Category Archives: Business and Economy

The sociological department at Ford

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I stumbled across an interesting piece of information the other day: Henry Ford established a sociological department at his company in 1913. Here are some interesting tidbits about the short-lived department culled from some varied sources:

–From a University of Michigan website:

The Sociological Department of the Ford Motor Company was organized in March, 1913, and oversaw a broad array of social benefits for Ford employees, including assistance in living in well-maintained single-family homes as opposed to small apartments. After the announcement of the Five Dollar Day in 1914, the Sociological Department was responsible for determining if employees’ personal lives and personal habits made them eligible for the full wage. This phase of the Department’s activities terminated with the reorganization of the company in 1920.

–From a blogger:

On January 5 1914, Ford announced the revolutionary five-dollar, eight-hour day:

What the company announced was not a plan to pay workers an hourly rate equivalent to five dollars a day. Instead, the company announced a plan to allow the workers to share in the company profits at a rate that promised five dollars a day … The five-dollar profit sharing plan was designed by the company to include only those who were ‘worthy’ and who would ‘not debauch the additional money he receives’.

The Sociological Department, under the leadership of the Reverend Samuel S. Marquis, was put in charge of administering the programme and investigating the home lives of workers: “investigators from the Sociological Department visited workers’ homes and suggested ways to achieve the company’s standards for ‘better morals,’ sanitary living conditions, and ‘habits of thrift and saving’.”…

Inspired by welfare capitalism, Ford’s “philosophy adopted a paternalistic attitude toward workers that, in Ford’s case, was rooted in the Protestant work ethic. Ford believed in it and wanted his employees to adopt it…” And Ford’s social standards reached far beyond the confines of work-life. The PBS film Demon Rum documents the Sociological Department’s efforts to “end the working man’s drinking habit” and how the “success of the small program led to a national prohibition campaign.”

-A 2004 article in American Culture titled “Ford’s Sociology Department and the Americanization Campaign and the Manufacture of Popular Culture Among Assembly Line Workers.”

–A two-day lesson for (high school?) students on the topic.

I am not surprised by Ford’s actions: there was a lot of pressure at the time to improve efficiency and a number of companies tried other tactics we might consider paternalistic today (example: the Pullman town which is now part of Chicago).

I am also reminded about the changed role of sociology. Ford seems to have viewed sociology as a means of “social engineering” or enforcing particular ways of living. This involved very strong value judgments and a lot of company control over workers. I imagine this would make most, if not all, sociologists today very nervous.

Virginia Postrel takes on typical arguments about worthless college majors

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Virginia Postrel counters arguments that many American college students are studying subjects that don’t matter and won’t help them find a job:

According to the National Center for Education Statistics, humanities majors account for about 12 percent of recent graduates, and art history majors are so rare they’re lost in the noise. They account for less than 0.2 percent of working adults with college degrees, a number that is probably about right for recent graduates, too. Yet somehow art history has become the go-to example for people bemoaning the state of higher education.

A longtime acquaintance perfectly captured the dominant Internet memes in an e-mail he sent me after my last column, which was on rising tuitions. “Many people that go to college lack the smarts and/or the tenacity to benefit in any real sense,” he wrote. “Many of these people would be much better off becoming plumbers — including financially. (No shame in that, who’re you gonna call when your pipes freeze in the middle of the night? An M.A. in Italian art?)”…

The higher-education system does have real problems, including rising tuition prices that may not pay off in higher earnings. But those problems won’t be solved by assuming that if American students would just stop studying stupid subjects like philosophy and art history and buckle down and major in petroleum engineering (the highest-paid major), the economy would flourish and everyone would have lucrative careers…

The critics miss the enormous diversity of both sides of the labor market. They tend to be grim materialists, who equate economic value with functional practicality. In reality, however, a tremendous amount of economic value arises from pleasure and meaning — the stuff of art, literature, psychology and anthropology. These qualities, built into goods and services, increasingly provide the work for all those computer programmers. And there are many categories of jobs, from public relations to interaction design to retailing, where insights and skills from these supposedly frivolous fields can be quite valuable. The critics seem to have never heard of marketing or video games, Starbucks or Nike, or that company in Cupertino, California, the rest of us are always going on about. Technical skills are valuable in part because of the “soft” professions that complement them.

The American economy is large and difficult to describe. It is a complex system where there are lots of educated and uneducated workers trying to fill a lot of different job slots. Simple answers on either side are not the solution in helping people to understand what is really going on. If there are lots of jobs in certain fields that need to be filled, like technical trades or nursing, it doesn’t necessarily mean that every student should suddenly go in that direction. I wonder if this is all tied to the Sportscenter-ization of discussion.

I wonder if someone has tracked whether these sorts of discussions happen in good economic times. In other words, when the economy is good and unemployment is low, do many people worry about what majors college students are pursuing or does it not really matter?

Quick Review: Boomerang

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Michael Lewis’s latest book, Boomerang, gives the current economic crisis some international context. In an entertaining and somewhat breezy manner, Lewis investigates why countries as disparate as Iceland, Greece, Germany, and the United States all fell into the economic mess. Here are a few thoughts about his take:

1. My overwhelming thought about Lewis’s explanations is that he wants to delve into different cultural approaches to the world of finance. Lewis’s argument goes like this: even though these countries have very different histories and cultural mindsets, somehow they all got involved with bad debt in the 2000s. This same topic could spark a fascinating economic sociology or cultural sociology manuscript.

2. Unfortunately, Lewis either doesn’t have much time to spend with each country (he admits the book began as he was working on understanding the US system, which became The Big Short or he doesn’t want to delve deeply into his thin arguments. For example, in Germany he tries to tie their fondness for following rules (which means Germans were the last people to be being disastrous American CDOs) to their fondness for scatalogical humor (which Lewis bases on one anthropological study). While there is a lot of potential here for showing how different cultures can be tied together by a global finance market, Lewis needs a lot more evidence to construct a convincing argument.

3. I found the last chapter to be both exhilarating and depressing. Lewis comes back to the United States in the final chapter and describes how this could all play out. Here is what Lewis suggests: while the centralized governments of Europe struggle, the problem in the US is pushed down the road because the federal government can push off more and more obligations on state and local governments. If this plays out as Lewis suggests (though there is debate over whether it will be as bad as Meredith Whitney suggested), local governments will continue to feel the pain of the economic crisis for years to come and the results may not be pretty.

Summary: I think Lewis is on to something here but I would like to see the topic covered with more depth and include more research.

Sociologist Richard Sennett: Wall Street offices lack cooperation

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After talking with a number of workers involved in the Wall Street troubles of 2008, sociologist Richard Sennett argues that Wall Street offices lack cooperation:

The financial industry is a high-stress business that requires people to work extremely long hours, sacrificing time for children, spouses and social pleasures. But after 2008, many of my subjects were no longer willing to make those sacrifices. Looking back, they realized how little respect they had for the executives who’d worked above them, how superficial was the trust they had for fellow workers and, most of all, how weak cooperation proved in the wake of financial disaster.

The fragility of this social triangle is disturbing. When informal channels of communication wither, people keep to themselves ideas about how the organization is really doing, or guard their own territory. Weak social ties erode loyalty, which businesses need in good times as well as bad. Many of the employees I’ve been talking with have come to feel embittered by the thin, superficial quality of social ties in places where they spend most of their waking hours…

Even for those workers who have recovered quickly, the crash isn’t something they are likely to forget. The front office may want to get back as quickly as possible to the old regime, to business as usual, but lower down the institutional ladder, people seem to feel that during the long boom something was missing in their lives: the connections and bonds forged at work.

This is an example of how sociology can help inform economics and/or social policy. In order for offices or any social group to work well, there has to be trust, solidarity, and cooperation. These traits cannot simply be dictated or ordered. Rather, relationships and social ties need to be started, developed, and maintained over time. These relationships may seem silly or unnecessary to some but it will be difficult to accomplish great things without them.

I expect an analysis like this is just the beginning of a flood of academic work and commentary about the recent economy crisis. And I would guess that a lot of research will show that people were not acting “rationally” but rather were working off of different emotions that led to “irrational exuberance.” Cultural and social factors played a role but it will up to scholars to determine how much.

The rise of dollar stores and the questions that should follow

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In recent years dollar stores have had a lot of growth:

Surveys have shown that today’s shoppers are more likely to make purchases in dollar stores lately, and chains such as Dollar Tree, Dollar General, and Family Dollar have experienced outstanding sales growth as a result…

Now, according to a study by retail research firm Colliers International, dollar store locations outnumber drugstore locations in the U.S. Specifically, Colliers added up the number of locations for four national dollar store chains (Dollar General, Dollar Tree, Family Dollar, 99 Cents Only), and compared that figure to the total number of locations for the country’s three biggest drugstore chains (CVS, Rite Aid, Walgreens).

The tally, as of mid-2001, stood at 21,500 dollar stores vs. 19,700 drugstores…

Also, the dollar store chains have all experienced remarkably strong sales in recent years, and have been expanding like crazy as a result. Dollar General, for example, has nearly doubled its location total over the past decade, 5,000 to more than 9,500 stores today. And counting.

I’ve wondered recently why Walmart gets a lot of attention while drug stores, particularly Walgreens in this area, and dollar stores have been expanding. Whenever I walk into a Walgreens, I can’t help but think they are mini-Walmarts. Walgreens sells everything from prescriptions to ice cream to photos to cosmetics and so on. Dollar stores are similar but cheaper, selling everything from food to detergent to household supplies.

After noting the growth in dollar stores, we could ask some questions about the effects these stores have. Clearly, they offer cheap goods. But: Are dollar stores good for the local economy? Do they provide good jobs? Do they tend to be found in areas of sprawl or strip malls and are dependent on automobile traffic? Are the goods primarily made in the US or overseas? Is the food for sale healthy? Perhaps these questions aren’t asked since it is assume dollar stores will recede in popularity when the economy improves. But since this likely won’t be for a while, shouldn’t we think about what it means to have a lot of dollar stores?

Forecast: US homeownership rate to hit low of 62% in 2015

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One forecast suggests that homeownership rates in the United States will drop to a low in 2015 before rising by 2025:

All this could push home ownership down to levels not seen at least since before the Census began tracking this data in 1963. Home ownership soared to 70 percent in 2005, but it could fall to 62 percent by 2015, according to the number crunchers at John Burns Real Estate Consulting. They suggest that the effect of foreclosures drops home ownership 5.6 percent, and cyclical trends, like poor consumer confidence, tightening mortgage credit and the weak economy drop it 3 percent. Positive demographic trends would only offset that by 0.7 percent…

Burns believes home ownership will return by 2025 to around 67 percent, as previously foreclosed borrowers return to the housing market, cyclical trends improve and positive demographics start to carry more weight.

This is quite an extended process that first requires foreclosed and underwater loans to get off the books before the homebuyers turn the numbers again. It is interesting that there is little political discussion about the length of this process – does it benefit any current politician to be forthright about how long it might take to turn the housing market around? Do people care that much about homeownership while issues like jobs and debt are also concerns?

If the process does take this much time, it could also lead to a long-term reassessment of real estate. I doubt that people will no longer value owning a home or that homeownership will disappear from the cultural image of the American Dream as some have hinted. However, there is less of a chance it will be considered an investment and people will be more careful with their purchases, particularly paying attention to being able to pay for it even in rough patches.

The growing sales share of big box stores

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In recent years, big box stores have increased their share of overall retail sales:

In the past two decades, the share of sales going to the top general merchandise stores has soared from 47 percent annually to 73 percent, according to an analysis of census data by University of Oregon sociologist John Bellamy Foster and University of Illinois at Urbana-Champaign communications professor Robert McChesney…

“In pretty much every category, you’ll see that the biggest guys are a lot bigger today than they were 10 years or 20 years ago,” said Lawrence Ring, business professor at the College of William & Mary in Virginia.

The implications of retail consolidation are varied: lower prices for consumers, but also less energetic hiring of workers and a more streamlined economy overall…

Whatever the big stores are doing has been working: Walmart’s U.S. sales last year were $308 billion. Target’s were $78 billion; Costco’s, $59 billion; Sears, $35 billion; Macy’s, $25 billion; Kohl’s, $18 billion; and J.C. Penney, $18 billion.

More points of evidence in a long-running discussion about the value of big box stores in the United States.

Another way you can tell how powerful these stores are: how many communities will turn them down if a big box store wants to open in the community and provide jobs plus tax revenues?

Occupy Wall Street to occupy Black Friday?

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There is a report that some Occupy Wall Street protesters want to take the movement to national retailers on Black Friday:

Some demonstrators are planning to occupy retailers on Black Friday to protest “the business that are in the pockets of Wall Street.”

Organizers are encouraging consumers to either occupy or boycott retailers that are publicly traded, according to the Stop Black Friday website…

“The idea is simple, hit the corporations that corrupt and control American politics where it hurts, their profits, ” states the Occupy Black Friday Facebook page.

A few of the retailers the protesters plan on targeting include Neiman Marcus, Amazon and Wal-Mart.

Besides wondering how many people will do this, it raises other questions:

1. Would most or even a sizable minority of shoppers welcome the protesters? I would guess not. People might think that the income and power situation in the United States is unequal but that shouldn’t get in the way of good sales.

2. Why are certain corporations singled out in this list (though they do suggest going after the top 100 retailers)? Why not Target? Walgreens? Kroger’s? Costco? If it is all big corporations that are the targets, will the protesters be evenly distributed or will they go for the typical targets like Walmart and McDonald’s that are often tied to sprawl and excessive consumption?

3. How exactly does one have a visible protest at Amazon.com? I guess the group could take over the comment boards. If Deadspin can prompt so many responses that ESPN can’t keep up, maybe Occupy Wall Street can do the same.

4. If protesters show up en masse, what will the response of stores be? Is the parking lot of Walmart a public space? (I assume not.)

The Main Streetification of shopping malls

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Perhaps you have seen the advertisements for Small Business Saturday – it will be fascinating to see if this campaign works. While the national retail market is not good overall, this piece suggests that “Main Street [is] making a comeback at the expense of the shopping mall.”

In short, the most successful malls usurped the role of Main Street as the commercial and even cultural center of the communities they served.

Now, however, many shoppers want Main Street back.

Development of new malls has almost completely stopped, with only two being erected in the country since the beginning of 2009, according to the International Council of Shopping Centers.

Outdoor town center concepts, featuring brick sidewalks, streetlights and even public clocks evoking the Main Street of yore, are climbing to a degree that many owners of enclosed malls are considering dramatic makeovers, some including plans to tear off the roof of, or “de-mall” enclosed shopping centers.

I feel this headline is a bit misleading: we’re not talking about a return to traditional downtowns. Rather, it is taking older shopping malls and adding “older” elements, creating a 21st century facsimile of what retailers and Disney want you to think old downtowns were like (but with modern amenities). This isn’t that different than the strategies a lot of older downtowns have pursued in order to become a little more mall-like. Perhaps the real story here is that we are moving toward an amalgamation of shopping mall and downtown where people want to purchase the latest and greatest but really feel like they are in a community setting. Perhaps we could call these new facilities “Main Street malls.” (Though I wonder how these are different from some of the new “lifestyle centers,” particularly the New Urbanist ones.)

I am a little miffed that the article provides little evidence that shoppers really want “Main Street malls.” Are developers not building malls because they are not needed or have the tastes of shoppers changed?