Jānis Skrastiņš – from SSE Riga to academia in the US and research in Brazil

Jānis Skrastiņš, a 2007 SSE Riga graduate, started off by doing what most graduates do – he worked in the private sector in banking and finance to test the skills he had learned. But unlike many other graduates from the mid-2000s who did the same and are now middle or even top managers or running a start-up, Jānis ended up as an Assistant Professor of Finance at Washington University in St. Louis, Missouri, in the US.

That some SSE Riga graduates are scattered far and wide in the world is no surprise, but Jānis is where he is because he went off the usual track, or rather, switched tracks. After working in the private sector, he completed a master’s degree in corporate finance and banking at the University of Amsterdam, and after that, he got a PhD in finance at the London Business School. His career was definitely on the academic track.

“The path was long and interesting, but studying at SSE Riga was critical to giving me a start on what I have ended up doing. Right after SSE Riga I started working, but then realized I needed some more intellectual growth,” Jānis recalls. That growth was another two degrees and a serious commitment to research.

 

One of the few who went to academia?

“I am not a standard SSE Riga graduate. Few of us go on to academia. I did not think of going on to academia, but when the chance presented itself, I thought, if not now, then never,” he says.

His research interests took him even further from Latvia and the European capitals where many of his fellow graduates have ended up. He started researching emerging markets and focused on Brazil. Brazil is his ongoing project while he teaches finance at Washington University, where he was hired in 2015.

One would think Brazil, with its tropical rainforests, would be the furthest one could get from Latvia’s pine and birch forests and Nordic climate, but the country actually has some strange historical ties with Latvia. In the 1920s, about two thousand Latvian Baptists, convinced by their leaders that the country faced an oncoming disaster in the form of a “red dragon”, moved to the Brazilian jungle to be as far as possible from this prophecy.

Some would say the prophecy came true when the Soviet Union occupied Latvia in 1940; others call the mass migration, which resulted in hard labour, misery and disease in the jungle, a foolish venture. Where the truth lies on these issues is for historians to investigate – Jānis’s interest in Brazil is in looking at the country’s ample data on unemployment benefits.

“Brazil has European-style unemployment insurance,” Jānis says, explaining that if a worker is laid off by the initiative of employer or because a company goes bankrupt, he or she is entitled to certain benefits for a certain amount of time. However, Jānis says he is not interested in the benefits system and how it affects those who lose their jobs, but rather in how the existence of the benefits system influences whether people make an effort to keep their jobs or not.

 

Unemployment benefits in Brazil – a reason to get oneself fired?

“It has been assumed that people become unemployed for random reasons – some company goes bankrupt – and that one doesn’t strategically allow oneself to become unemployed. What I show is there is a part of the workforce that decides to become unemployed. This has not been documented until now,” he says. In other words, the presence of an unemployment insurance system that will provide a reasonable living may be a reason for a worker to avoid doing his job well or to perform badly so as to be among those an employer would lay off first in an economic downturn.

“You have to be dismissed, you must strategically convince someone to fire you, which is expensive for the employer with severance pay in addition to the taxpayer-funded unemployment benefits. Everyone has been assuming people don’t do that,” Jānis explains.

One reason Jānis is researching unemployment insurance as part of the calculations in the minds of employees who are unhappy, looking for a change, but do not want to quit on their own is the thinking he was taught back at SSE Riga.

 

SSE Riga taught us to “think outside the box”

“At SSE Riga my biggest experience was Day One, when they said: ‘Think outside the box’. In academia thinking outside the box is rewarded the highest. You don’t get rewarded for doing standard things,” Jānis recalls.

He goes on to say that the issue of whether to work or not to work and take unemployment benefits is more complicated when a large informal or grey economy exists. In such a case, it is possible to do very well through receiving unemployment benefit payments and working in the informal economy. Jānis notes that this is a problem shared by Brazil and Latvia – both have large grey economies.

“My mother tells me of people she knows who collect benefits and work in the informal economy at the same time,” he says, adding that in many cases, only the combined incomes ensure a good standard of living for lower-skilled workers both in Latvia and Brazil.

He sums up his research to date as follows: “I have found that even before becoming unemployed, the benefit level will motivate people to get themselves fired or laid off. My second finding – if there is an informal sector, it is a strategic complement and you can really ‘game’ the system.”

Such an arrangement also creates disparities between different segments of the economy. According to Jānis, “you have the construction industry, with lots of informal work, and you have finance companies where everything is formal and documented and these people are paying full taxes for the others.”

 

Next: stopping people from “playing” the system

The next step for Jānis in his research, which has taken him and some research assistants to Brazil with the cooperation of Brazil’s central bank, is to look for remedies to the problem of workers who “play” the unemployment benefits system. He sees one solution in carefully designing eligibility standards for unemployment benefits.

He mentions some ideas: “The key is eligibility standards. One can put a limit on benefits or, if you do not have enough work experience, benefits can be reduced or denied if one detects job hopping, but not in a clear case where the factory goes bankrupt.”

For now, Jānis is comfortable in academia – as comfortable as one can be where one slogan is “publish or perish”. Of his own work and his team, he says, “The setup and the contract I have in Brazil was very hard to put together and we are presently research leaders.”

 Another “team member” is Jānis’s wife, who is a PhD researcher working on cancer cures. “We can both have the academic life,” he says.


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