Unfortunately for folks like Newt Gingrich, Mitt doesn’t have many real legitimate points at which he can be attacked.  Much of the focus has been on his past at Bain Capital.  By now we should all be familiar with the story.  He ran a company called Bain Capital that bought other companies and then later sold them for (hopefully) a huge profit.  Mitt made hundreds of millions running Bain and continues to collect income from it even today.  What actually happened to the companies Bain bought under Mitt’s leadership is a point of contention between Romney and his rivals.

The media have not been helping the matter as it’s pretty clear they don’t understand how all this works.  Here’s what people like Newt or Perry would say: Mitt raided down-home good American companies, laid off down-home good American people, sent jobs overseas, and then sold the companies for a huge profit. He got rich at the expense of others (Not to digress but it’s freaking hilarious that Republicans are bashing Romney for being a better capitalist than they are).

So the story goes.  Romney would tell it differently, his claim is that he created 100k jobs.  It’s an impossible number to verify, but it really doesn’t matter.  I actually don’t care at all if he created jobs or removed them, because whatever number you come up with can be contested.  What matters is the bad rep private equity has been getting.

Here’s the thing about what Romney and Bain Capital did.  They came in and bought companies no one else really wanted.  Companies owned by people who didn’t want to own them anymore or perhaps didn’t even have the money to stay up and running.  Bain bought Domino’s when the founder wanted to retire.  He wasn’t forced to sell to them, he chose to.

Bain Capital got into this business because the Bain consulting company had been very successful at consulting.  They thought, “if we’re so good at helping other companies fix problems, why don’t we just buy some companies and fix them ourselves?”  That’s what Mitt did.  Yes he likely was responsible for a number of layoffs he did what every other executive does.  They run the company the way they best see fit.  Sometimes layoffs are necessary for survival.  And if 500 jobs need to be outsourced or eliminated so that 7000 can survive, so be it.

The key here is that Romney wasn’t a job creator, he was perhaps a job preserver.  He helped keep companies moving.  If someone wanted to sell their company he bought it.  He would do what he thought was best to improve it, just as any owner would.  In some cases he, along with Bain, saved companies and jobs.  In others, they eliminated jobs.

That is the world of private equity.  I no more endorse Mitt than any other candidate, but it’s a flat out joke for Romney to be attacked for his past, especially by Republicans.  He’s a capitalist through and through.  And if you own mutual funds of any kind it is very likely you own companies that do the same thing.  You likely own companies that employ thousands of people that wouldn’t exist without Bain too.

Romney enriched himself by making smart investments and employing his knowledge to run companies.  Jobs are a byproduct of business, and they come and go like tides.  They are never the point, in any way.

Read more: Private Equity, Venture Capital, and the difference.

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It’s pretty clear that women today have achieved equality. They have the same opportunities as men and were very close to getting their first president a few years ago (I’m sure it’s coming soon ladies). They can make as much money as men (despite one of my favorite shows joking that the proper way to treat a lady is to pay her 74% of what men make). Women do still make less than men, but this is partially due to women working in lower income jobs and more often than not, sacrificing career for family.

Women do have the same opportunities as men today though. They’re leading Fortune 500 companies, ruling nations, and wearing pants. But equality wasn’t really what women were fighting for. No, they wanted something better. And with our 21st century society and a little help from the Great Recession they finally got what they wanted:

Stay-at-home dads

That’s right. Women have accelerated a trend of becoming the primary breadwinners. The recession laid off 3 times as many men than women. Women now make up 23% of all wives and in women under 30 are out-earning men in most of the major cities. This is the real victory. It’s not enough to have the right to vote, or for the laws to state you can’t discriminate. Having the men stay at home with their children represents two victories that were earned.

The first one is that women are getting to the tops of organizations. They are leading teams and getting into positions that can only be earned by merit and performance. They are making more than men and it’s because of hard work; equal rights laws have nothing to do with it. As I said before, it’s not enough to have laws say you are equal. The only way to truly be equal is to show that at least sometimes you’re better.

The second victory is over the spouse. Not only are women earning more and some instances, they’re convincing a growing number of men to stay home and raise the children. That’s a massive cultural shift that’s barely a generation old, if that. Of course many men these days are fine with this, but that still represents a win for women.

This is a progression we all expected in due time. That time has now come. The numbers still show men being most of the breadwinners, but the number is slowly changing. Due to gender differences I can’t expect women to become the dominate earner of most households in my lifetime. But the victory has already occurred. Women truly do have the option to do what they want, and it’s in their control.

Read: Behind Every Great Woman (BusinessWeek)

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That being said, I’d still make my predictions. Because it’s fun. If for some reason people started thinking I was qualified to make predictions, I’d have to stop. This time last year I made some predictions for 2011. Let’s see how I did. Note: the table looks big but there’s a lot of white space.

Not too bad if I say so myself. Keep in mind this is all in good fun. Whether I’m accurate or not doesn’t matter. You should trust my predictions as much as a presidential candidate’s promises.

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Since 2008(ish) we’ve been tip-toeing around the worry of looking like an ass in front of people who are unemployed. You can’t say you hate your job because people will either say or think, “at least you have a job”. And that’s true. At least you have a job. And those with employment have likely felt some kind of winner’s guilt when thinking how much they hate their job.

And let’s be honest, there’s lots to hate about our jobs. Many people have taken pay cuts or forgone raises just to stay employed. Others have to keep working jobs they hate to support a family. Those that lost jobs and were then able to find a new one may have taken a significant paycut to do so. All of this, added to a stressful work environment facing layoffs and an unstable economy have probably led to a lot of disgruntled employees. But the most complaining you’ll find is between spouses. For three years we’ve been too shy to complain about work to anyone else. That time is up.

The unemployment rate is falling, admittedly slowly, but still. Jobless claims are also coming down to levels not seen for a few years. While these changes have only really begun recently, they are indicative of a trend of improving employment. Improving employment means people who don’t have jobs may finally find one and people with jobs they hate have a better chance of finding a better one.

As a result, sometime this year the millions of people who do have jobs they hate will start complaining about it to people other than their spouses. Standing outside during smoke breaks we’ll complain about our bosses again. We’ll tell anyone who will listen how we’re disrespected, underpaid, and that lady who sits in the corner always gives you dirty looks.

It’s stressful to work a job where you aren’t paid what you deserve and must also live in fear of losing your job every day. It would be interesting to test the stress levels of the unemployed against people who don’t have a choice but to stay in a job they hate. While the unemployed might wish for such a thing as a job they hate, actual stress levels between the two might surprise us all. But those employed with such predicaments haven’t felt they have a right to complain. Until this year.

This year, so long as employment continues to improve at even the slow crawl it is right now, we’re going to starting complaining about our jobs again. And that’s a good thing.

Photo: mark sebastian

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There’s quite a bit to talk about with income and inequality, and not all of that talk is well informed. The hot issue is the gap between the top income earners and the bottom. Here’s an easy talking point. In 1967, the lowest fifth (called a quintile) of income earners earned 9% of what the top quintile earned. In 2010 that number was 6.5%. That means the gap between the top and bottom has widened.

But there’s a problem with statistics like that. It’s a measure of household income. Household income is the total income of anyone living at a particular address. Since 1967 the total number of households in the US has grown 95%, while the population has only grown 56%. How can that happen? When a household splits in half, you get two households. Say mom and dad get divorced and each make $30k a year. You go from having one household that makes $60k to two that make $30k. How does this get reflected in the data? It skews the low income numbers down. In the lowest quintile household, on average there are zero income earners. In the top, of course there are two. If more households had two income earners, you’d see less of the widening gap. A single income household is economically less efficient. The rise of divorce and single parent households has contributed to the perceived increase in income inequality for sure, but this isn’t the only thing out there.

Think about the older people in your lives. Many of them are on Social Security and/or are collecting a pension. When they took the step of leaving the workforce to retirement, they took a paycut. Not everyone collects 100% of their salary after leaving. But even if they did, benefits usually only increase with inflation. So while the working world is trying to move to the next income quintile above them, many retirees are slowly falling. And just in case you weren’t aware, the number of retirees also rising faster than the population, thanks to the baby boomers. But we’re not done yet.

Look at the vilified 1%. Regardless of income measurement type, they’ve been doing quite well. In fact you can say the top 10% or 20% have increased their income at a faster clip than the lower groups. Part of this is due to lax regulation. From the 1960s to today, companies have been given more freedom in what they can do. This has increased the potential for more income, and it’s come from profit sharing type compensation like stock awards and options. That, along with it not being taxed like regular income has been big for the top tier. Greater access to capital markets have also increased payouts. It’s now fairly easy for founders of companies to sell them than it was years ago. With more bidders, the price increases. Back in the 60s, wealth was tied up in a company, and if you didn’t keep running the company your wealth was gone. Now, a small business owner with 20 stores can sell to the national chain and exit the business a millionaire. Some of these things can be fixed with policy, but most of it is just a function of our economy today.  Sometimes it’s greed, sometimes it’s not.

This conversation could go on all day. We could talk about how much bigger companies are today than they used to be, and how that might demand the CEO pay we all gasp at when it’s printed in the local paper every year. Or we could talk about how government programs may actually keep the poor, poor. My hope is not to help someone justify the growth in compensation of the 1% this holiday party season. Just to offer a perspective that explains some of the widening gap.

Data sources were from the Census Bureau, St Louis Fed, and BLS.

Photo: The White House

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Business Management – 6%
General Business – 5.3%
Accounting – 5.4%
Nursing – 2.2%
Psychology – 6.1%
Marketing – 5.9%
Communications – 6.3%
Elementary Ed – 3.6%
General Ed – 4.2%
Computer Science – 5.6%
English Language and Lit – 6.7%
Finance – 4.5%
Criminal Justice – 4.7%
Biology – 5.6%
Political Science – 6%
Economics – 6.3%

What we have here are the 16 most popular majors and their associated unemployment rates in 2010, as compiled by the Wall Street Journal. I’ve been somewhat critical of people and their choices, and the classic example I’ve always used is “Art History”. It seems as if we now may be able to see how bad of a choice art history is. But first…

I am pleased to see that the most popular degrees mostly appear to have professional applications. Accordingly, their unemployment rates are close to the average unemployment rate for people with college degrees: 4.7%. Some of the lowest rates belong to nurses, and those majoring in education. No surprises there.

Not included in the top majors are the engineering degrees, the most popular of which is electrical engineering. It has an unemployment rate of 5%, higher than the national average of people with college degrees. Interestingly, the spectrum of unemployment rates across the various engineering majors is vast: 0%-9.2%. While I’m not going to go through the exercise of a weighted average unemployment rate, it’s pretty clear the average unemployment rate of engineers is likely higher than the average of all college degrees. Very notable.

Other categories are much less surprising. Virtually all education majors have unemployment rates below the 4.7% national average. The social sciences make a very good showing of just 3% unemployment for teachers, but the actual social science majors don’t fare so well at all. Sociology is at 7%, psychology holds 6.1%, and history is at 6.5%.

Still, everything we’ve seen here is clearly better than the national average unemployment rate officially at 9% right now. That takeaway has and always will be clear, getting an education is good for your personal economic situation.

And what of our beloved go-to degree for wasted educations: art history? With an unemployment rate of just 6.9% it’s better than sociology, journalism, and architecture. So, art history majors, consider yourselves dropped from my list of bad majors. Your major may still be worthless in terms of direct education (to me at least) but clearly you can find work.

Instead I’ll use something like Liberal Arts (7.6%), Philosophy/Religion (7.2%), or Drama (7.1%). But know this, I have and will always maintain that any degree is better than no degree.

Now of course, we didn’t talk about salary. And you’ll see in the charts that sometimes a period or two of unemployment may be worth the high salary when you are employed. That’s a conversation for another day. Until then, check out the interactive charts over at the Wall Street Journal site where you can filter to all kinds of majors and sort by various salary data, popularity, and unemployment rate. See anything interesting? Let us know in the comments.

From College Major To Career (WSJ)

Image: scui3asteveo

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LSU Researchers Find Link Between Personality and Credit Scores

Personal finance sites will note that the connection between your personality and credit score. Specifically, people that are more agreeable are more likely to have low credit scores. It is not known for certain, but one could reasonably assume agreeable people are more likely to cosign on a loan with someone risky. Stubborn people are less likely and do in fact have higher credit scores.

There was also well-known connection between disagreeable or stubborn people and workplace success. That also connects with a high credit score. So stubborn people have better credit and careers.

Of course there is no practical application for this knowledge. Like many of my posts, they merely make you raise your eyebrows and give you something interesting to say at cocktail parties. By the way, do people go to cocktail parties anymore?

Thankfully the researchers didn’t limit their scope just to that. They also took on an often controversial topic in the employment screening industry: using credit reports.

Some employers will use your credit report as a part of a background check. The theory is that someone with a poor score might be more likely to steal, or be just plain lazy. But there really was no connection in this space other than a correlation with high credit scores and some good measures of job performance.

But even these aren’t likely to be applicable to employers on a broad level. On the whole I consider this study a complete waste. It’s not surprising that pushovers have lower credit scores. But that doesn’t make them a greater risk if the impact merely comes from cosigning on loans. So that kind of negates the purpose of a credit score: to asses risk.

What I’d really like to see is a more granular view the credit score and the results of personality profiles. Since the credit score is made up of various factors (length of credit, type of credit, etc…) I’d like to see what makes actual contributing factor to the correlations with various personality types.

Via: Bad attitude, good credit score (Taking Charge)

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“In college, I smoked a lot of pot.  I still smoke a lot of pot”

“Math was too hard”

“My sense of entitlement comes from my parents giving me trophies even for losing”

“I have an engineering degree, am willing to live anywhere, and can’t find a job”

“I was dumb enough to believe I could afford a mortgage that was 60% of my income”

“Having my children hold up signs they don’t understand is a good idea”

“Because government was part of the problem, we should definitely want them to fix it with more government”

“Thank you Obama for taking student loans under the ownership of the government but still making it impossible to bankrupt them”

“I’m here for the camaraderie”

“I voted for the incumbent in the last election”

“Screw universities for overpaying administrators and jacking up tuition”

“Five years ago I was perfectly fine with Wall Street greed, now that the people that caused the crisis are gone I’m REALLY pissed”

“Corporations suck, except the ones that make coffee, Macbooks, Twitter, cover us in the media, and make food readily available”

“If the economy was better I wouldn’t be here”

“Obama wasted a trillion dollars on a stimulus that didn’t work”

“I have no money and no job and there’s nothing I could have done differently”

“My time would be better spent volunteering somewhere”

“I’m going to Europe for the stable economy and free healthcare”

“I don’t know how to change a tire, or program software, or harvest crops”

I think Occupy Wall Street is a great movement.  It’s awesome so many people are finally pissed off enough to demand the attention to get something solved.  They aren’t waiting for politicians.  Many understand that capitalism is a good thing, it’s just gotten a little misguided lately.  But what bothers me, at least based on the media coverage, is that there has been very little personal responsibility taken.  Fingers are point outward, not inward.  Free speech is great, but one of the primary themes on Weakonomics has always been people making poor decisions.  There was a series of poor decisions made by almost everyone over more than a decade.  I support change, I support this movement, and I support anyone who admits to making a mistake and saying they’ve learned from it.

Image: david_shankbone

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There’s a simple formula (actually, an inequality) to explain why people go to work every day instead of just doing what they want: X > Y. Where X is the utility you get from working and Y is the utility you get from doing what you want. Utility is sort of a measure of happiness. Sometimes this formula gets out of sync. This is most commonly known as hating your job. But you keep going because you know the utility you get today from quitting your job will be offset by the loss of utility when you run out of money.

Many times we face a similar tradeoff when figuring out whether to stay late at work. Staying late could mean keeping your job, or getting a bonus, or maybe a promotion. We would expect that most people make the right choice between staying late or going home, but we often hear of people not striking the balance correctly.

Said another way, we don’t always make the right choices.

The choice you don’t make is referred to as “opportunity cost” in economics. An easy illustration is a professional athlete choosing between a career in basketball or football. The choice he doesn’t make is the opportunity cost.

And I find myself facing an opportunity cost with this website. My real job is taking up more and more of my time. It’s good work, and interesting work, and good things could happen from it. But at the same time I love this site, I love writing, and I even like all nine of you readers. My opportunity cost formula is a little complicated too. While I get lots of utility from Weakonomics, I also get paid. Mind you, the pay is nothing to brag about, it works out to slightly less than minimum wage, but there is some compensation associated with it.

When faced with the choice of writing a post, or getting to work early or staying late, I have to weigh my options like this:

income from blog + utility from writing > income from work + utility from working

For the last few years the utility from writing has easily offset the other factors. But the right side of the equation has caught up recently and I find myself more and more weighing my options.

This example is largely illustrative. For now the incremental value of staying so late I can’t write doesn’t offset my gains from writing. But thinking about life in terms of opportunity cost really helps you understand the decisions you make at the time.

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• White people had a smaller reduction in births than African Americans and Hispanics.  Hispanics had the biggest dropoff.  This makes sense for a number of reasons.  Hispanics have been hit hard by the recession especially with the dropoff of work in areas like housing.
• States hit hardest by the recession had larger dropoffs in births than states that have weathered the economy better.  Arizona, Florida, and California were near the top birth rate changes while North Dakota and Nebraska continued to increase the number of babies they were making.

Not everything is so obvious though.  While the birth rate has fallen in the United States it’s level is still within a relative norm dating back to the 1970s.  Only in the early 90s did the rate go above 70 per 1000 (by comparison at the peak of baby booming it was over 120 per 1000). Today it’s likely right around 65.

Even if this study confirms what we already know, it’s still a good measure of how powerful an economic downturn really is.  Sure if an individual loses their job they are likely to put off plans to have a baby.  But each state has been impacted differently.  For some it’s housing prices, for others it’s unemployment, and for others still it’s income.

What remains to be seen is if people are just delaying baby making until the economy recovers, or if there will be a permanent dip in population growth as a result.  To know that of course, we need to have a recovery…

Via: NJ.com

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