Class Notes: Minimum wage and worker productivity, maternal well-being and the safety net, and more

This week in Class Notes:

• More generous tax credits improve mental health and reduce smoking and heavy drinking among single mothers, but higher SNAP benefits have the opposite effect.
• Piece-rate workers in Florida increased their productivity following an increase in the state minimum wage.
• The common finding of a drop in the share of couples where the wife earns a little more than the husband is explained in Finland by a high proportion of co-working spouses with identical earnings.
• This week’s top chart shows how the Tulsa Race Massacre had persistent negative impacts on Black Tulsans’ home ownership rates.
• Ross Douthat argues for family policy that is more generous but without neglecting marriage, employment, or households that do not use day care, in this week’s choice opinion.
• Check out our latest piece on the college enrollment and completion gaps among men.
• For your calendar: Virtual events discussing the economics of mobility, gender’s impact on life course events, and systemic racism and housing.

More generous tax credits improve mental health and reduce smoking and heavy drinking among single mothers, but higher SNAP benefits have the opposite effect

A more generous social safety net should alleviate some of the hardships faced by low-income single mothers. But which benefits help most? This can be hard to assess, because people can get assistance from multiple programs. Lucie Schmidt, Lara Shore-Sheppard, and Tara Watson use a unique multi-program calculator, that accounts for program interactions and eligibility requirements, to assess the impact of safety net generosity on mental health and risky behaviors for single mothers. They find benefits overall from a more generous package. But there are sharp differences between different programs, as well as in the timing of effects. In particular, tax credits give the most positive boost: a $1,000 increase reduces severe psychological distress by 22.5% and reduces smoking by 14.2%. These reductions are largely concentrated during the first half of the year when tax refunds are likely to occur. However, a similar bump in SNAP benefits increases the chances of smoking by almost 8%, and heavy drinking by almost 10%.

Piece-rate workers in Florida increased their productivity following an increase in the state minimum wage

On January 1, 2009, the state of Florida increased its minimum wage from $6.79 to $7.21. Hyejin Ku studies changes in worker effort in response to this raising of the wage floor using data from piece-rate workers on a Florida tomato farm. First, she notes that low-productivity workers have a greater incentive to increase effort than high-productivity workers. Consistent with this expectation, she finds a 4.6% increase in worker productivity among low-productive workers relative to high-productive workers. In addition, she finds that the minimum wage increase does not appear to lead to dis-employment among the lower-productivity workers. This increased worker productivity could offset about half of the rise in labor costs associated with the rise in minimum wage, she estimates, suggesting that higher costs are shared evenly between the employer and the workers.

The common finding of a drop in the share of couples where the wife earns a little more than the husband is explained in Finland by a high proportion of co-working spouses with identical earnings 

Past studies have found a discontinuity and decline in the share of married households when the wife earns more than her husband (greater than a threshold of 0.5). One primary explanation for this has been a gender identity norm, where women feel pressure to earn less than their husbands, and therefore reduce their labor supply when they out-earn their husbands. However, Natalia Zinovyeva and Maryna Tverdostup argue that this discontinuity actually results from a high proportion of couples who have identical earnings, resulting in a sharp drop off in the fraction of couples past the 0.5 threshold. Using data from an employer-employee matched dataset from Finland, the authors find that 15% of co-working spouses are either both self-employed or work at the same firm. For the self-employed couples, reporting equal earnings could reduce income tax liabilities, facilitate easier accounting, or avoid within-family negotiations. Finally, the authors find that, through co-working, female earnings increase above their earnings potential, which is something the gender norm hypothesis would not predict.

Top chart: The Tulsa Race Massacre had persistent negative impacts on Black Tulsans’ homeownership rates  

This week’s top chart shows the persistent negative impacts of the Tulsa Race Massacre on Black Tulsans’ homeownership. The researchers estimate that the massacre reduced the likelihood of homeownership among male household heads by 4.2 percentage points in the short-term. The direct effects are larger in 1940 and appear to remain constant until 1980, after which the adverse effect grows even more over time into the 2000s.

Chart source: National Bureau of Economic Research

Choice Opinion: The best family policy package is more generous without neglecting marriage, employment, or households that do not use day care   

“The best family policy deal would give progressives more of the money they want to spend, and give conservative ideas more influence over the way that money is spent…[One] possible compromise would attach a work requirement to the credit for parents with kids older than one, while offering the money free of strings to parents of infants. That would encourage single mothers, especially, to return to the workforce as their babies get older, without forcing them back at a moment when they’re particularly vulnerable and when children have the right to a parent in the home. [What you get is] a family policy that spends generously without disfavoring marriage, work or households that don’t use day care. In a better world, that’s what Republicans and Democrats would be negotiating together, but even in this one, it isn’t out of reach,” writes Ross Douthat.

Self-promotion: Younger men are less likely to enroll and complete schooling at every single level of the educational system  

Ember Smith and Richard V. Reeves explore the gender gaps in college enrollment and completion. Women are much more likely to enroll in college and now account for 59% of enrolled students. But there is also a completion gap among those who do enroll. Men who enrolled in a four-year college in 2013 were 10 percentage points less likely than women to graduate within four years. Six years after enrolling, the gender gap in graduation narrows to six percentage points. This leads to large gaps in the levels of education in the adult population. Among those born between 1985 and 1994, for example, men are eight percentage points less likely than women to have a BA or higher degree. We conclude: “Closing the gender gap in education will require interventions every step of the way…Some initiatives specifically focused on male students should be on the table.”

For your calendar: Virtual events discussing the economics of modern transportation, all things urban economics, and happiness and age during COVID-19

Economics of Mobility Meeting

NBER

October 22, 2021 11:30 AM – 5:30 PM EDT

Gender and the Economy Conference

Board of Governors of the Federal Reserve System

November 8, 2021

10th Annual Housing Conference

AEI

November 17, 2021