Benefit-Cost Analysis: Its Relevance to Public Investment Decisions: Comment

This is a critique of the Arthur Maass article on Benefit Cost Analysis.

A Free Market for Medical Care? It’s Been Tried

Alternative medical practitioners and Jacksonian populists found common cause in an open market for medicine, write Jacob Habinek and Heather A. Haveman

Overdraft America: Confusion and Concerns About Bank Practices

Based on a survey, examines the prevalence of overdraft penalty and transfer fees by age and income, as well as consumer satisfaction with overdraft fee options. Makes policy recommendations

Welfare to Work in the U.S.: A Model for Other Nations?

The 1996 welfare reform legislation establishing the Temporary Assistance for Needy Families (TANF) program marks a significant change in U.S. social and economic policy. This legislation represents the ascendance of the view that individuals and families need to be self-reliant and that collective support for individual well-being should be minimized. We first describe the major provisions of TANF, providing some background on its differences from prior policy targeted at needy families. Then we catalogue the wide variety of economic changes that are implicit in the new law, stressing those related to changed property rights, fiscal relations among jurisdictions, and economic incentives facing families. Third, we illustrate the form of state reforms that are likely to develop in response to the federal policy change by describing the actions of the state of Wisconsin, which has taken the lead in implementing the new policy. We conclude with a list of yet unanswered questions that will ultimately determine just how far this policy change will slide the nation along the efficiency-equity tradeoff function, away from the equity axis. The answer to these questions will influence the attraction the U.S. reform might hold as a model for other nations concerned with their own safety net programs for poor people.

"Self-reliance and Poverty, Net Earnings Capacity versus: Income for Measuring Poverty"

The official U.S. poverty measure defines the poor in terms of a family's actual, yearly cash income relative to an estimate of the income needed to sustain a minimally acceptable standard of living. An alternative definition, designed to reflect a family's ability to achieve economic independence, would instead rest on its capacity for generating income. Net earnings capacity (NEC) is an indicator of the income a family could earn if all working-age family members work full-time, full-year at earnings consistent with their age, education, and other characteristics, with an adjustment made for child care costs. NEC is not intended as a replacement for the official measure, but as a supplement. The official measure identifies the population in need of short-term monetary assistance, whereas NEC identifies the population in need of longer-term skill-enhancing assistance in order to become self-reliant. Two general policy approaches to reduce the prevalence of NEC poverty are to increase the level of education and other income-generating characteristics of those with low earnings capacity and to increase the returns they receive for work.

The Effect of Labor Market Changes from the Early 1970s to the Late 1980s on Youth Wage, Earnings, and Household Economic Position

While overall employment in the United States has risen in the last 30 years, the employment and earnings prospects for youths have fallen relative to those for older workers. This deterioration in youth labor market conditions has been most pronounced for low-skilled youths, high school dropouts, and those with low IQs. Using data from national longitudinal studies of young men, young women, and youths, this paper examines a number of aspects of the labor market outcomes of youths entering the labor market at two different times. The first group entered the robust labor market of the late 1960s, while the second group entered the deteriorated labor market of the mid-1980s. Consistent with previous research, this paper finds an improvement over the two periods in levels of employment and earnings for high-skilled youths, with a corresponding deterioration for lower-skilled youths. The paper presents a unique analysis of the growth trajectories of earnings and employment for high- and low-skilled youths in the two cohorts. We find substantial within-cohort growth for high-skilled youths in both cohorts (as well an improvement in household economic circumstances), with a corresponding deterioration in earnings, employment, and household economic circumstances for lower-skilled youths, especially those in the later cohort.

The “Inability to Be Self-Reliant” as an Indicator of Poverty: Trends in the United States, 1975–1995

The trend in national policy over the past two decades has emphasized self-reliance and a reduced role of government in society. Given this ideological shift, the official poverty measure, which is based on the premise that all families should have sufficient income from either their own efforts or government support to boost them above a family-size-specific threshold, appears now to have less policy relevance than in prior years. In this paper we present a new concept of poverty, the inability to be self-reliant, which is based on the ability of a family, using its own resources, to support a level of consumption in excess of needs. This concept closely parallels the “capability poverty” measure that has been proposed by Amartya Sen. We use this measure to examine the size and composition of the poor population from 1975 to 1995. We find that poverty in terms of self-reliance increased more rapidly over the 1975–95 period than did official poverty. We find that families commonly thought to be the most impoverished—those headed by minorities, single women with children, and individuals with low levels of education—have the highest levels of self-reliance poverty. However, these groups have also experienced the smallest increases in this poverty measure. Families largely thought to be economically secure, specifically those headed by whites, men, married couples, and highly educated individuals, while having the lowest levels of self-reliance poverty, have also experienced the largest increases in that measure. We speculate that the trends in self-reliance poverty stem largely from underlying trends in the U.S. economy, in particular the relative decline of wage rates among whites and men, and the rapidly expanding college-educated group.

Selective Employment Subsidies: Can Okun’s Law Be Repealed?

[Excerpt] Concern that structural factors impede efficient labor market performance is evidenced in both statistical analyses of economic potential and policy proposals for selective employment subsidies. Estimates of the level and expected growth of full-employment GNP have recently been revised downward, as has the 3.2 unemployment multiplier implicit in Okun\u27s Law (see U.S. Council of Economic Advisers and George Perry). These indications of structural changes in labor markets reinforce statistics showing excessively high unemployment rates for youths and blacks, and labor force participation rates that are increasing for women and decreasing for men. The simultaneous concern with high inflation and high measured unemployment, in the context of major changes in labor force composition and increased variance in sectoral unemployment rates (see Perry), has brought forth numerous and sizable selective employment subsidy policies (SESP) in both the United States and Western Europe. The SESP, changes in potential GNP, and Okun\u27s Law are not unrelated phenomena. This paper explores that relationship. Section I presents a brief taxonomy of the primary SESPs which are currently being discussed in Western industrialized countries. Section II provides the economic rationale underlying these measures. Section III explores the relationship of SESP to the prospective growth of aggregate output, in the context of Okun\u27s Law. Evidence on the existence and magnitude of changes in employment decisions in response to the New Jobs Tax Credit (NJTC) is presented in Section IV