation. Growing numbers of people are uneasy about how we treat our lowest-paid workers. This unease is well founded. Cutting living standards of the lowest-paid workers will not help fix our current economic malaise – in fact, it will make the situation worse. </p>
<p>There is now ample evidence and a growing policy research literature on how to nurture more sustainable and inclusive approaches to economic development. The nation would benefit immensely if we stopped the failed neoliberal experiment we have all been subjected to over the last three decades.</p><img src="https://counter.theconversation.com/content/75532/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Buchanan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Employer groups are calling for a cut in real wages for low paid workers, but this would only exacerbate current problems.John Buchanan, Head of the Discipline of Business Analytics, University of Sydney Business School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/632282017-01-26T16:02:15Z2017-01-26T16:02:15ZHow globalisation brought the brutality of markets to Western shores<figure><img src="https://images.theconversation.com/files/154386/original/image-20170126-30410-ceuiut.jpg?ixlib=rb-1.1.0&rect=377%2C33%2C1394%2C938&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/47997385@N00/16671154594/in/photolist-rpb2rU-74XjFQ-5wNCES-aBQ9y2-7XcmS6-myDGwt-dntUxm-pUqfBY-hxmBDe-a4u7aw-oa7E4y-8kwtZq-4VzhLz-a8cdrz-3bBbZj-j98JBn-r97Fj9-dq8sDC-6M9YVu-cjHsFb-4FGfCU-7KVXw5-bzRQ6K-CUfqpT-9NGKPy-7E3Hgu-dq8iog-aStPtP-9itvqs-cjHrvS-j9akRg-dugFe5-dSTNGi-ecAx9o-aCBqaF-qpbhaE-ikgqdz-rpaWxq-fQZ5Sd-5bHe6b-soLxR8-dGtnhq-pE6aCK-aPbg7V-3LzLci-9cmtqw-i7kAN1-spx285-snpxA1-s4zRjC">objectivised/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>The story of contemporary globalisation is, at its heart, the story of how we created a vast and impoverished working class. It is abundantly clear that the dynamics behind this have now hit home. First <a href="https://theconversation.com/uk/eu-referendum-2016">Brexit</a>, then Donald Trump. We have been told that these votes were a primal scream from those forgotten parts of society. </p>
<p>Both campaigns identified immigration as a core cause of worker impoverishment and social exclusion. Both argued that limiting immigration would reverse these disempowering trends. It is true that poverty remains high and has even been expanding <a href="https://www.theguardian.com/society/2015/jun/20/child-poverty-rise-uk-halts-progress-charities-claim">in the UK</a> <a href="https://www.theguardian.com/money/us-money-blog/2014/sep/16/us-census-bureau-stagnant-report-figures">and the US</a>, but the cause, and the solution, lie far deeper. </p>
<p>According to the charity Oxfam, one in five of the UK population live below the official poverty line, meaning that they experience life <a href="http://policy-practice.oxfam.org.uk/our-work/inequality/food-poverty">as a daily struggle</a>. In the US, the richest country in world history, one in five children <a href="https://www.theguardian.com/money/us-money-blog/2014/sep/16/us-census-bureau-stagnant-report-figures">live in poverty</a>. In the UK, austerity has played a role but is not the only cause. According to a Poverty and Social Exclusion project published early in <a href="https://www.parliament.uk/biographies/commons/george-osborne/1458">George Osborne’s</a> first wave of austerity, the proportion of households that fell below society’s minimum standards <a href="http://www.poverty.ac.uk/pse-research/going-backwards-1983-2012">had already doubled</a> since 1983. </p>
<p>Poverty pay and working conditions are proliferating across the UK. A recent study of the clothing manufacturing sector around the city of Leicester found that employers often consider welfare benefits as a “wage component”, forcing workers to supplement sub-minimum wage pay with welfare benefits. In this sector 75-90% of workers <a href="http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/">earn an average wage</a> of £3 an hour. Companies get round the law by paying cash-in-hand and by grossly under-recording the hours worked. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/154368/original/image-20170126-23867-y1xtpb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Worker rights no longer set in stone.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/warsaw-poland-august-12-social-realist-557580751?src=53nRAmdcgiIhVP8F6EXM6Q-1-23">Martyn Jandula/Shutterstock</a></span>
</figcaption>
</figure>
<p>Recent news <a href="https://theconversation.com/hermes-inquiry-shows-how-unions-are-finding-new-forms-of-leverage-67411">about working conditions</a> at Sports Direct, Hermes, Amazon, and others show that far from being an isolated case, the Leicester example is part of an increasingly common trend towards low-wage, exploitative practices, greatly facilitated by a state-directed <a href="https://theconversation.com/how-relevant-are-the-tuc-and-unions-today-65183">reduction in trade union power</a>. </p>
<h2>Income attacks</h2>
<p>Mainstream portrayals of globalisation present it as a relatively benign market expansion and deepening. But this misses out the bedrock upon which such growth occurs: the labour of new working classes.</p>
<p>Following the end of the Cold War, the global incorporation of the Chinese, Indian and Russian economies served to <a href="http://eml.berkeley.edu/%7Ewebfac/eichengreen/e183_sp07/great_doub.pdf">double the world’s labour supply</a>. De-peasantisation and the establishment of export processing zones across much of Latin America, Africa and Asia has enlarged it even further. The International Monetary Fund calculates that number of workers in export-orientated industries <a href="https://www.imf.org/external/pubs/ft/weo/2007/01/pdf/text.pdf">quadrupled between 1980 and 2003</a>.</p>
<p>This global working class subsists upon poverty wages. Forget the problems in the clothing sector around Leicester, The Clean Clothes Campaign found that textile workers’ minimum wages across Asia equate to as little as 19% of their <a href="http://www.cleanclothes.org/resources/national-cccs/shop-til-they-drop">basic living requirements</a>. To survive they must work many hours overtime, purchase low quality food and clothing, and forego many basic goods and services. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/154375/original/image-20170126-10546-1v68t1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cut from the same cloth? Workers in Asia.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/asiandevelopmentbank/15927526085/in/photolist-3yUhPb-qgsJAH">Asian Development Bank/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>A core element of globalisation has been the outsourcing of production from relatively high-wage northern economies to these poverty-wage southern economies. This enables firms to pay workers on the other side of the world 20 to 30 times less <a href="http://example.com/">than former, “native” workers</a>. They can then pocket the very significant cost difference in profits. For example, Apple’s profits for the iPhone in 2010 constituted over 58% of the device’s final sale price, while <a href="http://pcic.merage.uci.edu/papers/2011/value_ipad_iphone.pdf">Chinese workers’ share was only 1.8%</a>. </p>
<p>Outsourcing is celebrated by proponents of globalisation because, they argue, rather than produce goods expensively, they can be imported much more cheaply. This is true for many economic sectors in the global north, of course, but the downside is that wages and working conditions in remaining jobs are subject to colossal downward pressure. </p>
<h2>Not working</h2>
<p>What can be done? Limiting immigration will have no effect on these global dynamics, and may exacerbate them. You see, if wages are pushed up by labour shortages after any block on immigration, then the pressure and the incentive for firms to further outsource production, or to relocate, will increase. The anti-immigrant rhetoric and the mooted solutions of Donald Trump, UKIP, and much of the UK Conservative party will not help native workers one bit. Nor are they intended to. Rather, they represent a divisive political strategy designed to keep at bay any criticism of a decades-long assault on workers’ organisations. </p>
<p>For a problem brought about by globalisation it should shock no one that the progressive solution to poverty wages at home and abroad must be a global one. One thing that could work is the establishment of living wages across global supply chains. This would increase the price of labour in the global south, which in turn would limit some of the downward pressures that poverty wages here exert upon global north workers’ pay and conditions. </p>
<p>Doubling the wages of Mexican sweatshop workers would increase the cost of clothes sold in the US <a href="https://academic.oup.com/cje/article/28/2/153/1681263/Global-apparel-production-and-sweatshop-labour-can">by only 1.8%</a>. Increasing them ten-fold would raise costs by 18%. That cost increase can either be borne by northern consumers, who are themselves increasingly suffering from the wage-depressing dynamics of globalisation, or by reducing, only slightly, outsourcing firms’ profits. The outcome depends on politics and an understanding from voters that the dynamics that pushed towards Brexit and Trump are rooted in the systemic dynamics of corporate-driven globalisation. Contrary to its supporters claims, this mode of human development is based upon the degradation of labour worldwide. </p>
<p>The key question here is whether companies can be convinced to raise, significantly, their workers’ wages? Given capitalism’s cut-throat competitive dynamics, probably not right now. But there are many workers’ organisations toiling to achieve such objectives across the globe. Recognising that success in these struggles would contribute to improving the conditions for workers in the global north is a small, but necessary, first step towards realising these goals.</p><img src="https://counter.theconversation.com/content/63228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Benjamin Selwyn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In work poverty is a sign the icy tide of capitalism is now lapping at our ankles in the global north.Benjamin Selwyn, Professor of International Relations and International Develpoment and Director of the Centre for Global Political Economy, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/689362017-01-10T12:19:01Z2017-01-10T12:19:01ZHow to calculate the economic impact of grief<figure><img src="https://images.theconversation.com/files/151926/original/image-20170106-18656-evmikx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finding a way forward.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-546723670/stock-photo-dramatic-photo-of-a-bridge-a-winters-day.html?src=nz9cn9d80A6-gvgeka7pVA-3-52">Shutterstock</a></span></figcaption></figure><p>The death of a child is one of the most traumatic experiences that a parent can experience. Those who do experience it can struggle to recover. Child loss leads to intense grief and depression. Many affected parents <a href="http://research-information.bristol.ac.uk/en/publications/the-economics-of-grief(5446df32-8942-4605-bbb6-4fb4e9eaa22a).html">state</a> even decades later that their sense of joy in life has simply never returned. </p>
<p>These changes may also have an effect on the parents’ economic well-being. </p>
<p>Now, it might seem callous to link the huge pain of mourning for a lost child to the implications for the parents’ earnings. As the stereotype suggests, it takes an economist to quantify emotions in terms of money. And I admit that the economic impact is of second order importance when seen in the light of the <a href="https://theconversation.com/why-prolonged-grief-should-be-listed-as-a-mental-disorder-4262">intense grief</a> in such heartbreaking circumstances. </p>
<p>But there are sensible reasons for examining the long-term impact on economic health. Deaths due to traffic accidents or medical malpractice may often result in financial compensation. In such cases, one should take future income losses for the parents into account. </p>
<p>Perhaps more importantly, not all parents suffer to the same extent in terms of their earnings. <a href="http://research-information.bristol.ac.uk/en/publications/the-economics-of-grief(5446df32-8942-4605-bbb6-4fb4e9eaa22a).html">Our data show</a> that many years after the loss of a child, some parents earn 30% less, year after year after year, whereas others start with an income loss of 10% but then almost fully recover their income loss some six years later. By following parents over time, we can learn a lot about what drives these differences. Is there some event after the child loss that increases the likelihood of a downward spiral? And if so, can we use policy measures to prevent that from happening? </p>
<p>Studying the economic effects of child loss may also shed light on effects of grief in general. Grief can be triggered by many other, less dramatic, events, such as the death of a more remote family member or the end of a relationship. If we see that the effect on the father’s earnings depends on the gender of the child and on the household composition at the time of loss then we may be able to deduce more general insights about what drives the severity of grief responses. This is what we set out to do in our research.</p>
<p>Much of the existing literature on child loss focuses on the <a href="https://theconversation.com/death-and-families-when-normal-grief-can-last-a-lifetime-32959">intensity of the grief</a> itself. As child loss is rare, and as many affected parents are not in the mood to be interviewed by academic researchers, these studies often end up with very small numbers of parents available as study material for interviewing. It is difficult from a practical point of view to follow them up years after the child loss, or to gain access to comparison groups of parents who were in the same situation but who did not experience child loss. </p>
<p>In <a href="http://research-information.bristol.ac.uk/en/publications/the-economics-of-grief(5446df32-8942-4605-bbb6-4fb4e9eaa22a).html">our research</a>, we took a radically different approach. We did not talk to the parents. Instead, we used population registers following the whole population of a country (Sweden) for 11 years (1993-2003) to observe child deaths and the circumstances in the household before and after the death. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/151930/original/image-20170106-18662-y4dfxn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">We need to talk about grieving.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>The registers provide information on income, employment, use of unemployment benefits and sickness benefits, marital status, health, and fertility of the parents. Since the whole population is covered by the registers, we can compare the fate of the affected parents to that of parents who did not experience child loss but who otherwise lived in similar circumstances. </p>
<p>In many countries, such data is not available for research. Perhaps needless to say, the data protection measures imposed on us are extremely strict.</p>
<h2>The cost of loss</h2>
<p>We found that the economic well-being of the parents suffers for a long time after the intense grief has subsided. In addition, parents who lose a child are more likely to leave employment, get divorced, and experience a deterioration in mental health. </p>
<p>For example, the chances of being out of work some years after the loss is up to 9% greater than if the child had not died. In the first years after the loss, the probability of hospitalisation for mental health problems is two to three times higher than otherwise. Of course, these are average effects, and there are many bereaved parents who are less affected. </p>
<p>The effects do not depend on the age or birth order of the child or on family size. Whether the child is a son or a daughter does not matter either, with one exception. If a family has more than one daughter and one of them dies then the father seems to be less affected than if the family has multiple sons of which one dies. To be precise: in the second scenario the father’s income goes down more significantly than in the first. For mothers, we do not see such differences.</p>
<p>It is understandable that a grieving parent wants to quit work in such unbearable circumstances. But to do so may trigger a downward sloping path towards irrevocable adversities. After a substantial amount of time out of work, it becomes more and more difficult to find a job again. </p>
<p>These results suggest that it is important to communicate to parents who have just lost a child that they should continue participating in the labour force. In addition, if such parents do actually quit employment, it may be sensible to encourage them to enter tailored active labour market programs and therapies to prevent a downward spiral in their subsequent life.</p>
<p>Talking about death <a href="https://theconversation.com/coping-with-bereavement-and-grief-lessons-from-history-9088">is never easy</a>. But if we can anticipate the economic problems that bereaved parents are likely to face, it may be possible to help them avoid the additional pain of financial destitution.</p><img src="https://counter.theconversation.com/content/68936/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gerard Van den Berg does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Searching for a sensitive route to the practical aftermath of tragedy.Gerard Van den Berg, Professor of Economics, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/546132016-02-16T17:23:54Z2016-02-16T17:23:54ZHow a softly-softly approach could make Big Tobacco turn over a new leaf<p>Making and selling cigarettes may not be an edifying business, but it is a very lucrative one. In 2013 the profit of the world’s top six tobacco companies was US$44.1 billion – <a href="http://www.tobaccoatlas.org/secondary-topic-tax/economics/">equivalent to the combined profits</a> of Coca-Cola, Walt Disney, General Mills, FedEx, AT&T, Google, McDonald’s and Starbucks. The problem is that this profit is made almost entirely from a product that kills many of its long-term users.</p>
<p>Smoking remains the leading cause of preventable premature death. Globally, tobacco use has <a href="http://3pk43x313ggr4cy0lh3tctjh.wpengine.netdna-cdn.com/wp-content/uploads/2015/03/TA5_2015_WEB.pdf">killed 100m people in the 20th century</a>, much more than World Wars I and II combined. As a snapshot, more than <a href="http://www.hscic.gov.uk/catalogue/PUB17526">78,000 people</a> were killed in England in 2013, and it has been estimated that the total cost of tobacco use in England is <a href="http://www.ash.org.uk/files/documents/ASH_121.pdf">about £14 billion a year</a>.<br>
To address this, there needs to be a change in how governments deal with the industry. The relationship now is adversarial, and it’s not hard to see why: Big Tobacco exists to deliver nicotine to addicted smokers, who then develop illnesses which the state must pay to treat. </p>
<p>Governments have made this business more difficult over time, through higher taxation and advertising bans, but tobacco firms continue to thrive by selling significant quantities of deadly cigarettes at high prices. Big Tobacco firms listed on the FT500 global stock index are currently <a href="http://www.ft.com/cms/s/2/a352a706-16a0-11e5-b07f-00144feabdc0.html#axzz40ENzWNv4">valued at more US$550 billion</a>, which suggests they will not be going out of business any time soon.</p>
<p>It is time for governments to add some nice cop to the nasty; time to guide the world’s major tobacco firms away from their core business with economic incentives that encourage the marketing of less harmful alternatives.</p>
<h2>Responding to threats</h2>
<p>At the moment, companies fling themselves into bitter <a href="http://www.nolo.com/legal-encyclopedia/tobacco-litigation-history-and-development-32202.html">legal battles</a> to protect their markets against restrictions that seek to improve public health, but which damage the industry’s ability to make money. Just consider the millions being spent as Big Tobacco challenges the UK government over the latest measure that <a href="http://www.bbc.co.uk/news/business-35058074">requires standardised tobacco packaging</a> and the failed efforts put <a href="https://theconversation.com/australias-plain-packaging-win-over-philip-morris-should-take-the-heat-off-isds-52541">into stopping</a> a similar measure in Australia. </p>
<p>Not only do such expensive battles make it harder to protect public health, but existing public health policies also unintentionally trap the industry in the business of making very profitable but deadly cigarettes. Measures such as advertising bans and restrictions on using their brands outside the field of tobacco make it hard for the industry to diversify. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/111572/original/image-20160215-6548-jphu0x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A 1946 Philip Morris ad plays fast and loose.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/29069717@N02/12824533445/in/photolist-aeZDCK-af3rNC-pJYY65-qCnd91-p4Ms7T-ftiD51-kxg5ZB-97a7hH-nkQzWD-771Tjj-771V19-8MCUGP-nVoinZ-aobYSE-5dcHhN-xNKogS-4y2kbm-5A44mr-76WYoR-tRu1nd-5KMWUM-7P6T1Z-hcY4R-5f9boY-7agG2Q-dAAc6X-kJykFF-dEi3v7-bMyDJg-amgitj-7AEcSJ">Classic Film/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>The tobacco companies could use their profits to follow the example of <a href="http://company.nokia.com/en/about-us/our-company/our-story">companies like Nokia</a>, which moved from operating in rubber and wood pulp to be a leading producer of mobile phones. But the trouble with this type of diversification is that it doesn’t actually give the tobacco firms any incentive to stop making cigarettes. Indeed, they have tried it before, such as in the 1970s when British American Tobacco bought the Argos retail chain and in the 1980s when it dived into the <a href="http://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DO52ADGE?opendocument">UK insurance business</a>. </p>
<p>But what if the state stopped slapping down the industry and instead shepherded it towards a more desirable future, one where public health improves and cigarette firms stop acting like cornered animals fighting for their existence? Why not fix the market so other less deadly products were more profitable instead? </p>
<p>In this situation the industry would actually want its consumers to move away from cigarettes because it would make more money from doing so. The changed market environment would present the firms with a powerful reason to escape from their current business.</p>
<h2>An opportunity in e-cigs</h2>
<p>This might sound fanciful but the growing popularity of e-cigarettes is a real opportunity to act. The <a href="http://www.theguardian.com/society/2015/aug/19/public-health-england-e-cigarettes-safer-than-smoking">available evidence</a> suggests that these products are certainly massively less toxic than smoked tobacco products, and it is likely that they can be precursors of further innovations that lead to even better replacements for cigarettes. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=551&fit=crop&dpr=1 754w, https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=551&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/111474/original/image-20160215-22570-7sru8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=551&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Smoking out a solution?</span>
<span class="attribution"><a class="source" href="http://www.ecigclick.co.uk/">www.ecigclick.co.uk/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>While it can’t be said that there is no risk from using such products, it is clear that there are enormous health benefits if all tobacco smokers were to <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/457102/Ecigarettes_an_evidence_update_A_report_commissioned_by_Public_Health_England_FINAL.pdf">switch to e-cigarettes</a>. Tilting the market so that tobacco firms favour e-cigarettes at the expense of their existing tobacco products would mean the interests of the firms are finally more in line with those of wider society.</p>
<p>They can then either act on such incentives or go the way of companies like Kodak, who went out of business because they were out-competed by rivals more adept at responding to changing market conditions. </p>
<p>Governments have deliberately tilted markets in this fashion before. We switched from leaded to unleaded fuel because governments used a combination of <a href="http://www.eea.europa.eu/publications/late-lessons-2/">carrot and stick policies</a> to shepherd the auto and fuel industries in the right direction. They are doing it again now by favouring clean forms of energy like wind and solar power, over polluting sources such as the burning of coal and gas. </p>
<p>Such transformations, however slow, can happen when the economic incentives change. The desired products are given favourable tax treatments, subsidies and advantageous regulations, while products to be phased out are subject to heavy taxes, onerous regulations, and measures directly constraining the profit to be made. </p>
<h2>Health kick</h2>
<p>You might have spotted a problem with this. Adoption of such deliberately transformative policies in the regulation of the tobacco industry could certainly keep tobacco companies alive for longer (if they succeed in their competition with new market entrants). This shouldn’t be a concern, however. </p>
<p>Many of our current corporations have in the past produced products we now regard as unwelcome. Consider that Coca-Cola’s original formula <a href="http://inventors.about.com/od/cstartinventions/a/coca_cola.htm">contained cocaine</a> or that Grünenthal, the Germany drug company responsible <a href="https://theconversation.com/uk/topics/thalidomide-series">for Thalidomide</a> (which caused many to be born with disabilities) now produces Tramadol, a widely used painkiller.</p>
<p>What matters is that by moving away from the current adversarial approach to tobacco regulation, we can make the companies actually want to fundamentally change the nature of the products they sell. </p>
<p>The firms would then become part of the solution instead of being part of the problem, and most importantly, we could rapidly achieve a public health breakthrough of historic proportions.</p><img src="https://counter.theconversation.com/content/54613/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>J. Robert Branston has received funding from Action on Smoking and Health (ASH) and the National Institute for Health Research (NIHR). The views expressed in this publication are those of the author and not necessarily those of the NHS, the National Institute for Health Research, the Department of Health, or ASH. The responsibility for any errors remains entirely with the author.</span></em></p>Vaping has given governments a huge opportunity to cajole cigarette companies towards better public health.J. Robert Branston, Senior Lecturer (Associate Professor) in Business Economics, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/497872015-10-29T13:58:24Z2015-10-29T13:58:24ZTargets to bring women into the boardroom are missing the point<blockquote>
<p>When a measure becomes a target, it ceases to be a good measure. (Goodhart’s law)</p>
</blockquote>
<p>Women should make up a third of boardroom positions at the UK’s biggest companies within five years. This conclusion, <a href="http://www.theguardian.com/business/2015/oct/29/a-third-of-boardroom-positions-should-be-held-by-women-uk-firms-told">from a government-backed report compiled by Lord Mervyn Davies</a>, a former banker and trade minister, is Britain’s latest effort to redress a problem that affects the corporate sector worldwide.</p>
<p><a href="http://www.ft.com/cms/s/0/96f65730-65da-11e5-a57f-21b88f7d973f.html#axzz3pxZyeP7K">Proposals</a> to increase the number of female directors are based on the idea that, regardless of concerns over equality, this will be beneficial for governance and, ultimately, firm performance. These views have been at the heart of a number of reforms aimed at increasing female representation on executive boards. </p>
<h2>Quota, unquota</h2>
<p>These range from the requirements in the US and in the European Union for firms to disclose their gender diversity policy in board recruitment, through to enforced gender quotas. Recently, <a href="http://www.nytimes.com/2015/03/07/world/europe/german-law-requires-more-women-on-corporate-boards.html?_r=0">Germany</a> became the latest country to set a gender quota for corporate boards. Our research indicates why these measures are not likely to address the more fundamental issue of inclusive decision making.</p>
<p>In the UK, women now fill a quarter of FTSE 100 director roles, a fact which is highlighted in Davies’ report, and which indicates clear progress since that target was set in 2011. The report also <a href="http://www.ft.com/cms/s/0/d0268198-7d85-11e5-98fb-5a6d4728f74e.html#axzz3pwmFQyxQ">makes the new target</a> for a third representation applicable to 150 more companies. </p>
<p>This comes at a time when the EU is contemplating <a href="http://ec.europa.eu/justice/newsroom/gender-equality/news/121114_en.htm">mandatory gender quotas</a> for listed firms. Now, meeting an arbitrary headline target on gender diversity is a step in the right direction, but legislation can be too blunt a tool to tackle the genuine issues of gender diversity.</p>
<h2>Evidence hunting</h2>
<p>Even though the rationale for improving gender diversity is clear, there is surprisingly little evidence to support the economic case for increasing female representation on corporate boards. The evidence that exists for the US and the UK is not supportive of a positive effect from female board representation. </p>
<p><a href="http://personal.lse.ac.uk/FERREIRD/gender.pdf">One study</a> of US companies found having females on the board had a negative impact on firm performance, despite better attendance records and more effective monitoring in firms with more gender-balanced boards. For the UK, there is <a href="http://onlinelibrary.wiley.com/store/10.1111/ecoj.12102/asset/ecoj12102.pdf?v=1&t=ig984pxf&s=44de462c74c9b2bb4ae1dcd521357ed58383b489">no evidence</a> that the gender composition of the board affects firm performance. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100137/original/image-20151029-15355-1uo7iqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Slotting into place. The perils of tokenism.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/dragontomato/4975089626/in/photolist-7asdoC-7KVErk-7aoozz-7aoopD-94EcJg-4bF9WJ-5MXXY3-6oAPzK-diqddi-hoCMx-HcRBo-7aooJn-7KZCUS-8zCCPm-anjjna-8LZ7F3-5hzsu3-5hv6W2-6oAPDF-5tQgpm-9q6mfB-4ELoJy-qpJJVo-5hv6yi-5hv7xZ-bZN5Bs-2YRnSq">Andrew_Writer</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>There is also little evidence that <a href="http://ftp.iza.org/dp8266.pdf">quotas are successful</a> in bridging the gender wage gap. A potential danger with quotas is that it can quickly degenerate into tokenism.</p>
<h2>Adding value</h2>
<p>To focus simply on a certain proportion of female directors is to miss the bigger picture. The association between board gender diversity and good governance is more complex than imposed gender quotas. That the economic case for board gender diversity doesn’t hold up well under statistical scrutiny indicates that organisations may not reap the benefits of gender-diverse boards automatically. </p>
<p>In <a href="http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2015_023.pdf">our recent research</a> we examine the mechanisms through which female directors can add value to the firm. In particular we look at the integration of female directors in the governance mechanism. </p>
<p>To a great extent the way a board works is through committees that focus on narrowly defined jobs, such as the nomination committee, remuneration committee, and the audit committee. These groups of executives articulate the goals and strategic plans of the organisation in an area, and serve as a source of specialised expertise. They are fertile ground to closely examine the appointment of female directors, and the performance impact of such appointments.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100145/original/image-20151029-15348-1qjnqk5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">From two out of 27 to 25%…</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/center_for_jewish_history/3420953499/in/photolist-6dihhT-4wVHmj-bBZitR-dPQLqq-mXzTyQ-6xmG7C-bu7Enk-gWc8Co-gJAFuK-gJzjZ1-gJzBbt-61UPSK-dNfPob-6LmWc2-dTBLxF-gJzmvC-by31c8-dSz2kd-bk88bN-bk8787-aewke7-uxjJ7m-bk7XNQ-e1DS8N-bp8DzY-8dEa99-vrDHnw-atJETW-76D4Ex-eai81B-kXLgC7-hn44wy-hn3yPz-hn44w3-hn3yV6-hn44zE-hn58uF-hn3ZNy-hn3yRi-hn3Zvu-hn3yVr-hn3yPK-hn58JD-hn3yEr-hn58Mp-hn3Zzh-hn58H6-hn58sg-hn3yA8-hn3ZDA">Center for Jewish History, NYC</a></span>
</figcaption>
</figure>
<p>The point is that although regulatory and institutional pressures can lead to appointments of female directors to the board, they do not necessarily ensure that those women are directly involved in the nuts and bolts of governance. For any director to add value, they need to be appointed to positions in which they can influence governance, and consequently firm performance.</p>
<p>In our sample of large European firms, women are more likely to be appointed to monitoring-related committees, like the audit committee. However, they are less likely to be appointed to nomination and remuneration committees, where new CEOs are appointed and where pay and bonuses are set. The fact that fewer female directors make it on to these committees might partially explain the persistence of a gender pay gap at executive level. </p>
<h2>Numbers game</h2>
<p>Appointing a single female director to the board, or increasing the proportion of female directors seems to have no significant impact on firm performance. But, we find that firms do gain value if they appoint female directors to key board committees. </p>
<p>Let’s delve into the statistics. We found that a one standard deviation increase in the proportion of female directors on key committees enhances firm performance by 0.6 of a standard deviation, in other words a 5% increase in firm value <a href="http://www.investopedia.com/articles/investing/110613/market-value-versus-book-value.asp">based on market-to-book value</a>. In comparison, a one standard deviation increase in female board representation overall increases firm performance by a more modest 0.18 of a standard deviation, or a 0.9% increase in firm value. </p>
<p>Simply put, the performance benefit to the firm of appointing female directors to the key committees is three times greater than just appointing them to the board. The implications are important and twofold. First, appointing women to the board in response to regulatory pressure has, at best, a limited effect on firm performance. Second, putting women on the key committees may be indicative of a flexible board that simply includes high-ability individuals in the governance mechanism to enhance firm performance.</p>
<p>Quotas don’t necessarily advance the underlying cause of gender equality. Female directors appointed for Norwegian firms to meet the gender quota earned the unfortunate <a href="http://www.theguardian.com/business/2011/jul/01/norway-golden-skirt-quota-boardroom">“golden-skirts”</a> epithet. </p>
<p>But there is little evidence that targets are any more effective. Even though FTSE 100 companies have achieved the target of gender diversity set by Lord Davies, we believe that it is the deep integration of female directors into the mechanism of governance that is the key challenge for modern corporations. Companies need to be encouraged to embed female directors in the decision-making process. Without that, new female director appointments designed to meet a new target of 33% representation, risk drifting once more into the realm of token symbolism.</p><img src="https://counter.theconversation.com/content/49787/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Measures to bring more female directors into the executive suite are failing to boost performance. Here’s why…Swarnodeep Homroy, Assistant Professor in Economics, Lancaster UniversityColin Green, Professor of Economics, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.