Category Archives: politics

Federal Reserve: Economist Papers Propose Broad Conclusions without Proper Foundation; No Direct Tie between EUC and Amount of Job Openings

Economics is an art not an exact science, extensive use of Calculus notwithstanding. But just like other social sciences, practitioners must remember that the theories of these fields have very real effects on living, breathing human beings. The United States has seemed to place too much emphasis on an inexact Economics field to impose policy that brings misery to human beings without relief.

The practitioners take relief in absolute maintenance of academic theory at the cost of being blind to human effects of the policy. Economists must realize the limitations of their profession and resist making tremendous conclusions without sufficient foundation–support not only from other economists, but also of observations from other social science practitioners. Economics does not exist within a bubble after all.

In addition, excessive focus on artificial limitations leads to unfair, inaccurate conclusions lending support to the comfortable prevailing opinion or policy choice. The paper described in this post has this unfortunate flaw. The authors propose an artificial limit–the end of the emergency unemployment compensation (EUC) program–and use that limit to state the EUC held back job openings. However, the authors failed to consider the growth of job openings that occurred during the operation of the EUC policy.

This result suggests that EUC had no effect on job openings. This data was in the same chart the authors used to draw their ultimate, and inaccurate conclusion–that EUC seemed to hold down job openings. (The end of the EUC program left millions of people without financial resources and no employment.)

In September 2014, Economist Fatih Karahan Senior Research Analyst Samuel Kapon, and Senior Analyst Kaivan K. Sattar, published a paper, “Do Unemployment Benefits Expirations Help Explain the Surge in Job Openings?” for the Federal Reserve Bank of New York’s Liberty Street Economics web publication. The authors conclude that the end of the EUC program led to a tremendous increase of job openings (the types of jobs that were opened were not discussed unfortunately–this lapse reduces the effectiveness of the paper).

The authors base their opinion on two documents. First, the Diamond-Mortensen-Pissaredes (DMP) model, which, the authors state, “predicts that increases in UI (unemployment insurance benefits) generosity put upward pressure on wages since it becomes more expensive to lure people back into work.” Second, a staff report by Marcus Hagedorn, Fatih Karahan, Iourii Manovski, and Kurt Mitman suggested that UI extensions do put upward pressure on wages, reduce job openings, and raise unemployment. Essentially, following the DMP model’s conclusions.

But the authors’ own chart (Job Openings Level and Rate) contradicts this conclusion–job openings (whether real or effective placeholders–no one knows if the employer was actually going to hire from the posting) did increase generally during the duration of the EUC program–mid-2009 through the end of December 2013. Indeed, there was a sharp increase in early 2014, but given the general increase during the EUC period, it cannot truly be said that the end of the EUC program was the reason for that increase. The authors aver a suggestion, but a lack of presenting other reasons, suggests that this “suggestion” is more than that.

Unemployment and its effects on human beings are real not theoretical. Academic economists participating in policy making have a duty to examine all parts of the problem to ensure that advice provided in such a crucial area as unemployment is complete and accurate. In general, I think the United States commits an error by basing judgments solely on economic models–good within their limits but dangerous once economists go beyond the limits of their profession to offer advice.

Dick Grote: Favors Unjust, Unfair “Rank and Yank” Performance Management, Despite Practical Evidence that Rank and Yank Is a Failed System

Dick Grote, owner of Grote Consulting (“strategy-based performance management”), spoke on NPR’s “The Diane Rehm Show” on March 19, 2014.

I have covered Grote’s unworkable and organizationally destructive “rank and yank” system in this blog. It is the sole basis of his company’s existence–to profit himself and also managers and those employees deemed “high performers” at a cruel and immoral expense of other people’s (80% of the workforce) livelihoods–so it is unsurprising that he zealously defends it in the face of two organizations (Adobe and CEB) that stopped using it because rank and yank inhibits collaborative work practices.

At its best, rank and yank encourages unjust, artificial comparisons of employees with each other (not their work assignments) and permits total and unaccountable managerial power over powerless subordinates. Rank and yank is a system that is properly avoided by rational firms. In addition, employees are not rated against goal achievement (absolute comparison), they are rated based on their relative worth to the company compared with another employee (relative comparison). Grote deceptively skirts the issue knowing that deep analysis of relative comparision will lead to people rejecting it.

Thus, I was disappointed, but not surprised, that Grote uses double talk to present rank and yank’s inherent negativity (displayed in red font color) as positive (dark blue font color).

GROTE

11:17:12

Yes, it is. And what forced ranking is is a pejorative term, and actually, organizations have almost abandoned the use of the term, forced ranking, because it carries so much negative baggage. But the fact is, what forced ranking involves is relative comparison. When we look at evaluating how well a person on a job is done, there are basically two ways we can do it. One is, absolute comparison. How good a job did George do against his goals and objectives and expectations? The other way we can evaluate the performance is through relative comparison.

GROTE

11:17:50

How well did George do compared with how well Mary and Sam and Bill did? And I think both of those are important spectacles to have in the lens, to understand just how well someone has performed.

The issue that causes rank and yank to be a flawed system is managers are given absolute power (in secret) to rate others without facing any sort of accountability. Indeed, Grote expects that the managers will determine for themselves whether they are objective and fair in giving their opinions over a subordinate. The power disparity in the relationship permits rampant, unchecked abuse of the employment relationship in the rank and yank process. [Note in the discussion, below, how Grote pivots from the observation that a supervisor's opinion is subjective to a nongermane discussion of objective and fair. Without accountability for their "opinions" on subordinates, "opinions" from these supervisors will most likely be unobjective and unfair.]

 GROTE

11:26:00

Yeah, well, let’s take a look at the fundamental question, what is a performance appraisal? And the answer to that question is, a performance appraisal is a formal record of a supervisor’s opinion of the quality of an employee’s work. And right away that word opinion seems to vibrate in neon lights because people believe that if it’s someone’s opinion, then it’s necessarily subjective.

GROTE

11:26:30

And, Frank, every time I hear someone say that, I feel sad because what that says is that the person doesn’t know what the word objective means, what it means to be objective. What it means to be objective is to be uninfluenced by emotions or personal prejudices. It means to base your opinion on facts and present those facts — present the examples factually. It means to be fair. And so of course what we want our supervisors to be is to be fair in rendering their opinions.

In order to be truly objective and fair, one solution is to have the subordinate rate the supervisor. This check will resolve the power disparity and provide instant accountability.

Performance Management, Civil Service, & Merit Principles: Discussions Must Be Guided with Sober, Detailed Research and Commitment to Fair & Equitable Treatment; Management Abuse of Authority Must Also Be Addressed

All discussions of performance management within the federal government’s civil service must be done with in-depth, sober, and detailed research and analysis in order to ensure that any system proposed

  • is faithful with the merit principles and all laws of the United States of America,
  • fair and equitable to all those who are subject to the system, and
  • addresses management abuse of authority toward subordinates.

Moreover, vague mentions of “poor performers” must be avoided and replaced with substantiated and detailed examples.

The focus of the Government Executive article, “Wielding the Ax,” seems to be based on the “trials” of the manager trying to fire an undefined “poor performer.” Yet, the article merely passes over a tremendous problem identified by the Merit Systems Protection Board (MSPB): The managers cannot identify proper standards. (Emphasis, added, mine.)

In a 2009 report (quote is from the press release), MSPB said that complexities involved in performance management—not the law—present the greatest challenge to handling poor performers. “The agency is required to articulate a performance expectation, measure it and document the extent to which the employee has failed to meet expectations,” said the report. “According to an MSPB survey of proposing and deciding officials, this is where the actions become difficult. Our survey respondents told us that supervisors have difficulty creating standards for performance and documenting how well employees are meeting those standards.”

If management cannot identify standards, how can they rate performance? Lacking standards, it seems that managers are rating on whim, a situation that is unfair to employees.

The managers cited in the Government Executive article seemed to be focused on removal rather than coaching proper performance. Moreover, both managers cited are no longer with their government agencies. [John Palguta, vice president of policy at the nonprofit Partnership for Public Service. Palguta also has worked at the Office of Personnel Management and the Merit Systems Protection Board, the agency that adjudicates appeals from employees related to their job status. Henry Romero, who was associate director for workforce compensation and performance at OPM during the Clinton administration and was reported to be a senior adviser at Virginia-based consulting firm Federal Management Partners.]

In addition, and in fairness, the issue of managerial abuse of power toward subordinates must also be considered in any discussion of performance management. There are very few avenues for redress for suffering employees (especially if the avenues of redress–human relations, EEO, upper-level agency management–agree with or do not care about the employee’s suffering of abuse). Strengthening managerial power to discipline or remove–with severe financial consequences to the affected employee–without considering the plight of these affected persons would be a tremendous injustice.

Moreover, the discussion of performance management flies off in a tangent upon mention of “poor performers.” Yet, this mention of poor performer is not substantiated with clear, specific definitions or examples. The discussion will be best served with serious and detailed research and analysis identifying all of the issues from all viewpoints and with pinpointed, transparent, fair, and equitable solutions.

 

Futility of “Colorblindness”: GOP Demand that Black People Concentrate Only on Today and Forget the U.S.’s Continuing Bias Towards Whites Unreasonable

The “race card” is a term that usually is used to note that race is being discussed in a way that questions the “legitimacy” of the U.S.’s practice of White hegemony. Kathleen Parker, in a Washington Post opinion column, uses this worn-out race-card term.

I am not sure why this race-card terminology has such a hold over discourse on race; social imbalance has been and continues to be a problem. Supreme Court Justice John Harlan spoke openly about White supremacy in his dissent in the court case Plessy v. Ferguson.

The white race deems itself to be the dominant race in this country. And so it is, in prestige, in achievements, in education, in wealth and in power. So, I doubt not, it will continue to be for all time, if it remains true to its great heritage and holds fast to the principles of constitutional liberty. But in view of the Constitution, in the eye of the law, there is in this country no superior, dominant, ruling class of citizens.

Because of this history, race-card discussions, like discussions of “colorblindness,” are useless, as they are really another example of White hegemony. In this case, using the term to reaffirm the superior position of Whites.

United States (population: 308,745,538) (2010 Census)

Race

Percentage of population

Number

White

72.4%

223,553,265

Black

12.6

38,929,319

Native American

0.7

540,013

Asian

4.8

14,674,252

The Republican party (GOP) has a firm view on Blacks in their party–to be acceptable you have to accept all of the GOP’s tenets. Questioning any GOP position makes that person a target of a media devalue and discard campaign (like Parker’s column).

The seeming logical argument of the GOP that I think spurred Parker’s column–

  • The GOP is “colorblind” and has policies that benefit all people, including Black people (who avoid the GOP for some reason) [regardless of what anti-Black racial injustice happened in the past (or currently) in the United States].
  • The GOP supports Supreme Court Justice Clarence Thomas and U.S. Senator Tim Scott (as well as Dr. Ben Carson) (all three of them follow GOP tenets closely)
  • Thus, Black opposition to the GOP is baffling.
  • Critique of GOP’s Black standard bearers by Blacks who are not members of the GOP is unacceptable because it is in opposition to the supposed norm of “colorblindness” and, thus, such activity is “racist” because criticism of a Black person that holds complete fidelity to GOP beliefs is a denial of their freedom to sustain such fidelity.

With this foundation, it becomes apparent that a Black person who holds a non-GOP view (here, Alabama State Representative Alvin Holmes) is not welcome. His statement to critique the wisdom of Thomas and Scott being faithful to the GOP, therefore, had to be condemned.

This expectation of unquestioning support of the GOP in order to be a member of the GOP is itself disturbing.

Federal Reserve Board & Unemployment: FRB Approach to Unemployment Is Too Academic, Indirect and Unjust; Direct, Immediate Action Is Needed

It may be time to remove unemployment from the jurisdiction of the Federal Reserve (Fed); the institution is not well suited to handle unemployment applicable to demonstrable programs but rather academic theories and insular debate. Narrow, esoteric research is relied upon as the sole justification in making policy decisions in an area as vital as unemployment; it does not seem to be the right approach.

The Fed only performs theoretical and high-level monetary policy and banking supervision, making the agency unable to deal with an issue like unemployment in a concrete fashion. Perhaps another agency–for example, the Labor Department–would be much better suited to this role. It would be far more helpful to perform research simultaneously with the initiation with direct programs to help correct unemployment in order to get people back to work and earning money to sustain themselves and their families.

In general, economists cite each other’s work, leaving their research vulnerable to being refuted and dismissed when noneconomist arguments are presented against it. Also, tremendous assumptions are made in these academic works with no presentation of reasons for such assumptions, except the writer’s own thoughts, which may contain unexamined and unacknowledged biases. An example of this point is contained in a paper authored by Alan Krueger, Judd Cramer, and David Cho (KCC) titled “Are the Long-Term Unemployed on the Margins of the Labor Market?”

For example, on pages 40-41 of the KCC paper, the authors conclusion of “It appears that re-employment does not fully reset the clock for the long-term unemployed,” is based on the observation of one chart of data from one survey. Because of the huge ramifications of such a conclusion, more explanation of it is absolutely necessary or a qualification that the observation is solely based on their observation from one survey, period. The survey questions asking the long-term unemployed about their situation are leading; the paper just reports the option most selected. (See page 43 of the KCC paper.)

The paper’s authors also state a curious juxtaposition (carryover paragraph on page 54 of the KCC paper).

A stronger macroeconomy helps the long-term unemployed in part because it raises demand in their previous sectors. But even in good times, the long-term unemployed are often on the margins of the labor market, with diminished employment prospects and relatively high labor force withdrawal rates.

Well, if there were a stronger macroeconomy, most of the unemployed would be working. The paper is convoluting two themes: the long-term unemployed frozen from the job market due to stubbornness and those long-term unemployed persons who are frozen out of the job market because the jobs in their sector disappeared. Yet, the result for both situations would show as the same in the survey used in this paper.

If the Fed is to continue with unemployment, there must be immediate activity (not just more academic research) to generate programs to directly assist with getting people back to work. The current state of affairs is an injustice to taxpayers in need of real assistance.

[Note: I think the critique of the Federal Reserve (Fed) and its responsibility is valid; simply viewing the issue as academic alone does not produce real-world programs to address the problems. However, it seems that the new Chair of the Fed, Janet Yellen, seems to recognize this critique and is attempting to address it (although the Fed's action at best is indirect--to make moves to try to coax the financial markets to act on the economy. This indirectness is problematic at a time where the market signals an economic recovery and the public still sees recessionary effects. It is time for direct action; action that seems to be beyond the ability of the Fed to produce).]

U.S. Civil Service: Partnership for Public Service and Booz Allen Hamilton Propose Unfair, Inequitable Dick Grote Style “Rank and Yank” System for the Civil Service, despite Its Many Flaws

The second merit system principle (5 U.S.C. sec. 2301(b)) reads as follows and must guide any successful civil service reform proposal:

All employees and applicants for employment should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition, and with proper regard for their privacy and constitutional rights.

The website, Government Executive, published an article about a proposal from the Partnership for Public Service (PPS) and the federal contractor Booz Allen Hamilton (BAH) to reform the federal civil service in the United States. (See report at http://cdn.govexec.com/media/gbc/docs/pdfs_edit/040114e1.pdf.) In short, PPS and BAH propose an inhumane and cruel solution, rank and yank, (contrary to the second merit system principle)– wrapped up in a colorful PDF document and poor, vague writing–that must be rejected totally.

I continue to be amazed that a system that caused organizational failure (Enron) or organizational disarray and destruction of innovation in a high-tech company (Microsoft) continues to be seen as a positive cure-all solution. Any proposal that seeks to enrich few people at the cost of the many is an insult to the democratic form of government that governs the country; how ironic that such an undemocratic proposal is fashioned for the United States government’s civil service.

Among the various proposals was a stunning one–a rank and yank system. (Emphasis, below, mine.)

Problem seen by PPS & BAH: Rigid policies that were designed to encourage long-term tenure and internal equity, for example, are now a burden on a government that needs to encourage flexibility and innovation to meet rapidly changing and difficult challenges. (Page 8, second column, second full paragraph of PPS & BAH report.)

Their solution–a rank-and-yank style system: With a credible performance management system in place, our proposed system would eliminate tenure-based pay increases for managers and employees, and instead make pay progression within a particular salary band based strictly on performance—up to an occupation’s market rate for performance that meets expectations, and above that rate only for performance that exceeds expectations. Employees who fail to meet their performance expectations would not be eligible for a base pay increase until their performance improves to satisfactory levels. (Page 25, second column, second full paragraph of the PPS & BAH report.)

PPS and BAH rank-and-yank style system slightly differs from the full system proposed by Dick Grote in that it recommends no salary increase rather than direct firing. But curiously, with all of the vague and convoluted verbiage of the report, PPS and BAH do not say how this proposal will be paid for.

Given the reality of fixed salary budgets in government and a comment by Robert Tobias, consulted on the report, stating that the proposal will likely be budget neutral, I infer that the small amount of so-called top performers will be enriched at the impoverishment of the large remainder of the workforce (some of them suffering everlasting stagnant pay). This blatant inequity and unfairness, itself in violation of the merit principles the PPS & BAH report notes that it values (page 9), is likely the reason for the confusing writing in this part of the report. Given a flat salary pool, those designated as so-called poor performers would likely never get another increase while witnessing their paycheck’s economic power withering away as a result of inflation and an increasing cost of living.

Rank and yank, pay for performance, up or out, whatever it is called really works one way: Giving the managers the absolute power to sort the workforce (in secret), giving the employee little to no ability to participate or appeal the management decision. Twenty percent will be designated as the richly rewarded “top performers,” 70% will be designated as “vital” and yet receive little salary increase, and then 10% will be designated as poor performers, with no salary increase at all until they decide to quit or suffer with working hard for a salary that cannot keep up with their cost of living.

This cruel proposal must be subject to discussion of all consequences, with complete involvement of the public, in clear language and then rejected.

Group of 7 (8?) Industrialized Countries: Cover for Western (U.S.) Power; the Russian Federation’s Indifference to Exclusion and Ukraine’s Financial Status

Country Date of Membership Gross Domestic Product (2012, US$) Public Debt (2014) Nuclear Weapons UN Security Council Veto
United States 1975- 16,244,600,000,000 13,356,802,459,016 Y Y
Japan 1975- 5,959,718,262,199 12,366,765,846,995 N
Germany 1975- 3,428,130,624,839 2,794,118,579,235 N
France 1975- 2,612,878,387,760 2,410,642,622,951 Y Y
United Kingdom 1975- 2,471,783,570,300 2,483,846,721,311 Y Y
Russia 1998-2014(?) 2,014,774,938,342 197,418,852,459 Y Y
Italy 1975- 2,014,669,579,720 2,414,687,978,142 N
Canada 1976- 1,821,424,139,311 1,619,280,601,093 N
Ukraine 176,308,825,694 67,216,393,443 N N

Source: Country, date of membership, http://www.g8.utoronto.ca; gross domestic product, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD;
public debt, http://www.economist.com/content/global_debt_clock; nuclear weapons, http://www.armscontrol.org/factsheets/Nuclearweaponswhohaswhat;
UN Security Council, http://www.un.org/en/sc/members.