Browsing the blog archives for April, 2014.

Donald Sterling

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I would ordinarily pass on topics such as Donald Sterling’s presumably private conversations. If you’re not familiar with the situation, just Google “Sterling comments” and you can’t miss it. Taped conversations between Sterling—owner of the NBA’s LA Clippers franchise—and his former girlfriend, V. Stiviano, were aired on TMZ. Sterling made some racially charged and likely alcohol-induced comments, and everyone from basketball analysts to the President is airing their disdain.

You can listen to the complete hour-long conversation online if you like. I’m not interested in defending his comments; I can’t. However, there are some important angles people are missing.

Although Sterling appears to have a history of race-tinged comments, he has received a lifetime achievement award from the NAACP and was scheduled to receive another one. Why? My guess is that Sterling made a hefty contribution to the NAACP as part of the arrangement.

There are also questions surrounding the recording. What gives Stiviano the right to record their private conversations anyway? Whatever happened to the left’s so-called constitutional right to privacy? Is this situation connected to the ongoing lawsuit between Sterling’s estranged wife and Stiviano?

Consider the response from the LA Clippers. All 14 of the roster players earn in excess of $1 million annually; five of them make more than $10 million. They are well-compensated professionals. Basketball commentators have been telling us ad nauseum how difficult it is for them to endure such comments from the owner. The players actually considered boycotting their play-off game on Sunday in protest. I’ve had bosses who’ve said some disgusting things in the past, but not showing up for work was never an option.

Then there are calls for Sterling’s scalp, most beginning with, “He shouldn’t be allowed to…” I guess the concept of free speech doesn’t count when you address certain topics. Free speech, even when bigoted, is always the best policy because the alternative is worse; it empowers someone else to decide what speech will and will not be permitted.

Some are demanding that the NBA require Sterling to sell the team. I doubt there’s anything in the charter that gives the NBA widespread jurisdiction over owners’ private conversations. When this point was made to one commentator, his response was quick and clean: “The NBA should find a way. Sterling’s comments are disgusting that he shouldn’t be allowed to own a team regardless of any technicalities.” Really? So contracts are not just technicalities if someone doesn’t like what you say? If you’re willing to overlook this principle and pile on Sterling because you find his comments offensive, don’t be surprised when they come for you. If you think you’re safe, just ask Brendan Eich.

I understand the NBA’s interest in protecting the brand. Nonetheless, the market is completely capable of resolving this situation, and it will if it’s allowed to do so. Season-ticket holders can refuse to renew next year. Advertisers can back off as well. Players who find the terms of their contracts unbearable can refuse to re-sign with the team when they become free agents.

Unfortunately, I’m not sure the market will be allowed to resolve this. The lynch mob is coming for Sterling and will probably get him first.

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Gender & Equal Pay

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The left hates gaps. First it was the income gap. Now it’s the gender pay gap.

The argument goes like this. Women make 77 cents (or fill in any amount less than a dollar) compared to men. The 77 cents figure recently cited by the White House is erroneous according to strict numbers reported by the Bureau of Labor Statistics. Nonetheless, the inference is that of an unfair, male-dominated private sector that arbitrarily and systematically pays women less than men. But even if you want to make the broad generalization that women are victims of discrimination in the workforce, you have to be intellectually honest about the details. Proponents of legislation designed to combat this ostensible discrimination are not, because the facts just don’t work for them.

The first problem is with the calculation of the numbers. Without even considering job categories, it’s obvious that some people work longer hours than others. Historically, men tend to work more hours than women because women typically bear more of the childrearing and home responsibilities. I’m not suggesting that ALL men work longer hours than ALL women—we all know exceptions—but if we are comparing one group to another, we need only consider the averages. When you compare men working 40 hours a week with women also working 40 hours a week, the gap (according to the BLS) is 87 percent.

The second problem is job category. While most jobs are open to both men and women, the two sexes are not equally distributed. Women are disproportionately represented as grade school teachers, secretaries, nurses, and cashiers. Men are more likely to hold positions as firefighters, police officers, soldiers, and auto mechanics. Any serious look at pay differences should be within the same field and should account for obvious individual differences such as experience, education/training, and specific job-related skills. If you do not, you’re just comparing apples to oranges.

The third problem is that of individual choices, such as time off during a career. Studies suggest that pay gaps typically do not exist at the beginning of a career, but can emerge over time. Women are more likely to take time off to bear and raise children, and typically lose ground when they return to the work force. Others choose positions that require fewer hours or “job hassles”—distance from work, overnight travel required with the job, etc.—to accommodate this choice.  These jobs are more “family-friendly” and may pay a little less.

When all is said and done, women and men in the same jobs, working the same hours, with the same experience, and making the same types of career choices earn roughly the same. This should end the argument but it doesn’t. Many on the left claim a form of institutionalized sexism is still at work. For example, they claim that teachers and office workers earn less than many other professionals because most are women. While this theory is impossible to prove, it defies logic. If auto mechanics are paid too much and cashiers too little given the demands of their positions, then more women can train to be mechanics and cash in on the excess wages. Good mechanics are always in demand, and female job applicants with the right skills can have a rewarding career. Most women don’t make this choice, however. The differences in wages across jobs can be attributed to market forces.

But wouldn’t many auto repair shops discriminate against female applicants? I’m sure some in the industry might not give women a fair shot, but this could work the other way around as well. At the end of the day, devoid of government interference, the most successful businesses are the ones that find the best people. Any repair shop owner will tell you that competence drives performance, so anyone who discriminates gets what he or she deserves, less qualified workers.

The gender wage gap argument is easy to counter, but it still has an emotional appeal to many who would rather blame society and/or free markets for various job woes. “Equal pay” legislation is really about government control of employment decisions in the private sector. It’s but a leftist solution searching for a problem to solve. Talking about fixing the “problem” is a powerful political tool without a clear basis in economic reality.

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Is a college degree worth the investment?

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Most academics and politicians say yes and call for more funding and student aid to educate more students. They point to big income gaps between groups of Americans with various levels of education. But with record student loan debt and insufficient jobs in a lackluster economy, it’s difficult to justify the expense in all situations. More and more Americans are asking this question than ever before and for good reason, but the answer is not simple.

So why go to college in the first place? A college education consists of a combination of general education and career preparation. The general education part should help you understand the world in which you live and enable you to make more out of life regardless of your income. The career preparation part should give you the skills you need to enter a chosen field. General education is very important and is not done equally well at all schools. The general left-leaning bias inherent in many courses in arts and sciences is a real problem, but I’ll deal with that on another day. For now, let’s think about the career preparation part as the financial investment.

You can’t evaluate career preparation without considering majors. To put it bluntly, different majors prepare students for different jobs with different market prospects. Majors in areas such as science, business, and engineering offer relatively strong prospects—on average—while majors in the liberal arts are less likely to lead to more lucrative careers. I’m not suggesting that you major only in certain fields, but that you understand the likely outcomes after graduation. My point here is that you can’t consider the value of a college degree without considering the area of study. You’re not comparing apples to apples.

Is the degree worth the cost in time and money? Many recent studies attempt to calculate the average return on degrees from various colleges and universities. The April 5, 2014 issue of The Economist examines costs and job placement statistics, and reports that a degree from the University of Virginia leads the pack with an estimated annual return on investment of 17.6%. Shaw University is the lowest on the list, with an estimated annual loss of 10.9%. Read the story at www.economist.com/news/united-states/21600131-too-many-degrees-are-waste-money-return-higher-education-would-be-much-better.

While it is true that some colleges are—on average—a better “investment” than others, there are two major flaws to studies like this. First, the amount a student actually pays to attend a given school can vary greatly, depending on scholarships, grants, and the like. Second, students who are better prepared for college academically and are better connected are more likely to earn more after school regardless of where they go. In other words, many Ivy League students come from connected families and are destined for a good job after graduation regardless of what they learn in school. Because there are more of these students at some schools than others, it can lead one to conclude that those schools represent a better “investment.” Again, you’re not really comparing apples to apples.

So what do we conclude? Some of my academic colleagues might shoot me, but I’ll say it anyway. Given economic reality, college isn’t for everyone. A good education can be a real asset in both your personal and career lives, but a mediocre one can leave you with false expectations and a lot of debt. College is really an individualized decision. What’s best for you is not best for someone else.

I didn’t answer a burning question, however. Why was a college degree a stronger investment in the past than it is today? The answer has a lot to do with government efforts to increase the number of college graduates, including increases in student aid. Subsidies always raise prices, and this has certainly been the case for tuition. In an era of technology that should improve the efficiency of course delivery, costs have skyrocketed, making it more difficult for students to justify the expense. I’ll get into this on another day.

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GM vs NHTSA

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GM CEO Marry Barra addressed Congress today concerning the ignition switch scandal. Details are still emerging, but the GM crisis strategy remains unchanged:

1. Apologize and “accept full responsibility.”

2. Subtly deflect all of this responsibility to the old, pre-bailout GM.

Both parts of this strategy are critical. The facts cannot be ignored, so GM certainly can’t be seen making excuses. But all of this is complicated by the NHTSA, and this is where it gets interesting.

The general public is not only interested in learning why GM did what it did, but also in learning why the taxpayer-funded regulator appeared to look the other way for years. On the surface, this looks like a battle between two entities that reflect what has gone awry in our economic system–a firm that should have never been bailed out vs. an inept government agency. But there’s a third party involved as well, OLD GM.

OLD GM is the perfect scapegoat. It was run by evil corporatists before Obama and the unions ran them off during the bailout. It is legally responsibility for any and all atrocities before bankruptcy. It shafted both the NHTSA by hiding information and the NEW GM by leaving this mess behind. This is why the second part of the strategy is so important, and it’s easy to detect if you pay attention. Barra uses the term WE when accepting responsibility but constantly refers to the need to figure out what executives in the past were doing. She told Congress that “we have to do a better job sifting through all of the information.” In other words, we need to find out what OLD GM did.

I’m not interested in piling on Barra at this point. We still don’t know all the facts, but things are getting worse and she should be held fully accountable for this crisis as it unfolds. It might be convenient to blame everything on OLD GM, but this is not acceptable. There’s only one GM and Ms. Barra is in charge of it.

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