We got some good ink! Remember the Los Angeles Times story we flagged for you because it was prompted by a clear case of ideological retaliation? The report gave the impression that a small group of faculty members' calls to investigate an economics research center at UC Riverside were rooted in valid concerns, rather than the unsubstantiated aspersions of a powerful labor union. The center is run by BizFed member Beacon Economics.
Press-Enterprise reporter David Downey reached out to BizFed to dig deeper after we called out the Times for failing to vet its primary source's motivations. He laid out the facts in a thoroughly researched piece that closes with a quote from yours truly. We welcome you to read and share Dave's report, as well as our unpublished submission to the Times.
The Press-Enterprise report is copied below for those of you without subscriptions.
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By David Downey
March 2023 – UC Riverside’s relationship with a Los Angeles consulting firm that publishes economic reports and brands them as products of a UCR School of Business research center is under fire.
More than 100 faculty members and graduate students across the UC system signed a letter urging university officials to investigate “the use of the UC name and trademarks on research reports” by the Beacon Economics firm.
Beacon Economics has run UCR’s Center for Economic Forecasting and Development since 2015.
“Without funding transparency or real faculty oversight to enforce academic rigor, this arrangement has allowed corporations and industry groups to underwrite Beacon reports attacking proposals to improve the lives of working Californians,” the letter states.
“We unequivocally support academic freedom and freedom of speech, and we note that Beacon Economics produces quality macroeconomic forecasts. We believe, however, that Beacon’s UC-branded, corporate-funded reports often fail to meet the high standards we strive to meet in our research, thus endangering the credibility of our work and harming the University of California’s good name.”
It does not appear there will be a probe, UCR spokesperson John Warren said.
“The university is unaware of any allegations of misconduct that would compel an investigation,” he wrote in an email.
And Christopher Thornberg, who runs Beacon, said the letter results from a union’s attempt to discredit his firm after a report whose findings it did not like.
The faculty’s letter criticizes an industry-backed report generated in August — as a research center study — that says raising the minimum wage for California fast-food workers to $22 an hour would trigger a 20% increase in prices for meals at such eateries. The study assumes total worker compensation costs, including benefits, make up about 36% of a fast-food outlet’s expenses.
The letter says two other studies tell “a different story,” that prices would rise less.
The letter also criticizes industry-backed reports produced under UCR’s name in April 2019 on wage hike impacts on restaurants and in February 2022 on what is said to be app-based drivers’ widespread satisfaction.
The criticism comes about half a year after Gov. Gavin Newsom signed a bill to create a board of employees, advocates, franchise owners and public officials with power to set wages and workplace rules for the fast-food industry. California voters will be asked in November 2024 whether to implement the plan.
Thornberg, a former senior economist with UCLA’s Anderson Forecast who founded Beacon Economics in 2006 and is listed as director of the UCR center, pushed back.
“It’s not rocket science to see what’s going on here,” Thornberg said, mentioning the fast-food report. “If you don’t like the answer, you attack the character of the person who gave you the answer.”
Thornberg said the report pointed out “the obvious: If you increase compensation costs, prices have to go up.”
Thornberg said he believes the Service Employees International Union, one of California’s largest labor organizations and sponsor of the fast-food legislation, was behind the faculty letter. SEIU was attempting “to assassinate our character,” he said.
In a statement emailed by an SEIU spokesperson, the union said: “We stand by the 100+ academics who are calling on the university to live up to basic principles of independence and integrity. UCR is absolutely right to uphold its standards and prevent Beacon and other private companies from selling the UC name.”
The spokesperson did not respond to a request for comment on Thornberg’s assertion.
Beacon Economics spokesperson Victoria Bond said in an email that the firm did three studies for SEIU Local 2015 on in-home-care worker wages. Those reports focused on San Francisco last year, Alameda County in 2021 and Los Angeles County in 2018.
Beacon Economics delivered seven other reports on overtime and revenue forecasts for other SEIU chapters dating to 2010, Bond wrote. Bond did not elaborate on the nature of those studies, saying they were not publicly available for review.
In an Oct. 4 news release calling attention to a protest by L.A. County in-home-care workers who belong to SEIU Local 2015, the union called Beacon Economics “a highly respected firm.”
“The firm’s report highlights the significant financial benefit to the county that would result from a $20 wage for IHSS providers,” the release stated.
Among those who signed the letter demanding an investigation was Dylan Rodriguez, UCR professor of media and cultural studies and former chair of the Academic Senate at the Riverside campus.
“I’m extremely outraged,” Rodriguez said Tuesday, Feb. 21.
Rodriguez characterized the relationship as a “toxic arrangement” that lets Beacon Economics use UCR’s name to publish reports while avoiding the “rigorous” peer review that accompanies other research.
“Frankly, it is an insult to the research scholars and the faculty of the University of California,” he said.
Warren, the UCR spokesperson, said in an email that the university pays Beacon Economics $140,800 a year to produce 10 reports of various types for UCR and to stage an annual conference.
UCR receives 10% of the money Beacon Economics earns when it generates its own forecasts and studies on businesses and issues “pertaining to the Inland Empire,” Warren wrote. The university received about $68,000 in 2022 as a result, he said.
In criticizing the “10 percent royalty,” the faculty letter asserted that that money “often comes from corporations and industry groups that sponsor research and use the findings to advance their interests.”
Thornberg countered that research centers typically bring in outside money for their respective universities and he didn’t understand why that was an issue.
Asked if the letter will spur changes, Warren wrote that “in response to UCR’s branding” being used on the fast-food paper, the university requested Beacon clarify that “the report was neither commissioned nor endorsed by UCR.”
The university’s contract with Beacon Economics expired in December, Warren said. Discussions with Beacon had not yet occurred, but UCR “plans to discuss the future of the UCR-Beacon Economics relationship,” he wrote.
Warren added that Beacon Economics, in its role as “the UCR-affiliated” center since 2015, has provided “valuable research on matters related to the regional economy.”
Thornberg said he’s not worried “the tiniest bit” about a potential investigation and “absolutely” intends to continue his firm’s working relationship with the university.
“We’ve been around for 16 years now and we have a wide variety of clients,” he said. “And I think our reputation speaks for itself. We are known to be straight shooters.”
Thornberg added: “We sell analysis, not answers.”
Some economists around Southern California don’t like the arrangement.
Amihai Glazer, a professor of economics emeritus at UC Irvine, said he believes “the whole relationship is wrong.” A firm shouldn’t be able to use a university’s name for a fee, he said.
“It makes me very nervous,” Glazer said Friday, Feb. 24.
David Fairris, a UCR professor of economics emeritus, expressed concerns about the relationship in a Feb. 2 note to campus leaders.
Fairris, who specialized in labor economics, described Beacon’s fast-food report as a “simple, indeed grossly over-simplified” study of how raising the minimum wage would affect food prices. The study does not take into account factors that would offset a rise in costs, he wrote.
Longtime Inland Empire economist John Husing said by phone that he and other private economists have had concerns for years.
“We have regarded this as a scandal from almost the beginning,” Husing said.
Allowing a private company to use UCR’s name and logo “just seems way out of line,” Husing said, adding it was time university officials take a “hard look” at the arrangement.
“Hopefully, the faculty letter will cause the university administration to take corrective action to end this disgrace,” Husing wrote in a Feb. 17 note to economists, a regional planning agency and a newspaper editor.
Tracy Hernandez, CEO and founder of the Los Angeles County Business Federation, which has 410,000 member companies, defended Beacon Economics. The firm is a member and has done work for the group, she said.
Beacon Economics has been unfairly maligned simply because it reached an unpopular conclusion in its fast-food minimum wage study, Hernandez said.
It’s one thing to disagree with a report’s conclusion, she said, but it is “just blatantly wrong” to attack the character of those who generated the analysis.
“You shouldn’t also bring down the reputation of a fine university and a fine research firm,” Hernandez said.
Onward!
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Tracy Hernandez
BizFed Founding CEO
