How Poor
Household Responses to Guaranteed Income: Experimental Evidence from Compton, California
Sidhya Balakrishnan et al.
NBER Working Paper, November 2024
Abstract:
We study the effects of a two-year unconditional cash transfer program for low-income households in Compton, California between 2021 and 2023. 695 households were randomly assigned to receive transfers averaging about $500 per month over a two year period, with 1,402 households randomly assigned to a control group. To measure the impact of transfer frequency, half of the recipients were paid twice per month and the other half received quarterly transfers. We surveyed 1,074 respondents 18 months after the beginning of transfers. Receiving guaranteed income had no impact on the labor supply of full-time workers, but part-time workers (at baseline) had lower labor market participation by 13 percentage points. Income (excluding the transfer) was reduced by $333 per month on average relative to control households, and expenditures were reduced by $302 per month. At the same time, average non-housing debt balances declined by $2,190 over 18 months relative to the control group, although the drop is not statistically significant. We find a significant improvement in housing security, but no overall effects on indices of psychological and financial well-being. The recipients of twice-monthly transfers were more likely to own a car, had lower credit card debt and greater food security than recipients of quarterly transfers, but otherwise transfer frequency had little impact. Compared to male recipients, female recipients reported a greater increase in financial security, and a smaller reduction in earned income and expenditures.
Fines and Financial Wellbeing
Steven Mello
Review of Economic Studies, forthcoming
Abstract:
While survey evidence suggests widespread financial fragility in the U.S., causal evidence on the implications of typical, negative income shocks is scarce. I estimate the impact of speeding fines on household finances using administrative traffic citation records and a panel of credit reports. Event studies reveal that fines averaging $195 are associated with a $34 increase in unpaid bills in collections. Given additional evidence that fine payment explains this effect and that default is the "last resort" for households, I interpret this finding as suggesting rates of inability to meet unplanned expenses which are consistent with the survey evidence. I also find that fines are associated with longer-run declines in credit scores, borrowing limits, and the likelihood of appearing as employed in payroll records covering a subset of large, high-paying employers. This impact on employment situations appears attributable to the diminished financial position of households rather than, e.g., downstream license suspensions.
Divergent Paths: Differential Impacts of Minimum Wage Increases on Individuals with Disabilities
Jeffrey Clemens, Melissa Gentry & Jonathan Meer
NBER Working Paper, January 2025
Abstract:
We analyze the differential effects of minimum wage increases on individuals with disabilities using data from the American Community Survey and leveraging state-level minimum wage variation during the 2010s. We find that large minimum wage increases significantly reduce employment and labor force participation for individuals of all working ages with severe disabilities. These declines are accompanied by a downward shift in the wage distribution and an increase in public assistance receipt. By contrast, we find no employment effects for all but young individuals with either non-severe disabilities or no disabilities. Our findings highlight important heterogeneities in minimum wage impacts, raising concerns about labor market policies' unintended consequences for populations on the margins of the labor force.
Do minimum wage increases induce changes in work behavior for people with disabilities? Evidence from the AbilityOne program
Jiyoon Kim, Michael Levere & Ellen Magenheim
Labour Economics, January 2025
Abstract:
We provide the first evidence on the effects of minimum wage increases on labor market outcomes for people with disabilities. We use a novel dataset consisting of quarterly data on employment, earnings, and hours for workers at nonprofit firms that participate in the federal AbilityOne program. The nonprofits in this program are offered advantages in government contracting, though must primarily employ workers with disabilities. Using recent local variation in minimum wage changes, we find that increasing the minimum wage does not affect employment outcomes for workers with disabilities in this specific context, with precisely estimated null effects. However, these nonprofits respond along non-employment related margins after relatively large minimum wage increases.
Employer Credit Checks: Poverty Traps Versus Matching Efficiency
Dean Corbae & Andrew Glover
Review of Economic Studies, forthcoming
Abstract:
We develop a framework to understand pre-employment credit screening as a signal from credit markets that alleviates adverse selection in labour markets. In our theory, people differ in both their propensity to default on debt and the profits they create for firms that employ them; in our calibrated economy, highly productive workers have a low default probability. This leads firms to create more jobs for those with good credit, which creates a poverty trap: an unemployed worker with poor credit has a low job finding rate, but cannot improve her credit without a job. This manifests as an endogenous loss in present-discounted wages that is typically taken as exogenous in quantitative models of consumer default. Banning employer credit checks eliminates the poverty trap, but pools job seekers and reduces matching efficiency: average unemployment duration rises by 2 days for high productivity workers and falls by 13 days for low-productivity workers.
Coverage, Counter-cyclicality and Targeting of Work Requirement Waivers in the Supplemental Nutrition Assistance Program
Richard Burkhauser et al.
NBER Working Paper, December 2024
Abstract:
Non-disabled, working age adults without children are required to work 20 hours per week in order to maintain eligibility for the Supplemental Nutrition Assistance Program. However, states may waive the work requirement for areas that meet conditions reflective of a weak labor market. We construct a dataset with the waiver status of each United States county for every month from 1997-2023 and evaluate waiver coverage, counter-cyclicality and targeting. Waiver coverage has grown over time and in December 2023, when the national unemployment rate was 3.5 percent, waivers covered 29 percent of the U.S. population. In terms of counter-cyclicality, a county's probability of receiving a waiver increases by 3.1 percentage points for every one percentage point increase in its unemployment rate. In terms of targeting, counties with an unemployment rate below 5 percent received 25 percent of waivers in the average month from 1997-2023. We simulate the effects on waiver eligibility of counterfactual regulations finalized in 2019 -- but never implemented-by the U.S. Department of Agriculture. Altogether, the 2019 rule would have decreased waiver eligibility in all months, increased the responsiveness of waivers to county unemployment rates, and increased the share of waivers targeted to high unemployment counties.
The Hidden Costs of Working Multiple Jobs: Implications for Spending Behavior and Wellbeing
Paige Tsai & Ryan Buell
Harvard Working Paper, January 2025
Abstract:
Across three studies, combining survey data, transaction-level analysis from 90,548 customers of a nationwide retail bank, and insights from the General Social Survey, we study whether people with multiple jobs spend their labor income differently than people who earn the same total income from a single job. Inclusive of housing spend, we find that individuals who are more reliant on multiple jobs spend 17.0 percentage points (p.p.) less of their labor income overall, which is driven by a 15.5 p.p. decrease in the share of income spent on necessities and a 1.9 p.p. decrease in the share of income spent on indulgences. Examining differences in spend by expenditure category reveals that peoples' lived experiences differ meaningfully based on their income composition: individuals with multiple jobs spend meaningfully more on education and transportation, but notably less in all other key spending areas including groceries, dining out, healthcare, entertainment, home improvement and shopping. Although it's not possible in our data to directly assess whether these spending differences drive differences in individual wellbeing, we observe that those who are reliant on multiple jobs spend meaningfully less in categories traditionally associated with enhanced physical and mental wellbeing, such as healthcare and food, and less on experiential categories traditionally associated with enhanced emotional wellbeing, such as travel and entertainment. These patterns converge with responses from the General Social Survey, in which equivalently-compensated individuals who rely on multiple jobs report lower general happiness and financial satisfaction than their single-income counterparts. These findings suggest that it's not only the amount a person earns, but also the way they earn it, that links to variations in spending behavior and overall wellbeing, which offers significant insights for the design of sustainable work in operations.
Missing Poor in the U.S.
Mathieu Lefebvre, Pierre Pestieau & Gregory Ponthiere
Journal of Economic Inequality, December 2024, Pages 865-891
Abstract:
Given that poor individuals face worse survival conditions than non-poor individuals, one can expect that a steeper income gradient in mortality leads, through stronger income-based selection, to a lower poverty rate at the old age (i.e. the "missing poor" hypothesis). This paper uses U.S. state-level data on poverty at age 65+ and life expectancy by income levels to provide an empirical test of the missing poor hypothesis. Using average temperature as an instrument for mortality differentials, we show that instrumented changes in mortality differentials have a negative and statistically significant effect on old-age poverty: a 1% increase in the mortality differential implies a 16% decrease in the 65+ headcount poverty rate. Using those regression results, we compute hypothetical old-age poverty rates while neutralizing the impact of the income gradient in mortality, and show that correcting for heterogeneity in income-based selection effects modifies the comparison of old-age poverty prevalence across states.