Category: Rivera, Lauren


 Children of the wealthy and well-connected get the best jobs in a quid-pro-quo. Do they deserve it?

Since the start of the financial crisis, much has been said about inequality in income and wealth, how the 1% earn and possess so much more than average Americans. Less has been said about the societal mechanisms that are a barrier to equal opportunity and that keep economic mobility low, e.g.,  admission policies to Ivy League universities, and cronyism in hiring.

Now, Andrew Ross Sorkin writes in the New York Times that the recent SEC investigation whether JPMorgan Chase hired the children of Chinese government officials “to help the bank win business” is “sending shudders through Wall Street.”

“[If] JPMorgan Chase is found to have violated [1977 Foreign Corrupt Practices Act] by hiring the children of the elite, then the entire financial services industry is probably in a heap of trouble,”

Sorkin says, listing numerous examples of how common the hiring of the children of the elite really is. Access to a network of powerful friends and relatives has obvious value. So, profit-maximizing firms pay for it. In the process, the market system reproduces past disparities. It also joins the economic and political elites, since wealth buys political influence, and influence can be cashed out.

But, if cronyism is a “time tested practice here in the United States,” Sorkin asks, what’s the problem? 

“[In] truth, it is the way of the world. It is hard to fault a business for hiring someone who has better contacts than someone else .. As hard to defend as the phrase may be, it is a reality of life, “It’s not what you know, but whom you know.

Sorkin’s wraps this type of nepotism up in a form of meritocracy:

“… Given that many of the children of the elite have some of the best educations and thriving networks of contacts, it is hard to see how businesses are supposed to not seek them out, let alone turn them away.”

In other words, if the market system has an inherent tendency to produce great inequality, then it is less objectionable. Recent papers by Gregory MankiwSteve Kaplan and Joshua Rauh, published in the Journal of Economic Perspectives, appear to follow a similar line of reasoning.

One more academic companion piece to Sorkin’s article is a recent empirical study in the American Sociological Review by Lauren Rivera, a cultural psychologist at Northwestern University, titled “Hiring as cultural matching: the case of elite professional service firms.”

Rivera finds that “[h]iring is more than just a process of skills sorting: it is also a process of cultural matching between candidates, evaluators, and firms… Evaluators implicitly gravitated toward and explicitly fought for candidates with whom they felt an emotional spark of commonality… Moreover, evaluators tended to favor extracurricular activities associated with the white upper-middle class and that were acquired through intense, prolonged investment of material and temporal resources not only by job applicants but also by their parents…. In many respects, they hired in a manner more closely resembling the choice of friends or romantic partners than how sociologists typically portray employers selecting new workers.”

Rivera notes the long-run dangers of these practices. Perhaps, we should not be surprised that, as Charles Murray states in  Coming Apart (Crown Forum, 2012), the upper and lower classes in American society have diverged so far in core values and behaviors that they barely recognize one another.