posting this again because it's stuck in my head
from pluralistic1:
Before the Great Resignation, there was the Great Stagnation, a 40-year relentless decline in workers' compensation, no matter whether the economy was booming or busting. This was a sharp change from the historical norm in which rising profitability translated to rising wages.
There are lots of explanations for wage stagnation. The most obvious one is the decline of unions, which is the result of changes to labor law that make it much harder to form a union, win a contract, and enforce that contract (this, in turn, is largely the fault of the Democrats' abandonment of labor causes in a bid to appeal to the professional and managerial class, which created a bipartisan, anti-union coalition).
But in "Eclipse of Rent-Sharing: The Effects of Managers' Business Education on Wages and Labor Share in the US and Denmark," a March 2022 National Bureau for Economic Research paper, Daron Acemoglu (MIT econ), Alex He (U Maryland business), and Daniel le Maire (U Copenhagen econ), we get a more complex explanation:
The paper makes a somewhat nuanced and technically complex argument, but let me paraphrase its conclusion: Going to business-school makes you the kind of person who cuts wages in bad times and refuses to increase wages in good times. When companies are run by MBAs, their workers' wages decline.
The methodology behind this conclusion is really clever and goes to some lengths to rule out other possibilities:
Perhaps this is just a US phenomenon? (Nope, it's also true in Denmark); Maybe the kinds of companies that hire MBAs to run them are the kinds of companies that cut wages? (Nope, they control for this);
Maybe greedy dickheads are more likely to get MBAs (Nope, they use clever controls from the same high school classes to rule this out);
Maybe it's not business education that makes you a dick, maybe it's economic doctrine? (Nope, companies run by economists don't screw over their workers the same way).
In other words, all those cliches about your boss's MBA giving them brain worms that make them into wage-slashing monsters? They appear to be true.
What's more, the authors estimate that this is a sizable contributor to wage stagnation, which sounds plausible: wage stagnation is correlated with the growth of MBAs in top management positions.
Some specifics from the paper's conclusions:
Five years after the appointment of a business manager [ed: that is, a manager who's gone to business school], wages decline by 6% and the labor share by 5 percentage points in the US, and 3% and 3 percentage points in Denmark (relative to firms operated by non-business managers);
Business managers are not more productive: firms appointing business managers are not on differential trends and do not enjoy higher sales, productivity, investment, or employment growth following their accession;
Non-business managers share greater sales and profits with their workers (in fact with fairly high elasticities), business managers do not;
Our estimates correspond to causal effects of practices and values acquired in business education—rather than the selection of individuals averse to rent-sharing into business education.
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and originally seen by me on @nirebryce's post
seems worth reiterating the core point of the business school part of that post: they're taught by consultants and not people who actually ran a business before Business School Thinking took over.
one of these days I want to audit some higher level business classes just to see what actually goes on in them, because... yeah like, even second and third ones I've seen through the door, that screenshot you posted is both true and grim.
I went to a university with a pretty well regarded business school (no, not harvard, lmao) and attended the free public lectures when they happened, and, I do not say this lightly, I have found stones in a river more wise and learned than these men.
