Suppose that President Kamala Harris writes every American who identifies as “Black” (including Rachel Dolezal and, everyone’s new favorite Black American, Jessica Krug) a fat reparations check. Will Black Americans have greater spending power as a result?
Some Blacks are on means-tested welfare programs, such as public housing, Medicaid, or SNAP. If they receive a reparations check, maybe their “means” will now be greater and they’ll have to pay more for housing, health insurance, and food. A 2015 Census report:
At 41.6 percent, blacks were more likely to participate in government assistance programs in an average month. The black participation rate was followed by Hispanics at 36.4 percent, Asians or Pacific Islanders at 17.8 percent, and non-Hispanic whites at 13.2 percent.
The Son also Rises (Clark 2014; Princeton University Press) contains a survey of the academic literature regarding the effect of family wealth and unearned cash transfers on children. In 1832 there was a land lottery in Georgia where winners received a parcel of land roughly equal in value to the median family wealth at the time (i.e., the typical winners ended up with twice as much wealth, about $150,000 extra in today’s money). How did the children of the winners do?
They were no more literate than the children of losers. Their occupational status was no higher. Their own children in 1880 (the grandchildren of the 1832 winners) were again no more literate. Worse, they were significantly less likely to be enrolled in school than the grandchildren of the losers. … Wealth is not statistically higher for lottery winners’ children…
(Clark also reviews a study of Cherokee Indians who, starting in 1998, received substantial boosts to their income from casino profits. For children who had not been living in poverty, “there was no measurable change in any educational outcomes, including high school graduation rates…” This was despite the fact that a child who graduated high school would immediately become eligible for his or her own $4,000-per-year payment.)
“Divorce laws and the economic behavior of married couples,” by Alessandra Voena, a University of Chicago economist, concluded that an increased opportunity to obtain cash via a divorce lawsuit reduced reduced married women’s labor force participation rate. Similarly, successful child support plaintiffs generally reduce their working hours so that cash from the defendant is not turned into a higher standard of living for the child, but rather increased leisure time for the adult plaintiff.
See Long-term effects of short-term free cash (guaranteed minimum income experiments) for a reference to a paper regarding how just a few years of free government cash resulted in a lifetime of reduced labor force efforts. Those who got the cash were more likely to end up on disability and, if not Hispanic, to divorce their husbands and wives (additional gender IDs were unavailable in the 1970s).
Readers: What do you think? Will the free government cash result in higher spending power and standard of living or reduced working hours and additional leisure time for Americans who identify as “Black”?
- Donutnomics during the Coronaplague (for $600/week, Americans will gladly withdraw from the labor force)
- Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare (nobody wants to earn so much that means-tested benefits are cut)