Small Dollars
The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States
Eva Vivalt et al.
NBER Working Paper, July 2024
Abstract:
We study the causal impacts of income on a rich array of employment outcomes, leveraging an experiment in which 1,000 low-income individuals were randomized into receiving $1,000 per month unconditionally for three years, with a control group of 2,000 participants receiving $50/month. We gather detailed survey data, administrative records, and data from a custom mobile phone app. The transfer caused total individual income to fall by about $1,500/year relative to the control group, excluding the transfers. The program resulted in a 2.0 percentage point decrease in labor market participation for participants and a 1.3-1.4 hour per week reduction in labor hours, with participants' partners reducing their hours worked by a comparable amount. The transfer generated the largest increases in time spent on leisure, as well as smaller increases in time spent in other activities such as transportation and finances. Despite asking detailed questions about amenities, we find no impact on quality of employment, and our confidence intervals can rule out even small improvements. We observe no significant effects on investments in human capital, though younger participants may pursue more formal education. Overall, our results suggest a moderate labor supply effect that does not appear offset by other productive activities.
Does Income Affect Health? Evidence from a Randomized Controlled Trial of a Guaranteed Income
Sarah Miller et al.
NBER Working Paper, July 2024
Abstract:
This paper provides new evidence on the causal relationship between income and health by studying a randomized experiment in which 1,000 low-income adults in the United States received $1,000 per month for three years, with 2,000 control participants receiving $50 over that same period. The cash transfer resulted in large but short-lived improvements in stress and food security, greater use of hospital and emergency department care, and increased medical spending of about $20 per month in the treatment relative to the control group. Our results also suggest that the use of other office-based care -- particularly dental care -- may have increased as a result of the transfer. However, we find no effect of the transfer across several measures of physical health as captured by multiple well-validated survey measures and biomarkers derived from blood draws. We can rule out even very small improvements in physical health and the effect that would be implied by the cross-sectional correlation between income and health lies well outside our confidence intervals. We also find that the transfer did not improve mental health after the first year and by year 2 we can again reject very small improvements. We also find precise null effects on self-reported access to health care, physical activity, sleep, and several other measures related to preventive care and health behaviors. Our results imply that more targeted interventions may be more effective at reducing health inequality between high- and low-income individuals, at least for the population and time frame that we study.
The macroeconomic effects of universal basic income programs
André Victor Doherty Luduvice
Journal of Monetary Economics, forthcoming
Abstract:
I develop a heterogeneous agents overlapping generations model to assess the welfare effects of substituting the US income security system with a UBI policy. I study two counterfactual exercises: an expenditure-neutral reform and a large, policy-oriented UBI reform with a transfer equivalent to $1,000 monthly, both financed by changes in the consumption tax. The first exercise has a moderate fiscal impact, induces increases in the aggregate output and employment, and reduces earnings and wealth inequality. The second exercise requires a large increase in the consumption tax rate, decreases employment and output, and increases earnings inequality, which moves sideways for wealth. In both cases, disposable income and consumption are more equally distributed, with less accrual at the top. The two economies generate positive welfare gains, with those for the generous UBI economy being larger.
Does the EITC Reduce Caregiving for Parents?
Katherine Michelmore, Anna Wiersma Strauss & Emily Wiemers
NBER Working Paper, June 2024
Abstract:
Families provide substantial care to older adults with functional limitations. Policies that incentivize work have the potential to reduce this valuable care. This study uses the Health and Retirement Study (HRS) and a simulated instrument approach to examine the consequences of increases in the generosity of the Earned Income Tax Credit (EITC), a work-contingent cash benefit, for the care that parents receive from their EITC-eligible daughters. We find that increases in EITC generosity reduce the care that parents receive from their EITC-eligible daughters, especially older parents and those with functional limitations. To assess the full effect of this reduction in caregiving, we examine whether financial transfers increase as a substitute for reduced care, whether other adult children fill the care gap left by EITC-eligible daughters, and whether paid caregiving increases in response to declines in family care. We find no evidence of increased financial transfers and care gaps remain for older parents that are not filled by other children or paid care providers. We conclude that an unintended consequence of the EITC is that the older parents of EITC recipients receive less care from their children overall in response to increased EITC benefit generosity.
The U.S. Low-Wage Structure: A McWage Comparison
Orley Ashenfelter & Štěpán Jurajda
NBER Working Paper, July 2024
Abstract:
Thanks to standardized work protocol and technology of McDonald's restaurants, the hourly wage of McDonald's Basic Crew enables wage comparisons under near-identical skill inputs and hedonic job conditions. McWages capture labor costs in entry-level jobs, while the Big Macs (earned) Per Hour (BMPH) index measures corresponding purchasing power of wages. We document large and growing geographical wage differences in standardized jobs using data covering most U.S. counties during 2016-2023. Before the Covid-19 pandemic, there was no BMPH growth where minimum wages stayed constant, but the pandemic wage increase, which diminished the importance of minimum wages, was stronger in these areas.
Exposure to Community Violence as a Mechanism Linking Neighborhood Socioeconomic Disadvantage and Neural Responses to Reward
Heidi Westerman et al.
Social Cognitive and Affective Neuroscience, April 2024
Abstract:
A growing literature links socioeconomic disadvantage and adversity to brain function, including disruptions in reward processing. Less research has examined exposure to community violence as a specific adversity related to differences in reward-related brain activation, despite the prevalence of community violence exposure for those living in disadvantaged contexts. The current study tested whether exposure to community violence was associated with reward-related ventral striatum activation after accounting for familial factors associated with differences in reward-related activation (e.g., parenting, family income). Moreover, we tested whether exposure to community violence is a mechanism linking socioeconomic disadvantage to reward-related activation in the ventral striatum. We utilized data from 444 adolescent twins sampled from birth records and residing in neighborhoods with above-average levels of poverty. Exposure to community violence was associated with greater reward-related ventral striatum activation, and the association remained after accounting for family-level markers of disadvantage. We identified an indirect pathway in which socioeconomic disadvantage predicted greater reward-related activation via greater exposure to community violence, over and above family-level adversity. These findings highlight the unique impact of community violence exposure on reward processing and provide a mechanism through which socioeconomic disadvantage may shape brain function.