Free Socrates Cafe Online, Tue, Fri, Sat, 1st. Sun, 6:30 pm Denver MDT Correct Meeting ID and password posted below at 6 pm.

Thursday, September 07, 2006

Today is David Packard's birthday, he was born in 1912.

He and his business partner Hewitt were the ultimate entrepreneurs, taking Hewitt-Packard from garage to Fortune 500. The key to their growth, most agree, was the HP Way of treating employees.

They were criticized for the HP Way in the beginning. This is from a very interesting article about them in the newsletter of their Alma Mater, Stanford:

“Somehow, we got into a discussion of the responsibility of management,” Packard later told Peninsula journalist and historian Ward Winslow, ’52. “Holden made the point that management’s responsibility is to the shareholders -- that’s the end of it. And I objected. I said, ‘I think you’re absolutely wrong. Management has a responsibility to its employees, it has a responsibility to its customers, it has a responsibility to the community at large.’ And they almost laughed me out of the room.”

I wonder what David Packard would think of HP today.

Scott Shires, owner of the Campaign Compliance Center spoke to our South Denver Optimist Club yesterday.

Shires told us that 10 wealthy individuals are controlling the political process in Colorado. Today most votes are cast through absentee ballots, so this fall the elections will be decided by October 15. No wonder the grassroots is dieing! Grass roots get out the vote efforts on election day are now nearly useless.

Scott suggests changes to restore the power of the common person: 1) return to voting on one day (Scott suggests April 16, when the sting of paying taxes is fresh) and 2)return to all money going through candidate committees with full disclosure, eliminate the friends of the rich, the special committees that allow then to spend as they please, the "Small" donar committees, the issue committees that push through the pet projects of the powerful, and the 527 committees.

I wonder if it is time for a constitutional convention in Colorado?

This article appeared in this morning's paper. What do you think? Is there a growing problem with the difference in pay between the rich and the poor in this country? This is probably the most important economic question we face in America today. What is the truth?

The Populist Myths on Income Inequality
The New York Times, September 7, 2006

There are two schools of thought on income inequality. Members of the first school — populist politicians and a few economists — say the key issue is economic power.

The haves exercise more power over the have-nots. As a result, corporate profits soar, while wages stagnate. Money-drenched politicians push through shareholder-friendly trade deals that outsource American jobs while job insecurity skyrockets. C.E.O.’s get absurd salaries while the 99 percent of earners enjoy few benefits from productivity gains. Unions are weakened while manufacturing wages tumble and the middle class suffers.

In short, populists argue, the market is broken. The rules are rigged. The reigning ideology in Washington must be upended. Unions must be revived. Globalization needs to be reorganized.

The problem with this narrative is that it doesn’t really fit the facts. First, workers over all are not getting a smaller slice of the pie. Wages and benefits have made up roughly the same share of G.D.P. for 50 years. Second, offshore outsourcing is not decimating employment. According to the Bureau of Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than the ones destroyed.

Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago.

Fifth, declining unionization has not been the driving force behind inequality. David Card of the University of California, Berkeley, has estimated that de-unionization explains between 10 and 20 percent of the rise in inequality, and that effect was probably strongest decades ago. These days the working class is not falling behind the middle or upper-middle class. Instead, the big rise in inequality is within the office parks, among people who were never unionized. Middle managers are falling behind top executives.

The populists, who usually live in university towns, paint a portrait of unrelieved misery that badly distorts reality. It’s true that middle-class wages are lagging, but as Stephen Rose points out in The American Prospect, over the past 25 years the share of working-age adults in households making over $100,000 has risen by 13 percent while the share of households making less than $75,000 has dropped by 14 percent — after adjusting for inflation. The median household income of people in their prime working years (25-59) is $63,000. More than half of Americans have no credit card debt, and half of those who do owe less than $2,200.

Workers continue to see their wages rise as they age. The typical male worker with some college but no degree has seen his income rise from $34,000 in 2000 to about $40,000 today.

Members of the second and much more persuasive school of thought on inequality say the key issue is skills. Lawrence Katz, formerly of the Clinton administration, now of Harvard, puts it this way: Across many nations, the market increasingly rewards people with high social and customer-service skills.

A contractor who can work with customers, design kitchens and organize jobs may earn five times as much as one of his workers who has identical cabinetry skills. An office worker who is creative, charismatic and really good in fast-changing interactive settings now gets paid much more than a disciplined middle manager who excels at routine tasks.

Katz describes a polarized economy. Wages are rising in the bottom quartile for workers who provide personal services. The middle is lagging. The real rewards are going to the top 10 percent, especially to those relative few who have the skills to transform organizations from the top.

In other words, the market isn’t broken; the meritocracy is working almost too well. It’s rewarding people based on individual talents. Higher education pays off because it provides technical knowledge and because it screens out people who are not organized, self-motivated and socially adept. But even among people with identical education levels, inequality is widening as the economy favors certain abilities.

In short, government policy is not driving inequality and wage stagnation. But government hasn’t done much to effectively address the problem either, even though per-capita education spending has more than quadrupled since 1950. What’s needed is not a populist revolt, which would make everything worse, but a second generation of human capital policies, designed for people as they actually are, to help them get the intangible skills the economy rewards.

What would a set of second-generation human capital policies look like? I’ll come back to that in a few days.

No comments:

Post a Comment

Your comment or question here is very welcome! Or to keep it confidential email me at After you post or send it is very helpful if you then call me at (303)861-1447 to make sure I take a look at your comment here or your email. Thanks!