By all accounts, no data could hide its secrets from Finis Welch.
He can claim more than 30 years of success in the business world and oversees the 9000-acre Center Ranch in Centerville, Texas, but his greatest legacy lies in his unique talent for revealing the narrative of how labor markets operate by applying the tools of price theory and econometrics to earnings and other socioeconomic datasets.
“Finis was one of the first to build his academic career on empirical labor economics,” says Robert Topel, the Isidore Brown and Gladys J. Brown Distinguished Service Professor of Economics at the University of Chicago Booth School of Business.
Welch shepherded Topel through his thesis at the University of California, Los Angeles—the beginning of a 40-year friendship between the two labor economists. Considering the impact of Welch’s work on labor economics as it stands today, Topel felt it was time that Welch was formally recognized by the University of Chicago, where he earned his PhD in 1966 and served on the faculty.
As did Topel’s colleague Kevin Murphy, the George J. Stigler Distinguished Service Professor of Economics—another long-time friend of Welch whom Topel and Welch “discovered” in his undergraduate days at UCLA. Topel and Murphy worked with the Becker Friedman Institute and the George J. Stigler Center for the Study of the Economy and the State to organize a labor economics conference in Welch’s honor, to be held November 15.
After completing his undergraduate studies at the University of Houston, Welch arrived at the University of Chicago in the 1960s and set to work studying the impact of education on individuals and the economy. He studied with the time’s giants of labor economics , including H. Gregg Lewis and Nobel laureate Theodore Schultz. Finis’s work there led up to his landmark dissertation, “Education in Production,” which was published in the Journal of Political Economy. Later, in work with James P. Smith, Welch examined the changing disparities in black earnings versus white earnings over the 20th century. Consistent with his earlier research, Smith and Welch demonstrated the powerful role that education and its quality played in improving the relative standing of American blacks.
Examining the returns on schooling and the importance of human capital became a recurring theme in his work; other research exploring the economics of wage structures played a key role in understanding rising income inequality.
But Topel points out that Welch’s contributions reach even beyond the field of economics. He and William Gould, another student from UCLA, created STATA, perhaps the most advanced and widely used statistical software package in the world. The software’s wide adoption across statistical disciplines has cemented Welch’s success as an entrepreneur as well as accomplished economist.
“It all started with a program that he had written himself in order to analyze large data sets, back in the day when we didn’t have a lot of memory or storage space,” says Topel. “He figured out a way to efficiently store the data so that an analyst could run lots of regressions with only one pass through the data.” With this impetus, Gould wrote a version of Welch’s program for the first generation of personal computers. The rest was hard work together with the “perfect storm” of computing power, which saw personal computers displace mainframes for most statistical research.
Welch had a knack for solving such problems, says Topel. “There’s probably nobody in the business who is better at seeing what’s in a dataset than Finis is.”
The conference will honor Welch by highlighting the work of those who have been influenced by and continue to advance the research questions Welch raised across his 50 years in the discipline. “What we’ve tried to do is collect some younger scholars who are engaged in or influenced by the kind of work that Finis did—And we’re bringing together the people that knew Finis well and worked with him.”
Scholars on the University of Chicago campus and beyond continue to debate the core issues raised by much of Welch’s work. Presenters at the conference will share work asking similar questions within the context of today’s political and social climate. How has black progress been affected by the growth of the prison system? How does public insurance affect the labor supply?
The conference aims to capture a snapshot of the research conversation as it continues today, as a testament to the influence Welch has had on those using empirical data to try to answer hard questions about the way our workforce operates.
“Finis was one of the true pioneers of empirical labor economics who more than anyone emphasized the ‘data’ side of empirical analysis,” says Murphy. “His work led the way for empirical work on key issues still being studied today.”
Topel thinks that the conference will be a humble but fitting tribute to a man of tremendous accomplishment. “He’s been a big influence on both Kevin and me, as a teacher and as a friend.”