I also doubt that Mullainathan and Shafir’s description of the poor as suffering from scarcity is generally true. When it comes to time, the poor watch more television, invest less time in caring for their children, have plenty of free time to think about what they will eat, and yet are more likely to be obese. Their characterisation of the poor having a lot on their mind whereas the rich are relaxed despite their more complex employment does not seem particularly strong.
Read the whole thing.
Self-recommending, although I could raise many objections to his conclusion. Some excerpts:
There is reason to believe that many recent migrants to both the United States and Europe will have a much more difficult time than their predecessors. Meanwhile, the countries in which they settle are less likely to see the benefits of immigration as they experience heightened social tensions and widening social inequality. Policymakers would be wise to take those risks into account. Rather than focus on policies for integrating new immigrants, they should concentrate on avoiding selection policies that threaten to create near–permanent ethnic or religious underclasses.
…countries that selected elite immigrants to begin with now have high-performing immigrant classes. For example, the United Kingdom selects immigrants based more on education and skills. As a result, African, Chinese, and Indian immigrants outperform their British counterparts; although children of white British parents born between 1963 and 1975 attained on average 12.6 years of education, children of African migrants stayed in school for 15.2 years, those of Indian migrants for 14.2 years, and those of Chinese migrants for 15.1 years.
Pointer from Reihan Salam.
UPDATE: Also self-recommending is this Greg Clark podcast. Pointer from Jason Collins.
The wages of the top 10% of designers have risen strongly; the wages of the average designer have not. There is a shortage of skilled designers but it can only be seen in the wages of those designers who have managed to master new technologies.
Interesting interview, difficult to excerpt. The focus is on comparisons of U.S. policy with those of other countries. For example, Kenworthy says
Unemployment benefit levels are determined by state governments. In many instances, the benefit level is a “replacement rate,” which means the payment is a certain fraction of the unemployed person’s former wage or salary. Because real wages in the bottom half of the distribution have not increased in the past several decades, unemployment benefits for Americans in low-wage jobs have failed to keep up with growth in the economy. Other programs, such as the Earned Income Tax Credit, the Supplemental Nutritional Assistance Program (food stamps), Social Security Disability Insurance, and Supplemental Security Income, are indexed to prices. This means they keep up with inflation, but not with economic growth…As a result, government transfers for low-end households have increased less in the US than in many other affluent countries.
Later, he says
Sweden and Denmark often pressure benefit recipients into employment. Because individual circumstances vary so much, this is best done by giving caseworkers considerable discretion to decide which people can be effectively pushed into paid work, when, and with what kind of help. Doing this well requires an investment — in well-trained caseworkers who remain in their jobs and thereby build expertise, in having a sufficient number of caseworkers so that they aren’t overwhelmed with clients, and in ensuring that caseworkers have access to sufficient resources to help their clients enter and remain in the paid workforce (retraining, transportation, temporary housing, treatment for addiction, etc).
That sounds like an argument in favor of Paul Ryan’s latest proposals, although somehow I suspect that Kenworthy would not see it that way.
Consider the present total that Americans give annually to human-service organizations that assist the vulnerable. It comes to about $40 billion, according to Giving USA. Now suppose that we could spread that sum across the 48 million Americans receiving food assistance, with zero overhead and complete effectiveness. It would come to just $847 per person per year.
Or take the incredible donation levels that followed Hurricane Katrina in 2011. The outpouring of contributions exceeded $3 billion, a record-setting figure that topped even the response to the attacks of September 11, 2001. But even this historic episode raised enough to offset only 3 percent of the costs the storm imposed on the devastated areas of Louisiana and Mississippi. Voluntary charity simply cannot get the job done on its own.
This is not fully persuasive. It may be misleading to describe what a charity-only safety net would work like using an extrapolation based on current social arrangements.
1. If we took away today’s safety net and left that income in private hands, people would have more to donate to charity.
2. If we took away today’s safety net, then affluent people who now assume that government is taking care of those in need would instead take the view that donations are needed.
There was a further series of more than 30 randomized experiments conducted around the time of the welfare debates of the 1990s. These tested many ideas for improving welfare. What emerged from them was a clear picture: work requirements, and only work requirements, could be shown experimentally to get people off welfare and into jobs in a humane fashion. These experiments were an important input into the decision to make work requirements a central tenet of the new welfare regime when the welfare system was converted from AFDC to TANF in 1996.
In spite of these studies, I suspect that the long-run response of work effort to incentives is high. Imagine two children, one growing up in a household where parents work at low-wage, low-status jobs, and the other growing up in a household that lives primarily on government support. Suppose that the consumption basket of the two households is approximately the same. Do we believe that the child of the parents who work will want to work when he or she grows up?
That said, I recommend the entire essay. Manzi also writes,
if part of the motivation for giving adults income is that they spend it supporting their children, would we really allow parents receiving taxpayer money to spend it any way they want with no requirements for child welfare beyond child abuse laws? And as another, a huge and growing portion of the cost of the welfare state is health care. Suppose we gave every adult in America an annual grant of $10,000, and some person who did not buy health insurance with it got sick with an acute, easily treatable condition. Would we really bar them from any urgent medical care and just say “Tough luck, but it’s time to die”?
I tend to agree that large cash transfers with zero paternalistic oversight is not a likely political outcome.
From Catherine Rampell. One sample question:
Which income group receives more than half of federal housing subsidies?
A) Households with incomes below $30,000
B) Households with incomes between $30,000 and $100,000
C) Households with incomes above $100,000
Overall, what I think the answers point to is that the government’s role in income distribution is not purely technocratic. Political considerations are important.
Unlike other welfare programs which encourage or require recipients to consume certain specific kinds of good – such as medical care, housing, or food – a BIG simply gives people cash, and leaves them free to spend it, or save it, in whatever way they choose.
He lists four main advantages of this over the current approach: less bureaucracy; lower cost; less rent-seeking; and less paternalistic.
The “lower cost” is a bit of a swindle. He cites Ed Dolan’s suggestion that we cut middle-class entitlements while reforming programs for the poor, and counting those cuts the cost is indeed lower.
There is a significant contrast with Paul Ryan’s block grant proposal, which we have been discussing. Ryan’s vision is unapologetically paternalistic, and we have seen arguments that it would actually increase bureaucracy.
My proposal for a flexible benefit is somewhat paternalistic, since funds could only be used for “merit goods.” Compared to a BIG, my proposal would require more bureaucracy, in order to qualify the providers of merit goods. That in turn could lead to some rent-seeking, as businesses on the margins claim to be providing health care or education. However, there would be less bureaucracy than the current system.
Callie Gable finds that John J. DiIulio, Jr., has concerns with Paul Ryan’s idea of turning anti-poverty funds to the states.
He mentions Pennsylvania’s Summer Food Service Program, a federal program intended to replace the nutrition kids get during the school year from free or subsidized lunches, to illustrate how complicated tracking aid and its impacts can be. The program is funded through the U.S. Department of Agriculture, which gives the money to the state of Pennsylvania, which then distributes the money to three major cities in Pennsylvania, which pass it on to Pennsylvania school systems, which give it to individual schools, which then work with any number of local providers.
This money changes hands five times before finally being translated into lunches for kids. And after that, it’s hard to be sure that the community providers are using the funds efficiently and providing a quality service. That’s just one, ancillary program.
My preferred approach to consolidating anti-poverty programs is to send lump-sum funds to individuals, while limiting the use of such funds to “merit goods” such as health care, food, housing, and education. However, I do think that state and local governments must then play a role in identifying specific needs in their jurisdictions and coming up with programs to address those.
Gable point to an article DiIulio wrote in 2012, where he said
About three-quarters of non-profit organizations, including most faith-based ones, spend under a half a million dollars a year and receive little or no government grant or contract money. But the quarter of the sector’s organizations that boast its biggest annual budgets are highly dependent on direct government funding, meaning that one-third of all non-profit dollars are from government, paid through grants or contracts.
This gets back to a point that I have made, which is that I do not think we want to put non-profit organizations on some kind of pedestal.
The economically turbulent 2000s have redrawn America’s geography of poverty in more ways than one. After two downturns and subsequent recoveries that failed to reach down the economic ladder, the number of people living below the federal poverty line ($23,492 for a family of four in 2012) remains stubbornly stuck at record levels. Today, more of those residents live in suburbs than in big cities or rural communities, a significant shift compared to 2000, when the urban poor still outnumbered suburban residents living in poverty.
I got to this by reading an article linked to by Tyler Cowen.
You may recall the Haiku I wrote based on my road trip:
Gentrification
Bike-friendly beyond all sense
Poor people moved…to where?
Basically, I explain the phenomenon as follows.
1. Spending shifts from goods to education and health care (long-term trend. See Kling-Schulz, The New Commanding Heights)
2. Inner cities become impoverished, as manufacturing relocates and urban blight drives out the middle class.
3. The biggest urban employers become universities and hospitals. As they expand their presence in cities, they employ a lot of educated professionals. This leads to gentrification.
4. The urban poor get pushed out to the suburbs.
It seems to me that a lot of economic trends can be explained by the New Commanding Heights story.