The poor don't work because it doesn't make economic sense to hold a job

[yllus]

I'm not much of a numbers guy so I can't claim to have fact checked the below, but it's interesting if true. Sort of dovetails with how Clinton's welfare reform actually lowered the number of people using the system.

Crazybear's blog - The poor don't work because they are economically rational

It's a fairly pervasive myth within the US that the poor work very hard at unpleasant jobs. But this is nothing but a myth - according to the BLS [1, first paragraph], as of 2009, only 24% of people below the poverty line were in the labor force (this means working or looking for work) for at least 27 weeks/year.

Out of these 24%, just under half work full time and another 20% are involuntary part time employed (i.e., they would like to work full time, but are only able to find part time employment) [1, table 1].

This means that in total, about 17% of people below the poverty line are willing to work full time for at least 27 weeks/year. If you exclude children from the numbers (number of poor children and children as a whole taken from here [2]), then 36% of poor people work at least 27 weeks/year, and 25% work full time.

For comparison, for the population as a whole, 65% of people age 16 and older were in the labor force [3].

This data begs the question - why don't the poor work? Are they simply irrational, choosing to live in poverty when they could do better? Do they simply have flat utility functions, and not care about goods and services above a low minimum threshold?

On the X-axis I plotted earned income - the amount of money a person has earned via work or investment [5]. On the Y-axis, I plotted consumer expenditures. I also plotted spending vs earning in a theoretical world where income = expenditures.

The graph shows that utility (see Assumption 2) slightly decreases as you earn more money. People earning $5-10k actually spend $2k less than people earning $0-5k, and people earning $10-15k spend $1k less. By increasing your earned income to $20k, you still only get to spend $1000 more than if you didn't work.

So this presents you with a tradeoff. You can have no job, consume leisure in your free time, and your expenditures will be $22731. You can have a job and consume less leisure, and you'll only get to spend $23706. This means that if your work opportunities pay only $20k/year, every hour spent working only allows you to spend 97 cents. If the $20k/year job is actually 35 hours/week, then each hour spent working only enables 56 cents worth of expenditures.

In fact, even if you could increase your wages to $30k/year, you would only get to spend about $3.80 per hour worked (again assuming a 35 hour work week)

This means that it is completely rational for any person who values their time at more than $0.56-3.80 not to work as long as their work opportunities pay less than $30k/year.

Economic rationality seems to be a plausible explanation for the work habits of the poor.

 

[mizzou]

If living on welfare is so awesome, why wouldnt everybody do it? The sad fact of welfare is that it is not evenly distributed nor is it equitable for people in varying situations

The amount of food stamps you can rake in is quite astonishng. Combine that with relatively easy access to medicaid you could feasibly live a life that many retirees try to invest for.

The main problem is you are not flexible on where you can live. Its probably going to be a nasty area with bad schools, neighbors and crime. Unless you have the luxory of staying with relatives.

What i really dont like is how people who dont need it seem to get it and people who do, don't.

We just need a clear mission amd staffing that can consistantly deliver on that through the application process

 

[Texashiker]

If living on welfare is so awesome, why wouldnt everybody do it?

For people that work minimum wage jobs, it makes perfect sense to make less money and draw as many benefits from the government as you can.

Lets say you get a $1 an hour raise at your $8 an hour job, which means an extra $40 a week, $160 a month. But if you lose $300 a month in food stamps.

There is a gap where it does not make any sense to make more money. Not when your family is going to be losing government benefits.

 

[rudder]

I'm not much of a numbers guy so I can't claim to have fact checked the below, but it's interesting if true. Sort of dovetails with how Clinton's welfare reform actually lowered the number of people using the system.

The personal responsibility and Work opportunity act was signed by Clinton. It was part of the republican's Contract with America. Give credit where credit is due.

Of course the tech world started exploding after... so it is hard to say whether there were simply more job opportunities or the law worked. But one of the goals of the legislation was to end the practice of welfare being a lifestyle choice.

 

[senseamp]

That's why the minimum wage should be higher.

 

[OCGuy]

That's why the minimum wage should be higher.

So we can lose more jobs overseas?


Why can't all the liberals just stick to ruining CA and IL.....why the need to branch out?

 

[Atreus21]

If I understand this correctly, this compounds problems associated with minimum wage. Companies aren't going to be able to find people to fill minimum wage jobs because the government pays more to be unemployed.

 

[Throckmorton]

So we can lose more jobs overseas?


Why can't all the liberals just stick to ruining CA and IL.....why the need to branch out?

Can you provide some examples of minimum wage jobs that would go overseas?

 

[Throckmorton]

This would not happen if every job paid a living wage.

What's the difference between not making enough to survive and making a little more but still not enough to survive?

By the way, the poverty line is way too low. There's a reason we talk about eligibility for Medicare another benefits as being percentages higher than the poverty line.

 

[Atreus21]

This would not happen if every job paid a living wage.

What's the difference between not making enough to survive and making a little more but still not enough to survive?

By the way, the poverty line is way too low. There's a reason we talk about eligibility for Medicare another benefits as being percentages higher than the poverty line.

Price floors create shortages. There's no way out of this.

 

[Texashiker]

That's why the minimum wage should be higher.

So that more small family owned businesses can be driven out of business?

If anything, we need a structured minimum wage based on how much profit the company makes. That way wal-mart would be forced to pay a higher minimum wage, while the mom-and-pop shops can pay what they can afford.

 

[JSt0rm]

so in the last 30 years inflation has over taken minimum wage to the point that you make more living off the government?

Sounds like minimum wage needs a review.

 

[WhipperSnapper]

So we can lose more jobs overseas?

So what you're saying is that foreign outsourcing essentially mandates poverty-wages for a great many Americans? Maybe part of the solution to our nation's economic problems is to just put an end to foreign outsourcing for domestic consumption.

 

[wuliheron]

Its not just minimum wage. Its 13 million illegal aliens who've been here so long they're now taking over skilled jobs in areas like construction. Its companies being allowed to import cheap crap from countries that won't let us export ours to them. The result is only half of all Americans are even working full time jobs.

Forget good paying jobs, there are no jobs! All those tax breaks to the wealthy and corporations haven't produced jobs. They've just learned how to game the system even better by hiring illegals or exporting jobs to where the labor is dirt cheap. That way they can have their cake and eat it too.

 

[ConstipatedVigilante]

That's why the minimum wage should be higher.

No, that's why people shouldn't lose welfare as they earn money on a 1:1 basis. Raising the minimum wage will just make employers hire less people and demand more from those that they do hire.

 

[Pulsar]

This would not happen if every job paid a living wage.

What's the difference between not making enough to survive and making a little more but still not enough to survive?

By the way, the poverty line is way too low. There's a reason we talk about eligibility for Medicare another benefits as being percentages higher than the poverty line.

Get a clue. Please.

Go ahead. Raise the minimum wage. The first effect will be to lower the number of minimum wage employees to compensate. After that, jobs immediately above minimum wages will start increasing pay rates. After all, why would a semi-skilled job be paid the same? The domino effect follows quickly up through skilled jobs as well, and within a short matter of time you are back where you started.

So you raise it again...... over and over.

Sorry, but if you want a living wage, go get a damn education and earn one. Paying every job a living wage whether it's a part time fresh out of high school or a teenage drop out or a college graudate is idiotic.

 

[Pulsar]

No, that's why people shouldn't lose welfare as they earn money on a 1:1 basis. Raising the minimum wage will just make employers hire less people and demand more from those that they do hire.

Golf clap. Exactly right, and it's how other places like handle it. Slowly decrease the welfare as they begin to earn money, but don't decrease it 1:1 - then there's a motivation to earn more money.

 

[Anarchist420]

This would not happen if every job paid a living wage.

What's the difference between not making enough to survive and making a little more but still not enough to survive?

By the way, the poverty line is way too low. There's a reason we talk about eligibility for Medicare another benefits as being percentages higher than the poverty line.

It's not necessary to be a retarded corporatist. Minimum wage is corporatism, because it's a barrier to entry for new businesses and kills small business.

The minimum wage increased unemployment during the GD, FYI.

 

[Throckmorton]

Get a clue. Please.

Go ahead. Raise the minimum wage. The first effect will be to lower the number of minimum wage employees to compensate. After that, jobs immediately above minimum wages will start increasing pay rates. After all, why would a semi-skilled job be paid the same? The domino effect follows quickly up through skilled jobs as well, and within a short matter of time you are back where you started.

So you raise it again...... over and over.

Sorry, but if you want a living wage, go get a damn education and earn one. Paying every job a living wage whether it's a part time fresh out of high school or a teenage drop out or a college graudate is idiotic.

People have to do those jobs. In what world does it make sense for them to work necessary jobs while making a wage that isn't sufficient to survive?

Even if everybody "gets a damn education", those "menial" jobs will still exist. Hell, there's already a glut of people with degrees, and they're working in the service industry for less than living wages. The fact that it's possible to move up does not change the fact that those jobs MUST exist and be filled by some people.

The reason you think that's the natural state of the economy, a big chunk of the population working but not making enough to survive in the economy and needing welfare, is probably because of a century of brainwashing. Back in the subsistence farming days, if you farmed you had enough. Only if your crops failed would you need community support.

 

[senseamp]

I'd go on welfare instead of getting current minimum wage with no benefits. What's the point? I'd rather get health insurance and preserve my health and use the time to study for a better job. If I had kids, it would be a no-brainer.

 

[Hayabusa Rider]

Make people who are on medicaid work and become educated while on it. No more benefits for children except for food and clothing. No cash, no stamps. A card for each person which limits what can be purchased. No alternator size tenderloins. No HDTVs.

Watch what happens then.

 

[Fern]

If living on welfare is so awesome, why wouldnt everybody do it?
-snip-

I think some people are perfectly fine taking welfare, even if they must game the system to do so. Others would be embarrassed or ashamed to be on it. I don't know if it's properly described as 'principals', or 'culture' or what.

I've seen many examples of people who are perfectly fine with claiming disability (and the gov benefits) then turn around and try to get work under the table (or off the books) to augment the disability benefits.

I've seen plenty of people who game the system. Almost all small business have cycles. Some owners will lay off themselves or their wife/family member so they can collect unemployment benefits. Of course that person remains working, just not getting an official paycheck. Some will lay themselves off and go do self-employed type contracting work that is never reported.

I've seen couples with children who remain unmarried specifically to get benefits. The 'husband' has a decent paying job and the 'wife' remains unemployed. She claims the kids (not him) thus gets good welfare benefits all the while living in a nice home the 'husband' pays for from his salary.
---------------

As to OP's point - yes, this has been for a long time. It's not hard to see that if make benefits good enough some will choose that over employment. And some will claim the benefits then go work on the side receiving unreported money.

Fern

 

[dmcowen674]

The poor don't work because it doesn't make economic sense to hold a job

I'm not much of a numbers guy so I can't claim to have fact checked the below, but it's interesting if true. Sort of dovetails with how Clinton's welfare reform actually lowered the number of people using the system.

Crazybear's blog - The poor don't work because they are economically rational

With transportation costs getting to a job going through the roof I can understand why a lot of people have given up.

Can you blame someone who makes $8 an hour when it costs half of that for one gallon of fuel?

 

[JSt0rm]

I think some people are perfectly fine taking welfare, even if they must game the system to do so. Others would be embarrassed or ashamed to be on it. I don't know if it's properly described as 'principals', or 'culture' or what.

I've seen many examples of people who are perfectly fine with claiming disability (and the gov benefits) then turn around and try to get work under the table (or off the books) to augment the disability benefits.

I've seen plenty of people who game the system. Almost all small business have cycles. Some owners will lay off themselves or their wife/family member so they can collect unemployment benefits. Of course that person remains working, just not getting an official paycheck. Some will lay themselves off and go do self-employed type contracting work that is never reported.

I've seen couples with children who remain unmarried specifically to get benefits. The 'husband' has a decent paying job and the 'wife' remains unemployed. She claims the kids (not him) thus gets good welfare benefits all the while living in a nice home the 'husband' pays for from his salary.
---------------

As to OP's point - yes, this has been for a long time. It's not hard to see that if make benefits good enough some will choose that over employment. And some will claim the benefits then go work on the side receiving unreported money.

Fern

got any more of these ideas

 

[ShawnD1]

With transportation costs getting to a job going through the roof I can understand why a lot of people have given up.

Can you blame someone who makes $8 an hour when it costs half of that for one gallon of fuel?

They could try riding the bus.

I have a good job, i own a car, but i still bus to work. The only people who cant are rich fucks in the suburbs or guys making 80k per year at some chemical plant or refinery outside of town.