The Business Times

Open your minds to the benefits of nepotism

Society rightly condemns promoting unqualified progeny to unsuitable jobs, but there’s still value in passing down the family business

Allison Schrager
Published Wed, Aug 17, 2022 · 04:12 PM

GREG Long is one of the world’s best Big Wave surfers. His got his edge not just from his physical ability, comfort with risk and skill on the water; he was literally born to be a surfer. His father was a lifeguard and took young Long and his brother surfing, exposing them to the sport and the surfing community when they were children. This is a typical story in that industry. When I went to the Big Wave Surfing Risk Assessment Group, a risk conference for surfers, nearly all the famous surfers there grew up in the business.

In my research I meet a lot of people who do unusual jobs, from inseminating horses to bounty hunting. The first thing I ask is, “How did you get into this line of work?” and most of the time I get one answer (always said with pride): “My father.”

Gwyneth Paltrow recently induced a collective eyeroll when she complained to Hailey Bieber (of the Baldwin acting dynasty) that her road to stardom was not easy, and that in some ways nepotism made it harder. It’s hard to feel sorry for her. She was born into wealth and privilege and her family connections helped her get a leg up in an industry where there are a limited number of jobs that, for her, just meant even more wealth and glamour.

Nepotism, or using your connections to secure a job for friends or family, has always been a dirty word, associated with privilege and perpetuating an unfair system that undermines our meritocratic ideals. And more so lately. Social media is full of posts on nepotism babies (or Nepo baby) to shade success of high-profile actors who come from successful acting families.

Our resentment may be especially raw today because of the overt nepotism that featured in former President Donald Trump’s administration. For four years his unelected son-in-law, with little policy experience, was one of the most powerful men in America, and his daughter a key adviser with a West Wing office.

Yet as much as we hate nepotism in politics — Americans fought a war so our rulers wouldn’t be divined by birth — we also romanticise it. Depending on your political party, we tend to admire dynasties like the Roosevelts, the Kennedys, the Bushes and now the Trumps, even if those dynasties have had a mixed record.


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Perhaps that’s because as icky as it is, doing the same job as your family member has deep roots in human society and many advantages for the economy. Rather than burn the whole system down, or stir up resentment with Internet snark, we need to take what’s good about nepotism and figure out how to expand those benefits more broadly.

There was a time when going into the family business was the norm. People inherited the land they worked from their family or joined guilds through family connections. Industrialisation and the nuclear family upended these ties when people went to the factory instead of learning the family trade. And this was an important part of our economic development. The economy became more meritocratic, workers could rise through the ranks and more people ended up in jobs based on talent and hard work rather than family contacts.

But in 2003, Adam Bellow (son of writer Saul Bellow) argued that there was a new kind of nepotism emerging in the economy. Unlike the systemic nepotism from the pre-industrial era, people now had other options and joined the family business by choice. And in the last 20 years there are more reasons to believe that is true. Assortative mating (choosing a partner similar to yourself) increased the odds of having two parents with similar levels of success that get passed along to their offspring. In a more competitive economy, there are bigger gains to giving your children a leg up into that first job.

Despite all the economic changes in the last 200 years, nepotism has been a constant feature. According to the 2010 US census, about 22 per cent of men under 30 work in the same company as their father, with higher rates in Canada and Denmark.

The study found sharing an employer with your father was associated with higher earnings. Construction and manufacturing jobs are most likely to hire the children of current or former employees.

Working in the same company as a parent is only one form of nepotism. It’s even more common to work in the same industry or occupation, like Paltrow or Long. This may not be overt nepotism since it doesn’t always involve using family connections to get a job. But advantages are realised in other ways. You start your career with access to industry networks and with insider knowledge of how things work. Generally, the more guild-like a profession — doctor, lawyer, steel worker, fire or policeman — the more likely it is to be handed down. This is true even in the economics profession. A recent research paper estimates that 65 per cent of American-born economics graduate students have at least one parent with a graduate degree.

We all know at a gut level why this feels so outrageous. Nepotism is unfair (if you think of fairness as everyone starting behind the same line). It’s especially unfair when people are seeking high-status jobs in a high-stakes, already unequal economy.

And it has some nasty consequences. It can place the least-talented and unmotivated person in crucial jobs that could be better filled by someone else. There is a long history of children running family businesses into the ground. Government positions awarded on family connections often end up in corruption and waste.

Nepotism also limits options and undermines mobility. Surfer Long is adept at working mathematical models to predict waves, so perhaps he could have made a fortune on Wall Street if he were born into a different family (though he wouldn’t be so cool).

In the current economic and political climate, anything reeking of privilege demands to be dismantled, which may be why Paltrow’s comments struck a nerve and why #nepobaby is so often trending in social media.

But try taking a different view of the concept. What some people call nepotism others might call an efficient transfer of valuable human capital. Take two standout economists and nepo babies, Larry Summers and Emily Oster. Both were raised by prominent economists (both parents), and both have stories of how their parents injected economic logic in their child rearing. Summers’ father set up a bidding system to distribute TV-watching times among his children. A big part of being a good economist is the ability to think like an economist and apply the same kind of reasoning and logic. Just as Long was taken surfing at an early age, Summers and Oster were exposed to economic reasoning very early. This surely contributed to the economists they are today. That comes from more than just knowing the right people; they were born to be economists.

Human capital is also conferred in more subtle ways. I have a parent with a PhD (not in economics) as did most of the people in my PhD class, and this was critical to finishing my degree. First, it occurred to me to go to graduate school in the first place because I had a role model who planted the idea in my head that if you liked a subject, you take it all the way. Second, the emotional support was invaluable. The first time I called my mother in tears because a professor told me I wasn’t smart enough to be an economist and should drop out, she told me, “They tell everyone that. I heard it a million times, too. Finishing a Ph.D. isn’t about who is smartest, it’s about persistence and politics.”

I stuck with it. Excelling in any career involves many setbacks and dealing with bullies. Having a family member in the business means you have a built-in mentor and coach who is invested in your success. This is hard to replicate and unfair because others don’t share the advantage. But it’s still extremely valuable to society and the economy.

The other good thing about staying in the family business is it instills a sense of pride. I recently interviewed Leland Chapman, son of Dog the bounty hunter, about the bounty hunting business. I can’t overstate the sense of pride he had carrying on the family tradition. Many people are unhappy and dissatisfied with their jobs these days. A sense of tradition and pride in our work is missing, but following in the same job as your parent can impart that feeling.

So nepotism has its place in the economy, and in some ways the economy is evolving to encourage more nepotism. It’s more competitive, so getting in at the right firm early can mean higher earnings for life. But there are also forces working against the worst parts of nepotism. Posting jobs online means employers can widen their search and depend less on word of mouth for hiring. Knowing someone will still always give you an advantage, but staying in that job as an underperformer may be harder because now it’s easier to monitor productivity and competence.

There is value in working in the same occupation as your family, and that needn’t be unfair or harmful in an economy where success is not zero sum. If there are good jobs for everyone then nepotism is less of a problem.

Rather than fight nepotism with hiring restrictions or admissions quotas or online shame, we should focus on taking what works about it and expand those opportunities to other people, so the economy can accommodate more people’s success.

For instance, we can improve education so everyone gets better critical thinking skills and exposure to different jobs. Recent research indicates that simply exposing children to people from a more successful family can have a positive impact on their earnings and boost their human capital. In that case, looser zoning regulations might encourage more economic diversity, or a national service requirement could provide a chance for people from different backgrounds to interact as peers, conferring more of the benefits of nepotism to more people.

But first, to overcome society’s instinctive revulsion for the very idea of nepotism, perhaps we need a new word to describe its more beneficial aspects. The child of an etymologist might be able to help us out with that. BLOOMBERG

Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk”.



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