Adulting and Money Management 2.1: The Importance of Research

Author’s note: Please excuse last week’s absence of post. I was not able to better organize my schedule between researching about this article, managing side projects and settling in to our new home. Thank you for understanding. I do hope that the practicality of this post outweighs the lack of publishing several days ago.

This post complements the previous one (Adulting and Money Management 2: “Hooray, I have money! now what?”) that encourages channeling one’s savings into investment.

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Introduction: “Adulting” and Research

The term “adulting” was coined to describe a group of people transitioning from youths to adults, associating the latter with a sense of responsibility, commitment, maturity and trustworthiness.

The Urban Dictionary online defines adulting (v) as:

“To do grown up things and hold responsibilities such as, a 9-5 job, a mortgage/rent, a car payment, or anything else that makes one think of grown ups.”

Research (n) has several analogous definitions, but the one I like most is from Dictionary.com:

“diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, applications, etc.”

I identified adulting with research because being responsible usually entails being aware the effect of certain factors, or what elements would be affected once a decision is made. It requires to be informed of the risks, costs and benefits of each resolution or judgement. As you might have guessed, the best way to achieve this is to gather as much information as possible; and if that can be done in a systematic and efficient manner, all the better.

I never really gave much thought about researching until I bumped my thick head to wall after wall of reality. After the 256th bump, I had to admit that INFORMATION IS VITAL (some say it’s power, others say it’s equivalent to money…); but to be more precise, ACCESSING THE RIGHT INFORMATION MARKS THE DIFFERENCE. Unfortunately, there is no short cut to knowing what the right information exactly is. Even if helpful peers point it out, what’s “right” for them might not be right for you. So really, the only way to do this correctly is to start making inquiries yourself.

Nobody ever told me about this- not even my teachers in college. You’d think that people in charge of molding future economically-oriented minds would consider relaying this message…

(Later on when I reviewed some of my notes, I realized how this message was indeed passed on in the form of riddles.)

Research related to investing

Anybody who wishes to get the most out of what he has to offer will not hesitate to gather the necessary data to choose the best option. They  will not stop at believing hearsay, although they will certainly consider that type of information.

Still, there are others who are too trusting, too optimistic, or simply too lazy. Just like me, they won’t be encouraged to be more diligent in researching until they’ve paid the price… because there are several steep prices for overlooking the process of research, and more so when it comes to (first-time) investing. In my case, these are:

  1. Money-wise: (the price to pay will be) the very amount of capital invested
  2. Emotionally: pride that got too bruised, discouraging any discussion about this experience with people who might actually help
  3. Psychologically: being  too traumatized to “trust” any financially-profitable opportunity for quite some time
  4. Opportunity cost-wise: having less less money, lower spirits and inferior resolve to invest once again. This could likely make one miss the chance to make money grow

What to research? How to research?

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Performing an investigative task could be exhausting, especially when not used to it. Although I dare say that having one’s future at stake is surely an excellent incentive to do so.

From my point of view, I see two main aspects of research: the theoretical side (or the understanding) and the empirical side (the practical, “realistic” side). They require a lot of time and effort to be taken on, so you could be tempted to just focus your energy on one of them. But the truth is, both are too important for any of them to be ignored.

Suppose you’ve already decided how much you want to set aside to make your money grow; also suppose that you’re already sure of which type of investment you want to make; let’s also say that you’re currently convinced by a financial manager about the product/s he offers and that you’re very happy with what you’ve heard.

That’s fantastic because it means you won’t have to search for much more. Be that as it may, IT IS NOT THE SAME as not having to research anymore.

Theoretical research

In our proposed scenario, the main question to ask would be: What is the general understanding regarding the investment vehicle of your choice?

Even if you’re already content and convinced about the product that was offered to you, still it’s a good habit to read and re-read the brochure or any related document.

(Depending on the country where they operate) Most financial management companies are obliged to distribute a written communication, stating the product’s fundamental information to potential investors. This is very important because usually this is where the fine print lies.

To make a long story short: you might be interested to find out about the profitability of your venture, the different kinds of fees and commissions you’d be subjected to, how much tax you’d have to pay once you withdraw your capital earnings, what kinds of risks your investment is exposed to, etc… that is to say: by how much would your money potentially grow? How much would necessarily be deducted to your money once you’ve invested it? Is there any way to prevent it, or at least lessen the deductions to your future earnings? 

The second set of questions I suggest to be asked will surely empower those who are afraid of investing what savings they have acquired. It refers to one’s legal rights and obligations: Is there something in your country’s Constitution that would back you up, should you get into trouble (in the case of scams or bankruptcy)? What are your rights (ie: to invest and make your money grow) and obligations (ie: to pay taxes) according to the law? As for the financial services company, what are their rights (ie: to profit from rendering a service) and obligations (ie: transparency, honesty)?

In anything that you do, KNOW YOUR RIGHTS. ALWAYS KNOW YOUR RIGHTS. Consult a lawyer if you have to.

Empirical research

The most effective way to conduct empirical research would be to actually invest the money in your vehicle of choice. Just like a scientist observing a laboratory rat, you could closely monitor your investment with the help of your adviser.

Well, too bad for us- we can’t all have the luxury of “gambling” with our life savings. So for this type of research, I would mainly ask: What has been the experience of other (usually, older) people in this field?

Even if you’re already content and convinced about the product that was offered to you, talking to those who have already invested in the same product or a similar one could help. Most financial managers will hesitate to recount the negative experiences of some of their clients. So consider this: if you ask different kinds of investors (young, old, experts, newbies), they could only be too willing to warn you about not repeating the same mistakes they made. They may not share the secrets of their trade, but you could surely get some useful tips.

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Another important question to ask would be: What are other alternatives available in the market?

This question will most probably be answered by your fellow investors. But it’s always better to do your very own research. Remember that you want the best value for your hard-earned money. It’s not being greedy, it’s being wise. You’re not trying to outsmart anyone, you’re trying to educate yourself so you won’t be fooled.

Try informing yourself of the one or two better alternatives mentioned by other investors. Visit a financial service company’s office and ask all the questions you might have.

Benefits of research

Having done your research does not in any way reduce the risk of losing part (or all!) of your investment. It wouldn’t help you evade taxes either; but the results of your research will allow you to make decisions with more and better information. As a matter of fact, in the case where your decision turned out to be unfavorable, your research would’ve already provided you with enough knowledge that would orient you towards the most fitting solution.

Some might be wary of spending time to do research, even if it just meant comparing the profitability of different investment tools. Others might even think that they would do better investing their money already, instead of spending time talking to fellow investors. As respectable as this stance is, it is not advisable. Especially not to first time investors.

Undoubtedly, as you acquire more knowledge and experience about investment, you would spend less time and energy doing the basic research. By then, you would be informing yourself of different factors concerning other opportunities. You would know better who to talk to about one option or another. The task itself will not disappear, it will just take on a different turn.

Conclusions

People in the phase of “adulting” are automatically more prudent of their resources. Especially when it comes to their hard-earned savings. After all, that is the very essence of adulting: taking on more responsibilities and being more consistent with the decisions that were made.

One way to make adulting go a bit smoother is by taking time to research before going after one option or the other.

Whenever there is money involved, there is higher incentive to gather the right information. This becomes more evident when, along with the chance to make money grow, there is also a risk to lose part or all of it.

In general, there are two important aspects of research: the theoretical and the empirical. Both are equally important because they complement each other. That is to say, one cannot only mainly rely on hearsay when making an investment decision. And articles that are written in books, journals or magazines do not always play out the way they are supposed to. So one’s best bet would be to do both.

For the theoretical aspect, it would be wise to consult the documentation available in any financial services company. It is also highly advisable to be aware of the legal obligations and rights of both the investor and the investment company before establishing a financial relationship.

As for the empirical aspect, potential investors (especially the first-timers) would do good to talk to other investors. The latter group may not share their secret formula for success but they could warn about common mistakes and how to look out for scams. Lastly, it wouldn’t hurt to know what are the different alternatives that could fit an investor’s profile (those that adapt well to his current situation and future needs).

Researching wouldn’t make the risks go away. It wouldn’t lower the fees and commissions to be paid. Additionally, it doesn’t only take time and effort: some would also say it will make them miss the chance to invest immediately, thus losing money in the process. This type of opinion is respectable, but in the long run it will always prove to be worthwhile to exercise patience and diligence. Most people realize this too late along the way.

-The End-

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Some thoughts on philanthropy

For 5 months, I was given the chance to work as Prospect Research Officer (or Fundraising Researcher) for a prestigious business school just outside of Paris. I worked alongside the rest of the Advancement Team and sometimes also lent a hand to the Alumni Relations and Events (organization) departments. It was the most interesting part of my colorful professional history because: i) it introduced me to the fast-growing world of philanthropy, ii) I met some really great people and iii) the first two reasons combined have given me a different perspective when analyzing situations. Here are some of the thoughts I’ve reflected upon during that period…

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Some people believe that charity organizations should give aid to those in greatest need, wherever they live. Others believe that they better concentrate on helping people who live in their own countries instead.

From a practical point of view, resources are more effective when delivered to those who pressingly lack them. It is perceived to be more useful, as it directly addresses the problem at hand. In an ideal world, the aid that was donated would be equal to the aid received. Yet the fact remains that a percentage of this aid is lost along the way before finding its beneficiaries: conversion rates could be harsh, banks and other financial services companies charge high commissions, there’s tax to be dealt with… In short, there’s a certain level of fungibility in these funds, where aid can become “hostage” to the local context.

That is why not only aid effectiveness should be considered when allocating donations. Costs and benefits also have to be taken into account when deciding how to dispose of available resources. In this regard, economists would try to convert the dilemma into a mathematical formula: see if there are patterns that would lead to the best choice, and try to predict a final result of their analysis.

Still, the choice is not really between helping a population “in need” and one that has “better location”. The question actually lies in how charity organizations manage themselves, whose own funding mostly comes from subsidies, grants and/or donations. As a matter of fact, non-profits are accountable to their donors, binding them to comply with the specifications detailed out by their patrons regarding the use of funds. Oftentimes, they are also required to report about the funds’ impact to the community, or at least to the target population (but this is a subject for another essay). Therefore, the choice of which people to serve does not lie entirely in their hands.

A more balanced approach would seem to be reaching an accord to meet donors’ objectives while respecting the realities of both the organization and the community he wishes to help. This means donors would have to be engaged (at least the major givers) by the organization to take an active part in determining how best to allocate their contribution. The initiative would call for a constant and consistent communication from both parties.

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This offers a win-win situation because on one hand, regular contact would allow the donors to disclose their motivations for making such a contribution. For instance, they could make the organization understand their emotional connection to the beneficiaries. On the other hand, organizations could take this opportunity to better explain their activities to their patrons. This could be a good moment to make them see that a strong infrastructure and qualified professionals are required to deliver aid to those who are in need; and as such,  funding has to be allocated to these operational aspects as well. Only through communication can the two ends find a middle ground that would allow each of them to carry out their respective mission statements.

A typical philanthropist would think and argue about improving the lives of those in greatest need; while a typical economist would compute the costs in terms of time, effort, phone bills and transportation that result from the continued communication between donors and organizations. Both would have good points to defend their views.

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However, it should be noted that listening is as vital as analysing in any problem-solving situation. Gloria Steinem, co-founder of the Women’s Media Centre explains, “Helping begins with listening. Context is everything… Big problems often have small solutions. And finally, do what you can.”

Sources:

  1. “The Parable of the Fence and Other Lessons”, available at> https://www.linkedin.com/today/post/article/20140404194646-25295057-the-parable-of-the-fence-and-other-lessons
  2. IELTS Essays, Essay Topic sample available at: http://www.testbig.com/ielts-essays/some-people-believe-charity-organizations-should-give-aid-those-greatest-need-wherever

That Which Contains the Human Capital

When I was in 6th grade, my classmate Ellen S. once told me that according to her grandmother, “There are no ugly people. Only less beautiful ones”. That struck to me as something true and it appealed to my empathic nature. I adopted that philosophy until my adulthood and was happy with that reconciled thought.

The first time my husband heard me say that, he laughed so hard because he thought I was being sarcastic. After a few dates and several encounters with the “less beautiful”, he finally realized that I meant it.

So, what does it mean to be ugly in the realm of human capital?

What is Beauty? What is Ugly?

Beauty, according to sociologist Jean-François Dortier is a debatable topic for all eternity because ugliness is indisputable. Allow me to disagree. The concept of ugliness is just as subjective as that of beauty, making it susceptible to disagreement and justifications. What’s more, if people and societies have a clear idea of what is pleasing to the eye, then they must have an equally decided criteria of what is not. However, he argues, there are constant elements present in every idea of beauty across time and continents. For instance, badly placed teeth, weird spots on the face, grimace-like facial expressions or stains will hardly be found in those considered as canons of beauty.

Dortier, in his article “The Tyranny of Beauty”, says that ugliness in a person is a heavy handicap when brought into the markets of marriage and labor*. I will not disagree. But allow me to focus this post on how physical beauty plays an important role when buying and selling (workforce) in the labor market.

I believe that the idea behind this discrimination is caused by the unthinking mammals in us, who uses its instincts to survive. In the animal kingdom, the ones who are successful in mating are the more beautiful samples of their species. Why? Simply because it denotes HEALTH and thus, STRENGTH. An animal’s only role is to procreate and who better to multiply one’s race if not the best and the most likely to survive of the lot? The equation is easy to infer:

Beauty=Health=Strength=Breed=GOOD

With regards to human capital, somebody who looks good (well-proportioned body, bright eyes, good teeth and pinkish complexion) is certainly a sign of having been well-fed, a smooth skin on the face signifies not much exposure to external or internal stress and of course good grooming is very much attributed to a good upbringing in the family.

The relationship then, is easy to establish: somebody who is properly nourished, who did not experience much stress and who was brought up well must belong to a family with enough resources: resources which sufficed not only to make the person survive, but to develop him into a citizen able to participate in the community. Thus, the better-looking a person is, the higher value is attributed to the talents and capacities he was able to build up through his lifetime. The equation could then be modified into:

Beauty=Health=Learning Ability=Developed Talents=GOOD

Sadly as time passed, this equation has slowly been overly simplified as:

Beauty=GOOD

Sadder still, the concept of goodness has been generalized to being good overall: good worker, good person, good team mate, etc… Only time will prove this notion to be untrue, after all that’s been said and done, spent and consumed- leading to realizations and regrets.

For instance: 13 years ago while spending my summer holidays in the Philippines I overheard a friend complaining to my mother. Apparently in all the job interviews she has been to, the requirement “Must have pleasing personality” was always being equated to “Must be pleasing to the eyes”. In short, the job applicants must respond to a certain beauty standard established by the Human Resources (HR) department.

Now, I admit that for jobs requiring a brand representation or corporate delegation perhaps being easy on the eyes increases sales and improves financial results. I also know that HR staff cannot waste their time interviewing candidates just to check whether they meet the physical requirements they’ve imposed (in those cases where a photo was not included in the resumé). But demanding someone to have a pleasing personality when what they meant was for the candidate to be a certain kind of pretty… is just plain deceiving.

Anyway, who was the authority who declared that a beautiful physique is equal to a pleasing personality? Above all, whose claim made it a fact that a beautiful façade always holds a great talent?

In fact, below is Eduardo Gómez Manzano, famous Spanish actor. He is very well-appreciated in his job. He, along with the other beauty-lacking actors have opened up this generation’s minds and as well as this century’s entertainment industry that talent is not always contained in a lovely package.

Image courtesy of: http://www.fotoshumor.com

Boosted Brands but Talents Trashed

Studies have shown that other job types where no “representation” of the firm is needed, hiring teams still tend to favor beautiful applicants. Again, why? Because it’s good for the company’s image. It boosts the brand. It matters little if another candidate was more competent or skillful- human nature just can’t help but lean towards company that could offer pleasure to its vision.

It’s a pity though, because can you imagine if the Futbol Club Barcelona (FCB) refused to hire Ronaldinho because of his looks? Having said this, can you now picture just how many people lost their opportunity to contribute to an organization’s mission and vision just because they didn’t qualify physically? And can you imagine how much potential is currently being left unused just because of this terribly absurd bias?

I have stopped being a football fan more than a decade ago, but I admire how the sport’s values are consistent to their branding strategy. A football club must be composed of the best players it could hire (pay for) without regards to whether they would look good or bad in front of a camera (although I noticed Ronaldinho seemed to have had something done to his face).

In an ideal world, banks and/or banking groups would hire the brightest analytic minds, research organizations would employ the smartest and most focused among the pool of candidates, schools would choose their teachers according to their capacity to diffuse knowledge and infuse curiosity, shops would enlist salespeople with charm and wit to engage customers, and so on…

This way, demand for a specific qualification would be met by the satisfactory supplier; competition among various suppliers would rise, pushing more and more suppliers of talent/labor/workforce to be better qualified than the rest and prices (salaries) would adjust accordingly.

dream

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(In the least ideal world, we’ll have what I call “Pippas”. Pippa* was my college teacher in Economic History. Not only is she the opposite of beautiful, she also taught horribly! in short, ugly and incompetent people.)

Ugly ≠ Unkempt but Unkempt = Uninterested

While conducting a very modest research on this subject, I encountered quite a number of online fora exhibiting questions such as, “Are smart people ugly?” or “Why are smart people usually ugly?” (For the sake of simplicity, we shall assume that being smart equates to being competent in any given job.)

As someone who is more appreciated for her smarts, I believe I am at the position to respond. And my answer is that most (not all) smart people find it more important to strengthen their brains than to embellish their physical selves. There are so many books to read, so many people to talk to, so many things to ponder and many, many more things to (literally) take note of that a normal person’s waking hours are not enough**. That is why they make it a point not to “waste” time doing something not so gratifying to them.

The point is: One can be as ugly as far as ugly goes and admittedly, not all can afford cosmetic surgery to modify their genetic legacy. But I believe that a person’s appearance is his presentation card (especially in a job interview!). As such, one cannot care too less because first impressions do last. Besides, in the context of hiring, interviewers would actually imagine themselves working with you, travelling and attending meetings with you and perhaps even having to defend any future blunders you might commit. Do you think they would want to do all those things with a sloppy-looking colleague? Accordingly, one can and must appear neat, pleasant, motivated and ALWAYS COLLABORATIVE. Here’s why…

An Unexpected Twist

According to an article from INSEAD Knowledge, “… the type of expected relationship the decision-maker will have with the new hire is very much a consideration, consciously or not, when selecting candidates for the job.” Although the results of the experiments were more conclusive for men than women, it’s interesting to note that when the hiring personnel perceive that the attractive candidate could be a potential competition (read: could be a threat on their own promotion) the less attractive applicant would be chosen instead.

“Members of the same organisation are often mutually interdependent, for example they may cooperate for shared rewards when they work for the same team, or compete against each other for recognition, promotions, commissions, and bonuses. In many organisations today co-workers are included in the hiring process… Similarly, professors at universities often selected professors they are going to work with. When this occurs, the type of expected relationship the decision-maker will have with the new hire is very much a consideration… ”

A twist within the twist

On the other side of the Atlantic, Debrahlee Lorenzana sued her employers for having fired her because she was “too hot”. Thinking about it and as the Newsweek article pointed out: “isn’t it possible Lorenzana’s looks got her the job in the first place?”

Yet, did you know that some studies even show that attractive women may find it hard to be hired? supposedly if the employers are females, jealousy may arise.

∼sigh∼

Are We Doomed?

I would sincerely like to believe that we are not. Yes, it would take years of education and enlightenment before people get to terms that unattractive people can be competent, good team players, efficient leaders and desirable work mates. However, the diversity of human nature provides for adjustments such as:

  • The belief that beauty automatically translates to competency is compensated with the view that attractive people could deter the employers’ own progress or,
  • That beautiful people are just dumb.

Such absurd conclusions may be the exceptions to the rule, but I would like to believe that there is a balance being struck somewhere.

In a world where being beautiful is being sold as a choice (just Google how many $$$ the cosmetic industry cashes in per month), those who are not might be deemed indifferent or inflexible. But this is the same world where information is the most important resource for production, so it will just be a matter of time before everybody- even the unbeautifuls- find their place in it.

 

*Name was changed
**Personally, I prioritize hygiene but I don’t find it practical nor worth my time to wake up 30 minutes earlier just to apply makeup and fix my hair. I clean, I moisturize, I tie my hair and I brush my teeth. And I smile.

-the end-

 

Now, just because it’s summer in this part of the hemisphere: join me by putting your speaker volumes to MAX and enjoy the un-beautiful BUT DIVINE, JANIS JOPLIN!!!

(THANK GOODNESS THEY WEREN’T TOO SHALLOW BACK THEN)

 Disclaimer: I do not own this video. Video courtesy of Zuzuking Youtube page.

Sources:

  1. “Don’t Hate Me Because I’m Beautiful”, available at: http://www.economist.com/node/21551535
  2. “The Beauty Advantage: How Looks Affect Your Work, Your Career, Your Life”, by Jessica Bennett, available at: http://europe.newsweek.com/beauty-advantage-how-looks-affect-your-work-your-career-your-life-74313?rm=eu
  3. “The Beauty Premium”, by Schumpeter, available at: http://www.economist.com/blogs/schumpeter/2010/11/good_looks_and_good_jobs
  4. “La Tyrannie de la Beauté”, par Jean-François Dortier, available at: http://www.scienceshumaines.com/la-tyrannie-de-la-beaute_fr_22384.html
  5. “A New Twist to the Beauty Bias”, by Stefan Thau, available at: http://knowledge.insead.edu/talent-management/a-new-twist-to-the-beauty-bias-4004

Hidden-nomics (3)

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Proverbs 31:10-31

Epilogue: The Wife of Noble Character

10 A wife of noble character who can find? She is worth far more than rubies. 11 Her husband has full confidence in her and lacks nothing of value. 12 She brings him good, not harm, all the days of her life. 13 She selects wool and flax and works with eager hands. 14 She is like the merchant ships, bringing her food from afar. 15 She gets up while it is still night; she provides food for her family and portions for her female servants. 16 She considers a field and buys it; out of her earnings she plants a vineyard. 17 She sets about her work vigorously; her arms are strong for her tasks. 18 She sees that her trading is profitable, and her lamp does not go out at night. 19 In her hand she holds the distaff and grasps the spindle with her fingers. 20 She opens her arms to the poor and extends her hands to the needy. 21 When it snows, she has no fear for her household; for all of them are clothed in scarlet. 22 She makes coverings for her bed; she is clothed in fine linen and purple. 23 Her husband is respected at the city gate, where he takes his seat among the elders of the land. 24 She makes linen garments and sells them, and supplies the merchants with sashes. 25 She is clothed with strength and dignity; she can laugh at the days to come.26 She speaks with wisdom, and faithful instruction is on her tongue. 27 She watches over the affairs of her household and does not eat the bread of idleness. 28 Her children arise and call her blessed; her husband also, and he praises her: 29 “Many women do noble things, but you surpass them all.” 30 Charm is deceptive, and beauty is fleeting; but a woman who fears the LORD is to be praised. 31 Honor her for all that her hands have done, and let her works bring her praise at the city gate.

 

This is a doubly-hidden one! First because the material (passage) was derived from the Bible, the most widely read book as per the Guinness World Records webpage; but whose content is more acknowledged for its spiritual (and sometimes historical) ideas and not so much for the socio-economic issues it might present.

Second, because the concept of Family Economics has only started to develop (along with mainstream economics) in the 1960’s. In my experience, this branch has always been included in development economics analysis (population control, decisions for migration, Dependency Law, urban and rural development etc…) but I haven’t come across any material speaking solely of the subject. Hence, it occurred to me that this could be a thought-provoking way to discuss it.

Author’s Note: I especially love the selected passage because I felt as if it places woman as a man’s “equal”* in terms of providing, protecting and maintaing a household.

Given the nature of the selected material- where the subject is a wife to a husband- this post will not include single-parent households in the discussion.

The terms “family” and “household” are used indistinctively to maintain simplicity.

The Wife of Noble Character in Family Economics

According to the University of Chicago’s Becker Friedman Institute, “The family is the first and foremost influence on an individual’s success. Family choices about how much to invest in a child’s well-being and education are critical to building a strong, skilled workforce that drives a healthy economy.

The authors of the aforementioned Bible passage must have known this to be a fact. And their message was probably conceived to help guarantee that increase in their population will not only to satisfy their requirement for numbers, but also their need of high-quality citizens. For this aim, they encouraged the building of a strong nation starting from the choice of a virtuous life partner with whom to establish the basic unit of the society- the family.

Below are few of the economics-based perspectives used to examine this part of the Book of Proverbs.

Marriages as firms

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In Gary Becker’s “A theory of marriage”, he assumes that marriage occurs only if the future husband and wife could derive an increase in utility or satisfaction because of this new partnership. One way to achieve this (and this is really a simplification) is by considering that men and women hire each other’s work for household production. Becker attributes this to the strict complementarity of their resources (time) wherein no production will be attained if one of the couple’s contribution is nul (0).

The Bible’s ideal wife seems to possess enough common sense and strength in character to be a desirable complement in implementing the “household-building” project. She is described to be one who is capable of work both in and outside the boundaries of the household. Fairly enough, verses 28-31 summon the husband and the children to praise her for all her works.

Although recognition is a wonderful acknowledgement of one’s efforts, practicality still dominates reality. It must be mentioned therefore, that the production of women who are dedicated to homemaking is still not recognized as a contributor to the Gross Domestic Product (GDP). Now, due to this gap in the valuation of production, feminists argue that where a woman takes on the role of a housewife, she is exploited just as a worker is exploited by a capitalist (in this case, the husband).

The concept of exploitation arises when one party takes advantage of the other; but i) when both are properly rewarded for their production, and ii) both possess a shared authority to decide about resource allocation, no exploitation takes place. In the case of the family, husband and wife will be likewise benefitting from a fair collaboration and the pooling of talents and other scarce resources. So the way I see things is that the perceived exploitation may come from the fact that a housewife is not yet systematically compensated for her long hours of work and dedicated service. This is because as of the moment, her contribution to the family has not been given a monetary value as opposed to the husband’s salary** (thus making it seem that housewives “don’t do as much” for the family when compared with a working husband’s monthly payroll).

Think about how some people pay for services such as babysitting, house-cleaning, pet-walking, gardening, food catering, etc… The service providers are simply specializing in tasks that housewives have to do everyday, and in theory they are in no way exploited because they get a just compensation for the job they render (as prices are set by the markets of babysitting, pet-walking, catering and so on). This logic could be thoroughly applied to the sum of a homemakers’ completed tasks, dismissing a priori the concept of exploitation***.

Division of Labor in the Family

Practically from verses 12-27, the division of labor between husband and wife could be considered quite progressive. The verse has clearly expanded the roles a married woman (and an ideal one, too!) can play in a society: food gatherer, business woman and even an investor! She is also depicted as someone who can perform physical labor and work requiring creativity and imagination.

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Image courtesy of: http://hubpages.com

 

How wonderful for women to be considered as an equally able provider and decision-maker in the family as a man! The reality, however displays details that make the difference. Consider a family and career woman who works hard everyday to earn a living and to boost her ambitions: After her working day ends, how often is she expected to do a bigger part of the household chores? “Mostly” would be a good guess (although it must be admitted that this trend is currently changing). It could be because of tradition; or maybe if she has a lower salary, it has been deemed “fair” for her to be in charge of the “affairs of her household”. No matter what the reason, it does seem that a family woman- with or without a paid employment- never stops working. Perhaps after knowing this now, the idea about women’s exploitation (as in, being taken advantage of) in our society is not so dubious anymore.

Decision-making in the family

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Image courtesy of: https://www.cartoonstock.com

The noble-charactered wife is described by the Bible as someone willing and able to allocate resources without mentioning the need of her husband’s permission (which is different from opinion). She is supposed to apply her own criteria to ensure not only that the members of the household are well-provided for, but also to guarantee peace and harmony in the shared space (she provides… portions for her female servants), safety (her lamp does not go out at night), health (When it snows, she has no fear for her household; for all of them are clothed in scarlet.) and it goes without saying that she is in charge of the general state of the home (She watches over the affairs of her household).
Again, according to Gary Becker, what the Bible considers a noble wife is the “altruistic” member of the family. That is, someone who takes into account the welfare of the other members of the household, thus benefitting the entire unit. Empirical studies have apparently proven that not all households have at least one altruistic member, but the University of the United Nations shares a theoretical conclusion that shows the opposite:
“Income in the hands of women has effects on household expenditure that differ from those of income in the hands of men (Thomas 1990, 1992; Hoddinot and Haddad 1991; Engle 1993). Income in the hands of women is associated with a larger increase in the share of the household budget devoted to human capital. The inputs and outcomes measuring human capital in various studies have included household services, health and education, leisure and recreation, as well as more quantitative and biological measurements of child height, weight for height, immunizations, survival, and nutrient intake. In theory at least, this finding implies that increases in employment opportunities for women will have a greater positive effect on child welfare (Folbre 1992) than similar increases for men.”

Other interesting findings from the University of United Nations:

  • Actual earning power or economic profitability to the family of women in the current generation influences the allocation of food, health, and educational resources to female children (the next generation).
  • Poor women household heads with low incomes will make great personal sacrifices to achieve favourable child outcomes (Bruce and Lloyd 1992). These studies, however, have been done in societies where such women are highly dependent on their children for future support.

Gender Issues

From an empirical point of view, there exists a great amount of pressure for wives to fit the society’s idea of “Super Woman” or “Super Wife” or “Super Mother”. How often have we judged a fellow woman when she does things differently in her house, with her children, in her relationship with her husband…?

This is not to say that the Bible passage encourages this animosity, but it did mention the additional responsibilities of wives which are: to make sure that she keeps herself good-looking (she is clothed in fine linen and purple), interesting (She speaks with wisdom; does not eat the bread of idleness) and it is implied that she has half of the responsibility for upholding the family honor (Her husband is respected at the city gate, where he takes his seat among the elders of the land).

This is all and well because the passage is supposedly talks about what an ideal wife is, but it would be wonderful for everyone to understand that such an ideal wife is exactly that- an idea.

This is to say then, that the real, live, breathing wives or women who are future wives are a work in progress. They need encouraging, they will fail some days but will triumph on more and they certainly do their best to fulfill their duties…  just like the real, live, breathing husbands or men who will be husbands in the future.

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Image courtesy of: http://www.quotehd.com

 -the end-

*From what I’ve observed, most people shy away from reading the Bible because of some prejudiced concepts against women.

**When I suggested this in class one day, a Marxist classmate (may he rest in peace) asked me with a little bit of indignance: what kind of society would I like my children to grow up in, where a mother’s “love” is to be measured monetarily. He also asked whether I would be willing to turn something supposedly “humane” and priceless into another service or merchandise that could be exchanged at a given fee. Now older and myself a mother and housewife, I get the inkling that assigning a monetary value to a housewife’s production could be a way to start equating a woman’s salary to that of a man’s. After all (and this is not to agree with the neoliberals, but one has to know how to play this game) if a woman’s choice to leave the labor market and focus on caring for her family is one factor that widens the gender pay gap, why not continue giving measurable value to what she would do in her house? This way, there would be no vaccuum within her professional history because she would still be considered “productive”. And those years of being a homemaker would actually be considered as added experience in her curriculum.

***This presents a hole in the modern study of economics and I believe it is worth a deeper analysis. Women (and in some cases, men) who shift from being a paid professional to a homemaker do not necessarily become rusty and obsolete when it comes to all their skills. By channeling their efforts towards accomplishing a different kind of objective, they develop other abilities and could also be strengthening those that they already possess. For instance, an accountant-turned-housewife after years out of practice could turn outmoded in the latest software used in her field, but surely she has gained better organization and time management skills.

Sources:

  1. https://www.biblegateway.com/passage/?search=Proverbs+31%3A10-31&version=ESV
  2. https://www.biblegateway.com/passage/?search=Ephesians%205:22-33
  3. http://www2.um.edu.uy/acid/family_economics/family%20economics%20and%20macro%20behaviour.pdf
  4. http://www.nber.org/papers/w9232.pdf
  5. http://www.nber.org/chapters/c2970.pdf
  6. http://archive.unu.edu/unupress/unupbooks/uu13se/uu13se04.htm
  7. https://en.wikipedia.org/wiki/Family_economics
  8. https://bfi.uchicago.edu/initiative/economics-family

Hidden-nomics (2)

The Legend of Athens

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Image courtesy of: Wikipedia

“Let there be light! Said Liberty , And like sunrise from the sea, Athens arose!”

– Percy Bysshe Shelley

Once upon a time, there was a king named Cecrops who ruled the city of Cecropia. The time came when he had to find a deity to be the patron of the city and two gods were keen on having patronage of the land: Poseidon, God of the Sea and Athena, Goddess of Wisdom.

Cecrops did not want to attract the ire of either deity, so he suggested there be a contest between them. Whoever gives the people of Cecropia the most useful gift will win and will forever be venerated in the city.

Poseidon went first and after striking his trident to the ground, the first horse sprang up and produced such awe from everyone who witnessed it. Afterwards, he tamed it and taught the people the art of horsemanship.

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Image courtesy of: http://151.12.58.141/virtualexhibition/contest.html

When Athena’s turn came, she knelt down and planted an olive branch on the ground. She had planted the first olive tree. The goddess taught the people how to care for the plant and when the tree gave forth its first fruits, she trained the Cecropians how to harvest them. Later on, she also taught them how to make preserved olives and the very precious olive oil.

The citizens thought long and hard about this tough decision. Counsels and public debates were held so that everybody could give their opinion. In the end, the majority voted for Athena’s gift and thus the goddess was chosen to be the patron deity of the city. In her honor, the city’s name was changed to “Athens”.

Decision-making

The word “patron” comes from various root words:

i) the Medieval Latin patronus which means bestower of a benefice among others

ii) the Latin word patronus to signify defender or protector

iii) the old French patron referring to protector

So, what made the Greeks choose Athena as their patroness?

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Image courtesy of: https://wikis.nyu.edu

At first glance, one could say that a horse could be just as useful as an olive tree. Both gifts are useful to advance the citizens’ livelihood- the former through transport, added power in farming and even nourishment, while the latter could produce fruits to be preserved for food or to be made into oil.

Having been taught to think the way I do, the only explanation I could find was that the Cecropians did a Cost-Benefit Analysis of the gifts offered by the two gods.

Cost-Benefit Analysis (CBA)

As the name states, it is a study that involves the comparison between the costs and the benefits of a certain action. In this story, the Greeks had to make two CBAs: in case they choose the horse or in case they choose the olive tree.

According to Investopedia, “Prior to… taking on a new project, prudent managers will conduct a cost-benefit analysis as a means of evaluating all of the potential costs and revenues that may be generated if the project is completed.”

The procedure is simple: one has to compute all the costs of caring for a horse and then compare it to the gains or benefits one could get from using it. The same method would also be applied to the olive tree.

This process is very similar to listing “pros” and “cons” of various alternatives, the difference being, that the CBA assigns a monetary value on each item.

Can you imagine how they would do this? After all, Greeks are famous for their contribution in the field of mathematics, philosophy, physics, etc…

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Image courtesy of: http://toolbox.vetonline.swin.edu.au

Obviously, the CBA done by our ancient Greek friends must have turned out more favorable for cultivating olive trees instead of rearing horses. That is to say: when they estimated/imagined the difference between the costs and gains of horse-rearing and compared this to the difference between the costs and gains of cultivating olive trees, the second choice must have proven more beneficial to them.

Where:

CH- Cost of Horse

GH- Gains from Horse

CO- Cost of Olive tree

GO- Gains from Olive tree

Then:

GH – CH < GO – CO

An imaginary scenario…

In my imaginary scenario, the only thing the Cecropians were certain of were the costs related to tending either to an animal or a tree. Animal husbandry as well as cultivation were already practiced by then, making it easy for them to estimate how much it would cost to raise and maintain 1 horse (perhaps similar to raising and maintaining 4 goats), or to cultivate and tend to an olive tree (perhaps comparable to growing an almond tree).

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Image courtesy of: http://www.dailymail.co.uk

I believe that the benefits for each alternative would have been more difficult to estimate because supposedly, it was the first time the people of the world are looking at a horse and an olive tree. Though the wise men and women of Cecropia would have had no problem making another set of estimations (multiplying the gains of having 1 goat to 4 to have an idea on the benefits of the horse, and doing the same with the almond and olive trees), not all would have the same valuation for the “items”. Those who do not appreciate the advantages of having goats (horses) could argue that the proposed gains might be exaggerated. Those who are very fond of almonds (olives) or almond (olive) oil could overestimate the returns from the almond tree cultivation.

Abacus

Image courtesy of: http://www.slidingbeads.com

Given this reasoning, it is easy to see that the olive tree cultivation must have displayed lower (estimated) costs.

For instance, the need for water alone shows how much more favorable an olive tree is compared to an animal- while the first is among the most drought resistant plants, the other would need gallons of water to survive, especially in summer (The average horse will intake 5 to 10 gallons of fresh water per day!).

Add to that the existence of opportunity costs (remember them? they are the cost of an alternative that was given up): olive trees need water but an irrigation system could be put in place so that only the necessary supervision will be carried out. Horses, however, would have to be brought to a grazing land so they could feed. Either its owner will perform this task (thus incurring into the opportunity cost of a wage he could be earning or a siesta he could be enjoying) or someone will be hired to do so, for a given pay.

Legends say that the horse represented war, that was why this gift did not sit well with the Cecropians. This might be true, but my speculation is that the Greeks realized that while the olive tree would grow in value over time (it could live to be about hundreds of years old), the horse would some time end up dead- useless. When you think about it, horse rearing could actually be compared to today’s car purchasing. Both have very similar usage, both require a lot of attention and great expenses and lastly, the two seem to decrease in value as time passes by- the horse would grow older, slower, weaker and the car would turn older and more obsolete. Everybody would agree this is not a good investment.

On the contrary, it is believed that the olive tree was chosen because the way Athena planted the branch, it symbolized peace and prosperity to earth. As I see it, the people saw an alternative out of hunger and poverty through the possible livelihood/nourishment (and biodiversity, too!) provided by the olive tree; they realized that there is an opportunity to earn a living thanks to its cultivation, allowing them to secure their families’ sustenance without too much cost. Thanks to the olive tree, the people of Athens were confident that as long as they worked hard, the trees would continuously bear fruits and they will not fall into misery. They would then live harmoniously in the community because everybody would have the chance to survive and do well. This, I believe is the reason behind the symbol of peace and prosperity. Athena had truly bestowed benefice among others.

All hail the judicious Athena!

The Unpopular End-of-Story

Did you know that Poseidon got so mad that he flooded the (newly named) city of Athens? He couldn’t bear his loss to Athena and since he controls the waters of the earth, he sent a great deluge to punish the people for not having chosen him. Amusing?

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Image courtesy of: https://hhsprince.wikispaces.com/Poseidon

Even more interesting is the version that recounts how the “Unruly Earth Shaker” was finally appeased. In this tale it was said that the moment the gods showed their gifts, the men voted for Poseidon and the women voted for Athena. There was 1 woman more in Cecrops at that time, and that difference made Athena the chosen patroness. Poseidon got so mad, he started flooding the countryside. In order to make him stop, Athena declared that women would not be able to vote in upcoming elections. Intriguing, isn’t it? Although that, is another story…

 

Sources:

  1. “Who Did Poseidon Create the Horse for in Greek Mythology?”, by Charles Infosino, available at: http://classroom.synonym.com/did-poseidon-create-horse-greek-mythology-21051.html
  2. “The Contest of Poseidon and Athena”, available at: http://www.greek-gods.info/greek-gods/poseidon/stories/poseidon-athena-contest/
  3. http://www.etymonline.com/index.php?term=patron
  4. Investopedia
  5. http://olivetreegrowers.com/blog.php?view=detail&id=19
  6. http://quotes.yourdictionary.com/athens
  7. http://www.starsandseas.com/SAS_Mythology/poseidon.htm
  8. https://hhsprince.wikispaces.com/Poseidon
  9. http://extension.psu.edu/animals/equine/news/2012/how-much-drinking-water-does-your-horse-need

 

 

Prospect Research

“What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal.”- Albert Pike

“So, you are interested to be a prospect researcher?”, asked the French head hunter.

If I had one confession to make in this blog, it is that the first job I got in France was one I didn’t know anything about… I replied to the ad because it seemed like an organization was looking for a researcher. But until I had the first interview with the recruiting agency, I didn’t exactly understand what I applied for.

It was embarrassing to be on the phone, sneaking from my former boss, and having to admit that as good a researcher as I am, it was the very first time I’ve heard of Prospect Researching. I do not recall how I saved face during the interview, but somehow I was able to convince her that I’m an ideal fit for the job.

Philanthropy, a sector in progress

I suppose it was through a strike of luck that the head hunter assigned to me was a kind, considerate one. She didn’t blame me for cluelessly applying for a job. And how could she? when the very foundation of Prospect Research is still taking baby steps in Europe: the Philanthropic sector.

In philanthropy, the main activity that moves resources is Fundraising. Surely, you’ve heard all types of fundraising campaigns for a wide range of causes from fighting hunger to combatting illnesses. It is mostly the non-profit organizations that use fundraising to, well, raise funds. As opposed to investment, the donor does not receive any monetary value in return. But a recognition in one form or another is always offered (naming facilities after a donor like “Ismid Family Library”, setting up a plaque of appreciation or a giving symbolic like a fountain pen or a trophy). Many non-profit organizations are resorting more and more to soliciting donations in order to sustain their activities; especially after the recent economic downturns, which have certainly reduced investments in their enterprise.

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Image courtesy of: http://tc.mc3digital.com/2014/10/ten-tips-for-nyc-marathon-fundraising/

 

Almost all of us have witnessed how different associations raise funds in the streets: they either ask for a one-time donation or request for a longer-term commitment. What prospect reasearch does is to streamline information so that fundraisers know exactly who to target and how to enlist the “prospects” for a more stable and continuous organization-donor relationship. 

Research on Prospects

Prospects are defined as probable donors, and they could mainly be a company or an individual. Given my personal experience, I choose to consider prospects as individuals in this post.

The best way to identify a prospect is to investigate how he is linked to the organization that needs the funds. Is he an alumnus/current member of the organization? Is he a parent of an alumnus? Is he a parent of a current student? Is he a board member? Is he in any way interested in the mission and vision of the said organization (interest)? Has he made or is he currently making donations to similar causes (willingness)? And most importantly, does he have the resources (capacity)?

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Image courtesy of: http://www.slideshare.net/GrantsCollection/from-prospect-research-to-donor-relations

Fundraisers want to know almost anything there is to know about a prospect, but the most important information they need is the person’s capacity to give. All of us may agree that receiving a one-time donation of 1M Eur is much more efficient than asking for 2K Eur 500 times.

Research on this type of research

I found this job really interesting ever since the day I had to prepare for the second interview. I had to study the basic fundraising concepts and found out that fundraising is actually a cycle and prospect researching is the first step. The research done would make way for the rest of the steps such as:

  • a more target-based Cultivation (building relationships with identified prospects)
  • a realistic Solicitation (asking for an amount to be donated) and,
  • helping strategize Stewardship tasks (recognition and continuous engagement of donors). You may notice that the prospect turns into a donor once he has made a gift (another term for donation).

The cycle comes to full circle when the donors’ information is updated and they are once more identified as prospects for another round of solicitation/fundraising activities.

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Image courtesy of: http://www.gailperry.com/2014/02/help-board-members-understand-fundraising-everybodys-job/

 

The theory seems to be fairly understandable, logical and well-organized. However, as is everything in this colorful life, it is the reality that gives problems of execution. In prospect researching for example: for the world’s richest people, information is readily available at Forbes, Bloomberg and other periodic publications online (mostly this information is accessed for free) or in hard copy. There are even wealth search tools available that estimate a person’s assets and cash flow (not for free); and the principle would still be the same: the more famous the person, the more information you have.

The bigger problem is if the person you’re interested in is believed to have the capacity to donate but is either one of these:

  1. Not very famous, or not visible in media
  2. Somebody really old, hence very scarce information is available about him online
  3. Related to a rich/famous personality, so that the available information is more about his relatives than about him

… what are you to do?

As it turns out, this kind of dilemma is what made the job even more interesting than I expected- this is where prospect researchers would turn to other sources of information such as: Facebook (FB), LinkedIn, Instagram, news articles and- why not- gossip columns.

I used the word “intriguing” because the first time I had to resort to this technique, I wasn’t believing my luck that I was being paid to pry into people’s lives. Just like a gossip journalist. (Yep, you guessed it! gossip columns is my guilty pleasure…)

For example, after I reported about a prospect’s FB content he ended up being completely disregarded due to the conclusions drawn about him (too many inappropriate pictures and male chauvinist jokes). The organization didn’t want to be identified with someone like him.

And what about that time when I discovered that the heir of a vast family fortune in France is said to be addicted to poker? I had to look for more than 5 news articles/interviews just to assure the fundraisers that there might be some truth to it.

Or when I learned that a very famous former member of the organization was once married to an English aristocrat? This is important so that when the assigned fundraiser approaches her the topic could be treated with tact, or not treated at all.

Lastly, what about that week I spent digging up information about a prospect’s properties (a castle here, a manor there, several farms somewhere…), then it turns out he’s an octogenarian? I also found out that he’s being approached by fundraisers from various organizations to propose to him about leaving a legacy gift. I had to report this to the manager so they could adjust their expectations with regards to this prospect’s willingness to give.

How is this interesting career-wise?

The most obvious answer would be the fact that Philanthropy is slowly but surely rising in importance outside of the U.S. and U.K. (where it is of such high relevance). People who are interested to dedicate themselves in this kind of job would find that opportunities will gradually present themselves (perhaps sooner in some countries, later in others). But focusing on the research aspect of this sector, I found that I was able to develop and strengthen certain skills.

These, according to my limited exposure, are the skills needed to be able to successfully carry out a good prospect research work:

  1. Discretion: given the importance of the people involved in the research, fundraisers and campaign managers will greatly appreciate someone who could act as if they don’t know anything in front of non-concerned parties
  2. Strictly following instructions: this is the only way the fundraisers could get what they really want and the only way they can be truly effective in cultivating good relations with the prospect; and if the person is already a donor, strictly following their instructions would make it easier to continue engaging them
  3. Knowing what questions to ask: prospect researchers exist because in principle, fundraisers don’t have time to make the research work themselves. But they might have some ideas in mind which are useful to be known
  4. Fast reading: there is so much to read!
  5. Fast writing: there’s even more to write!
  6. Patience: sometimes people who ask for research materials change their minds. They might re-focus the research from another angle or change the subject altogether. It helps to think that all of it is for the best (which would be translated to $$$, literally!).
  7. Efficient time-management and multi-tasking: most of the times a researcher would be requested to submit various materials with the same deadline. These materials are not necessarily identical in length, content or effort needed to be produced.
  8. Network building: some important and “juicy” information would come from the people you meet outside the organization. Having said this, hearsay and rumors are not going to be taken seriously as research material, but fundraisers would appreciate knowing them (as long as they have been warned that those are in fact merely rumors).
  9. Believing in the cause: this quality would make any prospect researcher work hard and endure all types of difficulties when faced with a tough subject (or fundraiser, hehe!)
  10. Genuinely enjoying the job: I believe this is a pre-requisite for ANY type of job. Enjoying what you do, truly loving what puts the bread on your table will make the day-to-day travails easier to handle. Enjoying doesn’t mean not encountering any problems, though. Enjoying in this context means that no matter what problems you face, you are always ready and open-minded for the alternatives because you want to solve them.

Everything I learned and everything I have shared is the product of the handover process plus the 5 months I spent filling in for this job (it was a replacement for someone who went on maternity leave). It’s such a pity I wasn’t able to stay in that department to learn more from the original Prospect Researcher. But I am very grateful for that short period of discovery from such an insightful person. These were actually the qualities that fundraisers appreciate about her, and which I worked hard to develop to a higher level. I can proudly say that this job has helped me grow both professionally and personally.

So, are you interested to be a prospect researcher?

 

Sources:

1. Fundraising Fundamentals, available at: https://www.case.org/Publications_and_Products/Fundraising_Fundamentals_Intro/Fundraising_Fundamentals_section_7/Fundraising_Fundamentals_section_71.html

To see is to (dis) believe

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Image courtesty of: http://www.wsj.com

Disclaimer: the purpose of this post is to satisfy the author’s curiosity about the difficulty of finding a job in Paris. Due to limited resources, it has been restricted to briefly discuss whether the huge cost of hiring is causing the apparent “disfavor” of foreign candidates. It does not intend in any way to explain any socio-economic-political problems faced by the country today. Neither does it propose any solutions.

The conclusions presented do not reflect the French population’s opinion. They are solely the author’s point of view basing on her own experience and situation analysis.

A light, leisurely tour in the net…

I had started to write about my previous post “A color for disbelief” ,when I decided to do some light research online. I wanted to find out just why it’s so hard for a non-French to find a job in Paris. There were soooo many blogsites and fora about this topic. I did find many helpful ones and so many whiny ones, too! But for the purposes of this post, I would recommend a couple of articles available at:

These statements partly answer my question. Plus if I add this information to my own experience and other people’s stories, I could say that when we look at the supply side of the labor market it’s not a matter of foreign applicants presenting a lower-level training. It’s more a question of the selective process candidates undergo and the criteria being used when choosing the finalists.

What about the demand side? This made me think about the employers and the price they have to pay to acquire labor. It occured to me that perhaps this is one factor that’s discouraging hiring in general. And if we include the economic crisis in the picture, it could explain why the French are more favored by local companies when seeking to increase their staff.

By the way, no matter what they tell you: it’s the companies that demand work and the employees that supply them. Even if the ads announce “JOB OFFER”, technically they are the ones that need the labor to do such job.

What is the cost of hiring?

The cost of hiring basically includes: salaries and wages plus various expenditures such as payroll taxes and cost and benefits to be paid by employers- not to mention the operating expenses (setting up a computer, telephone line, in some cases a mobile phone, company vehicule, etc…). In France, social taxes (paid by the employee) average up to 22% of the gross salary, while the costs and benefits paid by companies average to 42%.

If a company decides to hire a foreigner, it has to take charge of organizing the person’s work authorization. This is a pre-requisite for anyone who wants to start processing his visa/residence permit and would raise the hiring cost. This is not only measured in terms of money but also in terms of time spent, effort exerted and those “things left undone because of having to allocate money, time and effort in applying for a work authorization”. The latter is what economists love to deal with and they call it opportunity cost. We’ll get back to that later.

As for EU nationals: technically they’re still foreigners but they have the liberty to move about and work within the EU zone. Because of this, French companies have theoretically started to widen their search; they are not anymore obliged to hire French candidates first. In theory. But with the high unemployment rates (10,5% for France and 8,4% for the city of Paris), it shouldn’t be surprising if candidate searches are still leaning towards French citizens. Here we can also insert the opportunity cost of not hiring a French national.

The opportunity cost is defined by Investopedia as “the cost of an alternative that must be given up in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.”

On one hand, in the case of using a company’s resources to prepare a work authorization: this would mean hours of an HR personnel’s time invested in the said task instead of, say, interviewing candidates, helping out in a team project or simply archiving letters and documents (the French are still big, big fans of hard copies of documents and snail mail). On the other hand, the opportunity cost of not hiring a French national is simply passing up the chance of employing a more competent and brilliant worker, compared to the foreign one (I really have the impression that the French take a lot of pride in themselves- which is good! I mean, why not?).

Is the cost of hiring affecting companies’ decision to employ?

You’ve probably heard about the protests in France concerning the employment reforms to be applied by the government. (I actually bumped with the protesters a couple of weeks ago, while I was taking my son for a walk. The demonstration took place in a roundabout 2 minutes away from our house. Ah! to live in Paris…)

Part of the agenda include lowering hiring costs. The idea is that once these costs are lowered, firms would have enough resources to boost their manpower. In fact, some of the proposals regarding hiring costs are:

  1. Part-time and full-time workers could be paid less for over time
  2. Less compensation for workers fired due to sickness or accident (as long as the company is not seeking replacement for the said worker)
  3. A firm- as per agreement with the labor union- could lower employees’ salaries and increase working hours even if it’s not undergoing financial difficulties (the changes could take effect for a maximum of 5 years)

It is widely known that France is a good place to be an employed, no matter how big-time or “small-time” the job is. In the short span of time when I worked, I noticed that the contracts promote the workers’  (ergo, the society’s) welfare: one is assured against accidents or sickness, there are compensations for unemployment, there’s a lot of vacation days, the company sets up a pension plan, the company also usually sets up a private health insurance to top-up the public one, etc…

(Thanks to this, the quality of life in France is among the highest in the world- there is relatively low level of inequality prompted by a generally high level of well-being. The proposed reforms are supposed to boost employment rate and consequently, the country’s economy. But it would also clearly lower the standards of living of an average Jean-Pierre.)

All of these mechanisms propped up to protect a worker generate certain costs shouldered by both employee and employer. But as I’ve mentioned earlier, employers pay an average of 42% of an employee’s gross salary in costs and benefits. That is an important chunk of enterprise money that could go to a “better” use.

Could this really be the reason? is labor really “too expensive” for employers to purchase? And thus when they could purchase it, they choose their countrymen so they don’t incur in unnecessary additional costs? In this sense, it apparently seems so (although it would not explain why other EU nationals have a hard time finding a job).

What do the heavier research materials say?

According to on OECD review dated a year ago (April 2016), France should “take measures to make employment contracts more flexible”. This translates to simplifying layoff procedures.

Now, does this mean that the problem lies in the costs of firing employees?

Pausing to think about it for a while, it does make sense: if a company cannot easily get rid of an inefficient worker who has been with them for a long time, there’s little incentive to hire a new one (firing could be much costlier than the profits a new employee could bring). Particularly in the French case, laying off employees is really hard. France seems to take the OECD’s word for it because if we go back to the Labor Law Reform agenda, we may find articles such as:

  1. An employee dismissed without justifiable cause is not legible for any compensation from the company
  2. Permissive dismissal of employees in case a company sells all or part of its economic activity
  3. An employee who refuses a modification in his contract (usually to lower his salary or increase his working hours with less compensation) following a deal with the labor union could be dismissed.

… all of them geared towards cheaper staff cutback to facilitate hiring.

Reading through other research materials, I found answers as varied as the schools of thought where the authors come from (some of the reasons presented were quite off-topic for the content of this blog). Though I came across a very interesting report from McKinsey (2012), which not only suggested reform on labor market conditions but also other mechanisms such as supporting “job-creating growth for the high- and low-skilled alike”.

As far as I’m concerned, this is a very englightening and practical response. While it may be true that French Labor Laws are strict, perhaps the reason why companies are not hiring is because they simply cannot create jobs and thus have no need for additional staff…??

So why is it so difficult to find a job in Paris?

While I actually enjoyed the brief research I did for this post, I’m not so sure I could say the same about the reader. Either you are pulling your hairs by now, ready for the big punchline or you simply stopped reading right here.

Bear with me because you see, a company owner was interviewed by the Financial Times (FT) in early 2013 and according to him, he’s doing his best to keep his staff below 50 persons. The reason is that he doesn’t want to “exceed a threshold under the labour code which imposes an increase in obligations in terms of worker representation, redundancy procedures and other costs to the employer.” I’ve inserted a chart* below from l’Institut National de la Statistique et des Études Économiques (INSEE). The Gross Domestic Product’s growth rate (GDP) over time will help get my point across:

GDP and its main components

(Note: GDP growth rate tells us how much an economy has grown from one period to another. A negative growth rate means a decrease in production; a lower but positive GDP growth means an economic slowdown.)

Notice how in Q1 of 2013, France’s economy was still on the uprise- the same period when the FT interview took place. My point is, if employers (whether from small- or medium-sized companies, they are still the ones hiring!) were already having this kind of thought during prosperous times, imagine their reaction during an economic downturn!

The same company owner also stated that he has to “employ people with ready-made skills who you are sure will fit straight into the job”. Going back to the case of foreigners applying for jobs in Paris, this seems to explain why they are not easily hired. Recruiters simply cannot afford to risk engaging someone who will make them incur in increased training costs.

In my particular situation, the simple answer is: I came in the right place at the wrong time. It was 2014 and the economic crisis was at its peak in Spain. In the meantime, my husband and I believed that France was doing just fine. It was not after our arrival when we realized that crisis was already budding in the neighboring country.

If we look back to the chart and take the middle block of data (Q1, Q2, Q3 and Q4 of 2014), notice how the GDP growth just dropped from the end of 2013- which was when I started looking for a job in Paris- and did not recover until the end of Q2 in 2014. It’s also important to consider that this recovery was a slow, small one which was not enough to replicate the features of a more booming Q1 2013.

(Facepalm)

I don’t believe that hiring costs hugely affect employment decisions by companies. In my opinion, if there’s need for personnel and there are resources available, a company will hire. And if a person is the right fit for the job, he will be employed even if it meant a little more effort from the recruiting side. That’s why negotiation was invented.

The complicated answer? Well, I’d like to invite you to review the literature along with me and perhaps start a debate? The more varied the schools of thought, the better!

Thoughts to ponder

I truly like ending my posts with a moral lesson or some inspiring anecdote- anything to leave the reader with a nice, feel-good vibe.

Unfortunately, economic analysis doesn’t allow much for that luxury. At best, we could count on an optimistic (albeit unsure) projection in the future and a very clear vision of what happened in the past. In the case of this post, I’ll stick to the latter…

There was really no way for me to know that France was already suffering from a sharp economic decline during the moment I decided to search for a job. The kind of chart I presented above doesn’t get “done” until a certain period of time has passed. Meaning, that the earliest I could’ve known about the French economic crisis was at the end of Q1 2014, and by then I was already working in that 5-month contract outside of Paris.

This is the beauty of economics- it makes you learn the lesson the hard way but also gives you an understandable image of the past so you won’t commit the same mistakes in the future. It allows you to (dis) believe in what you know for yourself.

 

*Chart contents:

Q1, Q2, Q3, Q4- 1st Quarter, 2nd Quarter…

GDP- Gross Domestic Product

Consumption- household consumption expenditure

Inventory changes- Goods produced minus goods sold. (An excessive increase in inventories may signal aggregate demand is slowing down as there are more goods produced than sold.)

GFCF- Gross Fixed Capital Formation (investment)

Net foreign trade- External balance (Export-Import)

Sources:

  1. Eurostat
  2. INSEE
  3. Investopedia
  4. “Comment calculer le coût d’un salarié”, available at: http://www.petite-entreprise.net/P-3848-88-G1-comment-calculer-le-cout-d-un-salarie.html
  5. “French Attempt at German-Style Labor Reform Flounders”, available at: http://www.wsj.com/articles/french-attempt-at-german-style-labor-reform-flounders-1417684679
  6. “French Labor Law Reform not supported by Economic evidence”, available at: http://cepr.net/publications/op-eds-columns/french-labor-law-reform-not-supported-by-economic-evidence
  7. Loi travail, available at: http://loitravail.lol/
  8. “OECD: France must Reform Labor Market and Cut Spending”, available at: http://www.euractiv.com/section/social-europe-jobs/news/oecd-france-must-reform-labour-market-and-cut-spending/
  9. “France battles with labour market reform”, available at: https://next.ft.com/content/05b54c84-5a63-11e2-bc93-00144feab49a
  10. “Unemployment and Labor Market Rigidities: Europe versus North America”, available at: https://wwz.unibas.ch/fileadmin/wwz/redaktion/fai/EIB_Arbeitsmarkt_HS08/Nickell.pdf
  11. “Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium”, available at: http://www.nber.org/chapters/c11255.pdf
  12. Defition of “inventory changes”, available at: http://pages.stern.nyu.edu/~nroubini/bci/inventories.html
  13. “French Employment 2020: Five priorities for action”, available at: http://www.mckinsey.com/global-themes/employment-and-growth/french-employment-2020