Tag Archives: Incentives

New study: social welfare programs encourage low-income Americans not to marry

Does government provide incentives for people to get married?
Does government provide incentives for people to NOT get married?

I don’t think anyone disagrees that it’s good for society if the next generation of young workers are raised in a home where their mothers and fathers are present in a stable, loving married home. And so, you would expect that no one would ever pay people money to not get married, and/or take away money from people who do get married. After all, if marriage is a good thing, why use money to discourage people from doing it?

Well, take a look at this article in the Wall Street Journal.

It says:

When it comes to marriage, the U.S. tax code is roughly neutral: The number of people penalized for being married is roughly the same as the number who benefit from it.

The same is not true for social welfare programs, such as Medicaid, food stamps or housing assistance, which can impose significant financial penalties on recipients who are married, according to new research from the R Street Institute, a Washington think tank.

In some cases, that creates major disincentives for low-income couples—especially those who are already living together—to tie the knot.

“Historically, low-income couples have faced especially onerous marriage penalties, because most safety-net benefits are means-tested (with steep phase-out rates or even cliffs)” applied on those who are married, researchers Douglas J. Besharov and Neil Gilbert wrote. “Marriage could easily reduce or end the benefits of a single parent with children.”

The effects vary from state to state, and depend on the relationship between the couple living together, whether or not they have children, whether they share expenses and how much money they earn.

In Arkansas, the state with the highest marriage penalties, if a nonparent marries a parent with two children and each adult earns $20,000, they would lose approximately $13,248 in benefits, or roughly a third of their total household income, according to the study.

The effects also vary by program. In a paper released Tuesday, researchers at the Urban Institute found the additional-child tax credit and the earned-income tax credit had the largest effect on creating either marriage penalties or bonuses, depending on the state and how the earnings were divided among the couple.

The penalties have become a growing issue in recent years as the size and coverage of means-tested welfare programs has swelled, and now includes more middle-income households. At the same time the stigma associated with living together out of wedlock has shrunk, leading to declining marriage rates.

The study’s authors claim:

“The supposition that marriage penalties have an impact on decisions to marry gains credence from the simple fact that marriage rates are highest among higher-income groups that are less affected by them and for whom such penalties represent a smaller proportion of total income,” they wrote.

I think we want to guard against the situation where we are transferring money from people who do the right thing and get married to people who do the wrong thing and have children before they get married. It’s not good for anyone that single mothers do this. It’s not good for the children of single mothers, it’s not good for the single mothers, and it’s not good for the taxpayers who have to pay for these welfare programs. It’s not a good thing when a politician is generous at spending other people’s money.

Like it or not, taxes and welfare payments do communicate incentives to people… incentives that affect their decision-making. If we really care about kids getting the best environment to grow up in, then we ought to care that government does not tell people to not get married by how they tax and spend.

You can read this paper by Dr. Robert Rector of the Heritage Foundation to see why marriage is so good for children, when compared to a single mom on welfare.

How well are Democrat Party economic policies working out in Venezuela?

I think that when we discuss economics, we should try to identify where specific policies have been tried and then we should observe the consequences to the people who tried them. Often, in college and university classrooms, one view of economics is sold to students by professors as the “nice” view. The professors, many of whom have never worked in the private sector in their entire lives, tell the students that socialism is the “nice” point of view, and anyone who disagrees is “mean”. Is that the right approach to teaching young people what to believe about economics?

Are Barack Obama and Hugo Chavez very different?
Are Barack Obama and Hugo Chavez very different?

Let’s take a look at this article from Yahoo News about socialist dictator Hugo Chavez’s country of Venezuela, a country much admired by people on the socialist left.

It says:

All the lady wanted was some chicken. But in shortage-plagued Venezuela, she waited in line five hours, only to go home empty-handed.

“I got here at 5:30 am and came away with nothing! It is just not fair that you have to work so hard — and then put up with these lines,” said an exasperated Lileana Diaz, a 49-year-old receptionist at a hospital emergency room.
Venezuelans have been enduring shortages of the most basic goods, such as toilet paper, for more than a year.

In Caracas, a cottage industry has emerged with people who will wait in line for you — at a price.

But things are even worse outside the capital.

The problems are staggering here in Valencia, an industrial city west of the capital of this oil-rich country.

Valencia has big factories that produce food and other essentials. Still, the list of goods in short supply is long.

It includes coffee, cooking oil, cornmeal, soap, detergent, you name it.

Chicken is one of the most coveted.

Frustrated shoppers like Diaz are legion.

One tells the story of people who climbed over a fence to get a good place in line outside a store, prompting police to intervene and stop scuffles that broke out.

Another lady shopper shows off a nasty bruise on her right leg, thanks to a fight she got into as she tried to buy disposable diapers.

In recent weeks, the lines of people waiting hopefully outside supermarkets and stores have grown longer in cities away from the coast, such as Maracaibo, Puerto Ordaz and Cumana.

Venezuelan media have reported situations of nerves running very, very high and shoppers coming close to looting.

At times it has gotten that bad, in fact. In late January, one person died and dozens were arrested in the chaos of a looting outbreak at stores in the town of San Felix in the southern state of Bolivar.

[…]In another supermarket in Valencia, a line 50 meters (yards) long snakes away from the entrance.

“We call these ‘holding out hope lines,’ because once you get inside, there is nothing on the shelves,” said Oscar Oroste, a 53-year-old chef.

Oroste said that until recently, people would wait in line knowing what was available to buy. “Now, people are in line but do not even know what they will be sold.”

Venezuelans go from supermarket to supermarket, and store to store, clamoring for basic necessities which have prices regulated by the leftist government.

But some buy just to resell at a handsome profit, and economists say that is another source of the shortages.

Egne Casano, a 28-year-old homemaker, said things are a bit better in Caracas. “I went there not long ago and saw that there is a better supply,” she said.

[…]In the long lines, people digest their woes with a mix of humor, resignation and anger.

At another supermarket in Valencia, a whopping 600 people stood in line under a blazing sun to buy powdered milk.

Graciela Duran, a retiree, got a kilo of it after waiting for four hours.

“I was lucky today, Sometimes I come and there is nothing,” she said.

“Waiting in huge lines is what we do all day, every day,” said Duran, shielding herself from the sun with an umbrella.

A dozen police were stationed at the entrance of the store and around the parking lot through which the queue moved.

A truck drove by and the driver shouted out sarcastically: “Homeland, homeland, beloved homeland.”

That comes from a song that late president Hugo Chavez used to sing and is heard often on government-run media and at official events.

If you’re interested in real statistics on Venezuela, I recommend this recent article from The Economist, which is as far left as Venezuela is, and endorsed Barack Obama.

In socialism, the main purpose of policies is to make the leftist leaders at the top receive applause. They say things that will get them applause from the people. The policies are not intended to lift people out of poverty, otherwise Zimbabwe, North Korea, Cuba, Venezuela, etc. would all be rich and prosperous. The policies are intended to make the leaders feel good about themselves. “If you like your doctor, you can keep your doctor”. “If you like your health plan, you can keep your health plan”. It’s not true, it’s just meant to make economically-illiterate people applaud.

So why do we keep voting for socialism, when we know it doesn’t work?

Related posts

Do unemployment benefits discourage people from working?

I noticed that the latest jobs report showed that the percentage of work-eligible Americans working was at a 38-year-low.

CNS News reports:

A record 93,626,000 Americans 16 or older did not participate in the nation’s labor force in June, as the labor force participation rate dropped to 62.6 percent, a 38-year low, according to the Bureau of Labor Statistics.

In June, according to BLS, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, hit 250,663,000. Of those, 157,037,000 participated in the labor force by either holding a job or actively seeking one.

Now, let me ask you this. Does paying people to not work cause more people to not work? It seems to me that whatever you subsidize, you get more of, and whatever you tax, you get less of.

Now look at this article from the radically-leftist New York Times.

It says:

Before this recession, most economists probably thought that some amount of unemployment benefits were just and compassionate, and offered a sense of security even to people who were lucky enough to retain their jobs, despite the fact that the program would raise unemployment rates and reduce both employment and economic output.

In other words, unemployment benefits shrink the economy to some degree, but shrinking the economy a bit may be a price worth paying.

Unemployment benefits were thought to reduce employment and output because, by definition, working people were ineligible for the benefits. In particular, an unemployed person who finds and starts a new job, or returns to working at his previous job, is supposed to give up his unemployment benefits. Economists had found that a large fraction of unemployed people delay going back to work solely because the unemployment insurance program was paying them for not working.

Here’s a new study explaining how the “generosity” of the big government Democrat Party actually encourages people to avoid working, and to remain dependent on the government for their “income”.

A study published by two labor economists, Stepan Jurajda and Frederick J. Tannery, looked at employment histories for unemployment insurance recipients in Pittsburgh in the early 1980s. Unemployment rates got quite high in Pittsburgh in those days, reaching 16 percent at one point, and staying over 10 percent for two and a half years.

The chart below summarizes their findings for Pittsburgh.

The chart displays the fraction of persons (in Pittsburgh) receiving unemployment benefits who began working again, as a function of the number of weeks until their unemployment benefits were scheduled to be exhausted. For example, a “hazard” value of “0.04″ for week “-14″ means that, among unemployed persons with 14 weeks remaining until their benefit exhaustion date, 4 percent of them either began working a new job or returned to their previous job.

The chart:

Unemployment offers a disincentive to find work
Unemployment benefits offer a disincentive for Americans to find work

The most troubling thing about this is what is not said in the chart or the study – think about the children growing up in these households where their parents, especially the fathers, are not working. What are they learning about self-sufficiency and the role of government? They are the ones who we are going to task with paying for our lavish entitlement programs in the future. Are people who think that dependency on government is normal being trained to pay for the exploding costs of Social Security and Medicare?

What is the purpose of capital punishment? Does it deter crime?

Why do some people support the death penalty? Because research conducted by multiple teams of scholars at multiple universities have shown that the death penalty deters crime.


“Science does really draw a conclusion. It did. There is no question about it,” said Naci Mocan, an economics professor at the University of Colorado at Denver. “The conclusion is there is a deterrent effect.”

A 2003 study he co-authored, and a 2006 study that re-examined the data, found that each execution results in five fewer homicides, and commuting a death sentence means five more homicides. “The results are robust, they don’t really go away,” he said. “I oppose the death penalty. But my results show that the death penalty (deters) — what am I going to do, hide them?”

Statistical studies like his are among a dozen papers since 2001 that capital punishment has deterrent effects. They all explore the same basic theory — if the cost of something (be it the purchase of an apple or the act of killing someone) becomes too high, people will change their behavior (forego apples or shy from murder).

And specifically:

• Each execution deters an average of 18 murders, according to a 2003 nationwide study by professors at Emory University. (Other studies have estimated the deterred murders per execution at three, five and 14).

• The Illinois moratorium on executions in 2000 led to 150 additional homicides over four years following, according to a 2006 study by professors at the University of Houston.

• Speeding up executions would strengthen the deterrent effect. For every 2.75 years cut from time spent on death row, one murder would be prevented, according to a 2004 study by an Emory University professor.

In case anyone is wondering what sort of crimes are deterred by the death penalty, you can read this graphic description of a recent death-penalty crime.

What sort of crimes are eligible for the death penalty?

Here’s an example of a death-penalty eligible crime from the Hartford Courant. (WARNING: graphic!)


A Superior Court jury today sentenced Steven Hayes to death for the murders of Jennifer Hawke-Petit and her daughters, Hayley and Michaela, during a seven-hour home invasion, robbery and arson at their Cheshire home in July 2007.

Outside the courthouse after the verdicts, Hawke-Petit’s father, the Rev. Richard Hawke, said “There are some people who do not deserve to live in God’s world.”

Asked what he had in his heart, Dr. William Petit Jr. struggled with his answer. “….Probably many of you have kids,” he said, pausing to choke back tears. “Michaela was an 11-year-old little girl…tortured and killed in her own bedroom, surrounded by her stuffed animals….”

Petit then talked about his daughter Hayley’s bright future and her strength and the children that his wife, Jennifer, helped.

“So, I was really thinking of the tremendous loss” during the verdict, Petit said, adding that he was pleased with it, but “mostly I was sad for the loss we have all suffered.”

Asked if he thought there’d be closure now, Petit said, “There’s never closure. There’s a hole…. with jagged edges…that may smooth out with time, but the hole in your heart and the hole in your soul” remains.

“This isn’t about revenge,” Petit said. “Vengeance belongs to the Lord. This is about justice.”

[…]The jury sentenced Hayes to death on six counts: killing Hawke-Petit and Michaela and Hayley in the course of a single action; killing a child under the age of 16; killing Hawke-Petit in the course of a kidnapping; killing Hayley in the course of a kidnapping; killing Michaela in the course of a kidnapping; and killing Hawke-Petit in the course of a sexual assault.

[…]Hayes, 47, of Winsted, was convicted Oct. 5 of breaking into the Petit home, beating Petit, tying up and torturing the family as Hayes and another man ransacked the home for cash and valuables and tortured the family for seven hours. Testimony during Hayes’ trial showed that at one point in the break-in, Hayes forced Hawke-Petit to go to the bank to withdraw money. During that time, according to testimony, Komisarjevsky sexually assaulted Michaela Petit, 11.

When Hawke-Petit and Hayes returned from the bank, Hayes raped and strangled Hawke-Petit. The house was doused with gasoline and set on fire as the intruders fled, testimony showed. Hayley, 17, and Michaela died of smoke inhalation.

[…]Prosecutors used the words of Hayes’ younger brother Matthew to counter testimony that home-invasion crime was an aberration in Hayes otherwise troubled but basically nonviolent life.

Matthew Hayes portrayed his brother as a conniving, sadistic, violent thief who saw Matthew take countless beatings from his brutal father for Steven Hayes’ misdeeds. At one point, Steven Hayes held a gun to Matthew’s head, according to the statement, which was given to state police after the home invasion.

Examples of Hayes’ sadistic behavior toward his brother included hooking Matthew to the garage door by his belt and raising the door up and down, and holding Matthew’s hand to a red-hot burner. Matthew said his brother’s life of crime was not a result of bad parenting or poor childhood. He said Hayes never learned to take responsibility for his actions.

Sometimes, I think that we have stopped judging others because we do not want to be judged ourselves. We hope that by not judging anyone, that we will somehow escape being judged by anyone – especially by God himself. The opposition to punishing the guilty is, I think, really just a way of expressing our desire to do away with the idea that we will finally face judgment.We seem to be able to ignore the victim’s needs and act as if the criminal is the victim. We act as if deterring a crime with punishment has no impact on the decision making of people who are considering whether to commit the crime. But crime isn’t some random action – criminals do consider what will happen to them if they are caught. We send potential killers a message by being willing to punish the ones we catch. But if we treat them like victims, then others watching are not going to be deterred from committing crimes.

Treasury Department threatens private companies for responding to Obamacare incentives

Investors Business Daily reports on how the Treasury Department is threatening private companies who lay off employees because of the costs imposed on them by Obamacare.


In what may be considered an ObamaCare loyalty oath, the Treasury Department orders employers to attest that any employee layoffs are not due to its imposed costs under penalty of perjury.

The first rule of business is to stay in business, something which is accomplished by doing what government is incapable of doing — controlling costs and making a profit by giving customers a product or service they need or want.

ObamaCare is obviously a product neither business nor the individual wants, so coercion is necessary under penalty of law.

Enforced by the Internal Revenue Service, individuals must enroll in government-approved plans or be fined.

Individuals are not allowed, despite presidential promises, to keep the plans and doctors they like and can afford.

Instead, they must accept plans they don’t like and can’t afford, some getting subsidies extracted from other taxpayers or China. They must grin and bear their reduced health care choices and higher costs.

Even though ObamaCare’s employer mandate has once again been illegally and unconstitutionally extended by the president who would be king, business still faces ObamaCare’s punitive cost increases down the road and its own form of government coercion.

Layoffs are an unfortunate but sometimes necessary means for a business to control costs and stay in business.

On Monday, a Treasury Department unconcerned with the necessities of the free market said that businesses will need to “certify” that they are not shedding full-time workers simply to avoid the mandate and its costs.

Officials said employers will be told to sign a “self-attestation” on their tax forms affirming this, under penalty of perjury.

What happens when a government passes regulations that make it harder for employers to lay off workers if they are forced to? Well, companies stop hiring workers, and expand their operations elsewhere. That’s exactly what has happened in countries like France, where the government makes it nearly impossible to get rid of workers, even when circumstances warrant it. So the net effect of policies that reduce the freedom to hire/fire as needed is to raise unemployment.

Here’s the economist Aparna Mathur of the American Enterprise Institute to explain.


Labor market regulations often take the form of employment protection rules that govern the hiring and firing of workers. These were originally introduced to enhance workers’ welfare; for instance, by reducing unfair dismissals. The same provisions that protect employees, however, translate into cost for employers, leading an employer to think twice (at least) before hiring a new employee.

Theoretical economic models have shown that, in general, the effect of such laws is to reduce job flows (broadly, the sum of jobs created and jobs destroyed). In my paper, I show that these reduced job flows could have negative effects on investments in education because they reduce the expected returns on a job search; and they lower the value of education as a signaling device.

Under rigid labor market regulations, employers have a stronger disincentive to create new jobs, so there are fewer available jobs on the market. As a result, one’s likelihood of earning a productive wage is reduced. Moreover, firings under a system of strong labor market regulations are less frequent than they would be otherwise, so even workers with jobs expect to face fewer opportunities to search for re-employment. As a result, they will have less use of education as a signaling device to secure their next job.

With flexible labor markets and higher job mobility, these conditions are reversed. Job flows are higher, leading to more vacancies per unemployed worker. This yields a higher expected return on a job search for educated workers since the likelihood of finding a job is higher. Further, workers are either fired or they quit more frequently (i.e., job destruction is higher), leading to a greater use (or need) of education as a signaling device.

Put simply, imagine a developing country with rigid labor markets leading to few vacancies. For a low-income worker, the cost of getting educated may outweigh the prospective benefits since the likelihood of finding a job in this scenario is fairly low. On the other hand, for the same worker, if the likelihood of finding a job goes up when labor market restrictions are removed, the incentive to invest in education may be higher since the returns to investing in this costly activity are higher. Countries such as France, Germany, and Italy, which consistently have strict labor regulations, would do well to heed these results (see figure). It is also true in general that developing countries have stricter labor regulations than the OECD economies.

All these regulations sound so good, but we have to think beyond stage one in order to see the real results of the happy-sounding speeches. These things are understood by economists, but we didn’t elect an economist.