Women at the Reserve Bank

My post the other day, about the Treasury paper on “Women in economics”, was mostly about the apparent waste of (probably quite expensive) staff resources –  diverted from the real and substantive economic challenges Treasury should be addressing.  It seemed to be about virtue-signalling and feel-goodism more than focused analysis, made all the worse because the authors weren’t new graduates repeating an honours project (sometimes the basis for NZAE papers by young economists); indeed one of the authors is the chief economist of The Treasury, a deputy secretary no less.  Of course, that paper in itself was just a small example of what has gone wrong at The Treasury under its current leadership (facilitated by both the past and present government).  The Living Standards Framework, and the coming Wellbeing Budget, are the more prominent examples: a “well-meaning wafflefest” is the best that is likely to be said for that.   The quote is from Pattrick Smellie’s column today –  he seems slightly more optimistic than I am, noting the “intellectual grunt of The Treasury” (perhaps his memories of his time as Roger Douglas’s press secretary in the days when Treasury had intellectual grunt –  agree with them or not), but clearly a bit uneasy that it might all come to nothing much.

As I noted in comments to the previous post, I spent a couple of years working at The Treasury, and although it was getting on for a decade ago now, one of the things that struck me then –  recall, I was coming from the Reserve Bank – was the much higher proportion of women in economics, policy, and core management roles.  Frankly, I found it refreshing, and it was the only time in my working life when I sometimes went to economics/policy meetings at which there were more women than men.  I was struck then by the openness of The Treasury to part-time work, and to job-sharing arrangements, which seemed to make the place more attractive to women, especially those with young children (including several who had moved from the Reserve Bank to The Treasury).  The situation is also self-reinforcing –  when some (future) parents see flexible arrangements in an institution genuinely working for other people, it gives them more confidence it can work for them.  My own children were very young at the time, and my wife was considering going back to work, so they were issues that I paid attention to.

Perhaps it has all gone downhill again, even in these areas, in the last few years.  But I doubt it.   Which is partly why I struggle to take seriously Gabs Makhlouf, Tim Ng, and the rest of them whipping themselves about not meeting self-imposed quotas –  or indeed giving more attention to such issues, including in their Annual Report, than to lifting analytical excellence and the quality of their policy advice.   It just isn’t clear that they are addressing a real problem in The Treasury –  perhaps exemplified by them discovering that the institution had been using a tool that would have discouraged the use of words like “analysis” in job adverts, because they were somehow male-dominated words.

By contrast, I think there probably is a real situation that needs addressing at the Reserve Bank.  Here is how I described my assessment of the situation at the Bank in a comment on a post a few months ago

I agree that sex is not, and should not be, a relevant criterion in the selection of a Governor. But I also recognise that in a powerful public sector institution, with a high public profile and pervasive impact, in this era it isn’t necessarily inappropriate that questions should be asked to understand why, after 84 years there has never been a women appointed to a policy or operational senior management position (Governors, or heads of economics, financial markets, macrofinanancial stability, prudential regulation, or even notes and coins). For years, I defended those outcomes as mostly reflecting preferences (far more men end up doing macro and finance – and far more women do health and social economics etc), and I still think there is something to that story, but I’m no longer convinced it is enough of an explanation – substantively or politically. After all, Janet Yellen has just stepped down, and the RBA has two pretty impressive female Assistant Governors.

A commenter on my Treasury post drew my attention to an article from a couple of months ago, quoting the new Governor, that I hadn’t seen.   In it, Adrian Orr says

“I’m disappointed that it is as imbalanced as it is. We will be working actively. We are just going to have to be far more aggressive at getting the gender balance balanced,” Orr said in a recent interview with BusinessDesk.

Consistent with my comments in that quote just above

At the Reserve Bank, 36 percent of its 252 staff were women, although that dropped down to 20 percent of management roles – including managers and team leaders and senior positions of influence – and 26.2 percent of senior specialist roles. The Reserve Bank’s website shows just two of 13 senior managers are women: chief information officer Klarissa Plimmer and human resources head Lindsay Jenkin.

To its credit, the Bank is now being a bit more open with some of the data

In the year to June 30, 2017, the bank tried to hire six mid and senior management positions, attracting 101 external applicants, of which 19 were women. Of the four external hires, only one was female.

In particular, the data around applications for the position of Governor.    They initially refused to release this data, only relenting after the (surprisingly quick) intervention of the Ombudsman.

In the same vein, the hiring process that appointed Orr attracted 48 applicants, of which just six were women. Only two of those women made the final short list of 25.

But in a sense, the data on applicants for the position of Governor highlight that whatever is going on, isn’t a simple and straightforward story about (eg) institutional bias.

After all, anyone is free to apply, and in applying to be Governor you are backing yourself to be able to make a difference, including if you had heard that the Bank wasn’t (say) very welcoming to capable women.

And who got to make the decisions?  Well, the Minister of Finance was the final decisionmaker, and even he had to take the nomination to Cabinet (chaired by a woman).  But the real decision on the appointment of the Governor was made by the Reserve Bank’s Board.   And at the time, late last year, of the six Board members, three were women (including the deputy chair).  I only know one of the three, but none looks like the sort of person who would be pushed around by anyone, let alone consciously or unconsciously biased against female candidates.

Successful organisations mostly end up promoting from within.  It is a mark of the Reserve Bank’s failure as an organisation that 1982 was the last time an internal candidate was appointed as Governor and, perhaps even more so, that currently three of the four most senior positions (including Governor and Deputy Governor) are held by outsiders.  The failure of the Reserve Bank to have women in senior core functional positions (top advisers or senior managers) is, to a substantial extent, a failure of history, the failure to develop and maintain a culture and working arrangements that made it attractive for the very many female economics (and related) graduates the Bank has recruited over the years to stay.  Of course, most of all the graduates the Bank hires go on to do other things, but not one of the many female hires has stayed. I look around Wellington and see various women who once worked for the Bank in economics roles now holding relatively senior positions in other agencies.

The Bank itself has made this point.

The Reserve Bank admitted as much during a Parliamentary review of its 2017 annual report in February, with then acting governor Grant Spencer saying the bank hired a lot of women graduates, but struggled to retain women in senior and management roles

It is the single biggest difference between the Reserve Bank of New Zealand and the Reserve Bank of Australia: both of the two (impressive) female RBA Assistant Governors (in core areas –  economics and financial system) have spent the bulk of their careers at the RBA.  There has been nothing similar at the Reserve Bank of New Zealand.

To be sure, the Reserve Bank of New Zealand is a smaller organisation.  And no organisation can compel an individual to stay.  And I –  and probably most people –  am firmly opposed to so-called “positive discrimination”.  But our central bank should be the sort of place –  interesting work, reasonable prestige –  that plenty of able people (male and female) would want to stay at.

I wrote earlier about my observations of flexible working arrangements at The Treasury.  There was, in practice, nothing similar at the Reserve Bank; few or no examples of it working successfully, even if on paper the rules allowed it.  In my observation, it wasn’t that senior managers were in any active sense discriminating against women, but they just didn’t have a mindset that focused on creating an environment where women (in particular) who wanted to be parents as well as economists would find it most attractive to work.  That was still my observation, as part of the Economics Department management group, just a few years ago.  And, as a result, decades on the Bank seems to have not many more women in senior policy or analysis roles than it did when I started there 35 years ago.

Is the quality of the Bank’s work poorer as a result?  Probably not much, but probably a bit –  I seriously doubt there is a distinctive female perspective on macro or financial stability or bank regulation, but some of those very able women who didn’t stay might well have made a stronger contribution than at least some of the men who did.  We’ll never know.

There are probably aren’t any wise quick fixes.  As the pool of applicants for Governor suggests, there aren’t currently many women in New Zealand with a strong interest and/or the skills/experience for the very top roles in the Bank.  And, as the Treasury paper noted, the number of people doing economics to an advanced level at university is falling, and the proportion of women among them seems to be falling away a bit too.   Absent token appointments (which would be bad for everyone, except perhaps the appointee, and perhaps even her) fixing the Bank is likely to be the work of a decade or more –  most worthwhile things probably are.  But it still needs to be treated as a priority, for both substantive reasons, and because the Bank is a high profile and very powerful institution and questions will (and should) be asked.

What worries me a bit is that the Governor often shows signs of appearing to favour the quick win and the rather-too-glib answers, rather than digging more deeply into issues.  He has, after all, lots of turf battles to fight in the next few years, and a government that is all too keen on quotas.  In the article my reader linked to there was a private sector example of the sort of questionable responses to external pressures

ANZ Bank New Zealand has a policy that any short list for a position must be 50:50 gender split and the interview panel must also be equally split.

And yet, if honours graduates in economics are roughly one third female and two thirds male, a shortlist requirement of 50/50 male and female will (by construction) often not mean that only the best candidates are on the list.

And keep an eye out for appointments from the Governor in which he chooses to positively discriminate (while no doubt denying it).  I was a bit puzzled recently to see who the Bank had appointed an acting head of its Macro-financial Department (to fill in for a substantial period while the permanent head is on secondment leading the review of the RB Act).  The Macrofinancial Department is responsible for producing the Financial Stability Report, and for analysis and policy advice on macro-stability and macro-prudential issues. It also happens to include the Bank’s statistics unit (which doesn’t naturally fit in any of the core departments).  The acting head of the unit has no background at all in financial stability, regulatory policy or anything of the sort.  I gather she is quite well-regarded as manager of the statistics unit, but is hardly a natural fit for leading the entire policy-focused department.   Perhaps she really was the best available option, but when the Governor is out promising to be “aggressive” in rebalancing the statistics, it is inevitable (and sadly appropriate) that the question will have to be asked.

Change needs to come, but it needs to be done well and wisely.