IRP Discussion Paper Abstracts - 1994

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Educational performance indicators: A critique
Robert H. Meyer

Full Text: DP 1052-94

The typical indicators used to assess a school's performance - average and median achievement test scores - are highly flawed. Simulation results indicate that these indicators provide a severely misleading portrait of changes in school performance over time and differences in performance across schools, particularly if students change schools a lot or school performance varies significantly over time. Moreover, these indicators provide schools with the incentive to cater to students who score high on achievement tests, and they tend to be biased against schools that serve a large number of academically disadvantaged students. Better than average and median test scores are gain indicators, which measure the growth in achievement from one grade to the next for a given group of students, and value-added indicators, which rely on a statistical model to identify the distinct contributions of schools to growth in student achievement at a given grade level. In order to implement valid school performance indicators, schools should test students every two years, if not annually, beginning with kindergarten; collect better data on student and family characteristics; and develop tests that are sound and attuned to their educational goals.

The Fading Breadwinner Role and the Economic Implications for Young Couples
Aimee Dechter and Pamela J. Smock

Full Text: DP 1051-94

It is a commonplace that the past few decades have been a time of increasing importance in the role of women as income providers, both within and outside of marriage. Drawing on data from the 1964 and 1993 March Current Population Surveys (CPS), we document the changing division of income provision within marriage and the association between changing marital income-provision roles and younger couples' economic welfare over the past thirty years. We find that the proportion of marriages in which husbands are primary breadwinners has declined dramatically, with a corresponding rise in "co-provider" marriages. Regression analyses show that (1) co- provider marriages are economically advantaged compared to other income-provision-role arrangements in both the early 1960s and the early 1990s; and (2) a relatively substantial part of the total improvement in younger couples' economic welfare over time stems from the shift towards co-provider marriages.

Using Expectations Data to Study Subjective Income Expectations
Jeff Dominitz and Charles F. Manski

Full Text: DP 1050-94

We have collected data on the one-year-ahead income expectations of members of American households in our Survey of Economic Expectations (SEE), a module of a national continuous telephone survey conducted at the University of Wisconsin. The income-expectations questions take this form: "What do you think is the percent chance (or what are the chances out of 100) that your total household income, before taxes, will be less than Y over the next 12 months?" We use the responses to a sequence of such questions posed for different income thresholds Y to estimate each respondent's subjective probability distribution for next year's household income. We use the estimates to study the cross- sectional variation in income expectations one year into the future.

Eliciting Student Expectations of the Returns to Schooling
Jeff Dominitz and Charles F. Manski

Full Text: DP 1049-94

We report here on the design and first application of an interactive computer-administered personal interview (CAPI) survey eliciting from high school students and college undergraduates their expectations of the income they would earn if they were to complete different levels of schooling. We also elicit respondents' beliefs about current earnings distributions. Whereas a scattering of earlier studies have elicited point expectations of earnings unconditional on future schooling, we elicit subjective earnings distributions under alternative scenarios for future earnings. We find that respondents, even ones as young as high school juniors, are willing and able to respond meaningfully to questions eliciting their earnings expectations in probabilistic form. Respondents vary considerably in their earnings expectations, but there is a common belief that the returns to a college education are positive and that earnings rise between ages 30 and 40. There is a common belief that one's own future earnings are rather uncertain. Moreover, respondents tend to overestimate the current degree of earnings inequality in American society.

The Foster Care Crisis
Mark E. Courtney

Full Text: DP 1048-94

Foster care is a poorly studied and poorly understood social service program. In particular, foster care has received almost no attention from poverty policy analysts in spite of its growing size and close relationship to the Aid to Families with Dependent Children program. In this article, I describe historical and recent trends in foster care caseloads and costs and suggest that the child welfare services system is in a state of crisis. I describe the current policy framework in child welfare, arguing that it does not hold out much promise for resolving this crisis. Lastly, I argue that it is perilous for politicians and policy analysts to ignore the potential impact of currently discussed welfare reform efforts on the foster care system.

Interaction Effects of a Child Tax Credit, National Health Insurance, and Assured Child Support
Rebecca Y. Kim, Irwin Garfinkel, and Daniel R. Meyer

Full Text: DP 1047-94

If the government offered a refundable tax credit for children, national health insurance, and an assured child support benefit to all families with children - poor families as well as nonpoor families - what would happen to poverty, welfare dependency, and other related issues? The authors simulate the effects of each program operating on its own and of all three acting in concert. They find that the impacts of the programs interacting with one another would be much larger than the sum of the impacts produced by each program alone. With the three programs in place, the poverty rate would fall by 43 percent, the AFDC caseload would shrink by 22 percent, and the annual incomes of poor families would rise by $2500. In addition, AFDC recipients would work more hours. Data come from the 1987 Survey of Income and Program Participation.

A Hazard Model for Welfare Durations with Unobserved Location-Specific Effects
John Fitzgerald

Full Text: DP 1046-94

Many papers have investigated how personal characteristics and environmental variables affect welfare durations of unmarried mothers. This paper estimates proportional hazard models for welfare durations that allow for either fixed state or fixed labor market area effects. Conditioning on residence location by fixed effects can limit the impact of three types of potential bias. (1) Estimates of the effects of personal characteristics can be biased owing to the omission of relevant local area variables. (2) Estimates of the impact of state welfare benefit levels are biased because they proxy for other unmeasured attributes of the state, in particular, the entire state welfare system. Conditioning on state fixed effects limits this bias to the extent that we can use time variation within states to estimate the benefit level effect. (3) With state fixed effects, we can better estimate the impact of local conditions, such as unemployment rates, because they also may have been picking up omitted state-level effects. The models are estimated by the Cox partial likelihood method with time-varying covariates. Data come from the 1984 and 1985 panels of the Survey of Income and Program Participation. I find that some personal characteristics (being black or Hispanic, education) have greater impact after controlling for location-specific effects.

New Deal to New Frontier: From Security to Opportunity in the American Welfare State
Thomas Kaplan

Full Text: DP 1045-94

This paper considers U.S. social policy in the years 1935-1960 through the prism of recurring disagreements over the appropriate balance between social security and individual freedom. The disagreements were sharpest in the 1930s, when the Social Security bill was drafted and revised, and resumed in intensity after World War II, with the introduction of President Truman's health insurance proposal. The disagreements diminished during the 1950s, as Republicans came to accept Social Security. When John Kennedy became president, during the first crisis in public confidence over the Aid to Dependent Children title of the Social Security Act, discussions about balancing security and freedom had lost currency. The paper argues that this loss of currency was unfortunate. The Roosevelt administration's approach to balancing goals of social security and individual freedom was a reasonable gamble, even when applied to single women and their children, and might have served Kennedy and subsequent presidents well.

Long-Term Poverty and Child Development in the United States: Results from the NLSY
Sanderd Korenman, Jane E. Miller and John E. Sjaastad

Full Text: DP 1044-94

The authors describe developmental deficits in early childhood associated with long-term poverty in the National Longitudinal Survey of Youth (NLSY). They compare estimates of the effects of long-term poverty (based on a thirteen-year average of income) to estimates of the effects of poverty based on a single year of income (at the time of developmental assessment). They find substantial developmental deficits among children who, on average, are poor over a number of years relative to those who are not. These deficits are approximately twice as large according to the long-term income measure as compared to those based on the single- year measure, and are not explained by differences in maternal education, family structure, maternal behaviors during pregnancy, infant health, nutritional status, or age of mother at first birth. However, an index of the home environment accounts for one-third to one-half of the developmental disadvantages (net of other factors) of children who experience long-term poverty.

Compliance with Child Support Orders in Divorce Cases
Daniel R. Meyer and Judi Bartfeld

Full Text: DP 1043-94

This paper examines compliance with child support orders by divorced fathers in Wisconsin. Compliance increases as the income of the father increases, although it falls in the highest income category. The "burden" of awards does not affect compliance unless more than 30 percent of income is owed. More stringent enforcement systems increase compliance. We find that most divorced fathers who are not complying with their orders do not have very low incomes, in contrast to noncomplying fathers in nonmarital cases. This suggests that the best policies to increase compliance among divorced fathers may differ from those for nonmarital fathers.

Health Insurance and Child Support
Daniel R. Meyer

Full Text: DP 1042-94

The child support system has been increasing its efforts to make health insurance a part of child support awards. Data from the 1990 Current Population Survey Child Support Supplement show that 40 percent of child support awards require that the noncustodial parent provide health insurance to his children. However, in a third of the cases, the noncustodial parents are not providing coverage. This matters because 16 percent of the children whose noncustodial fathers are not providing the coverage they were ordered to provide are not insured through other sources (e.g., Medicaid). But expecting noncustodial parents to be the sole providers of health insurance for their children may be unwise. Data from Wisconsin suggest that fewer than half (and probably less than 10 percent) of uninsured children in custodial- parent families have a noncustodial parent who can afford to provide health insurance for them. Health care reform is needed so that all children will have coverage, whether it is provided by their parents or the government.

Welfare Effects of Fixed and Percentage-Expressed Child Support Awards
Daniela Del Boca and Christopher J. Flinn

Full Text: DP 1041-94

Over the last decade a large number of states have significantly altered their legal statutes concerning the disposition of divorce cases involving children. In particular, many states have increasingly employed percentage-expressed orders in which child support obligations in a given period are determined as a proportion of the contemporaneous income of the noncustodial parent. In contrast to more traditional systems in which obligations were set in fixed nominal terms at the time of the divorce settlement and were infrequently (or never) updated, the dynamic system has the advantages of allowing children (and the custodial parent) an opportunity to share in the general income gains experienced by the noncustodial parent over the life cycle and of possibly alleviating some noncompliance problems. In this paper we conduct a rather extensive theory-based empirical investigation of the effects of these systems on the income process for divorced fathers and the child support transfer decision. We estimate a flexible statistical model for the income- generation process for divorced fathers which encompasses the period both before and after the divorce. We interpret the estimates from this model to indicate small behavioral effects of the type of order on postdivorce income, but nonrandom assignment (in terms of the means and variances of predivorce income) into the percentage-expressed-order state. Our analysis of the effects of the order type on child support transfers is divided into two parts. In the first, a "reduced form" analysis, we investigate whether or not the divorced father's regime defined as the order type and withholding status can be considered exogenous vis-a-vis the transfer decision, and examine the relative effects of the various regimes on the transfer rate. We further attempt to investigate order-type effects on compliance in the context of a structural model of the compliance decision. The results of the two analyses are for the most part consistent. Percentage orders are generally associated with lower compliance rates, though withholding tends to alleviate the problem. The highest compliance rates are associated with fixed orders coupled with withholding.

Taxes and the Poor: A Microsimulation Study of Implicit and Explicit Taxes
Stacy Dickert, Scott Houser, and John Karl Scholz

Full Text: DP 1040-94

The authors measure the cumulative burden on low-income households resulting from explicit taxes (state and federal income, and payroll taxes) and implicit taxes (reductions of program benefits as earnings rise). With monthly data from the 1990 Survey of Income and Program Participation, a simulation model calculates the benefits and taxes households receive and pay in 1990. A household's marginal tax rate is established by simulating the benefits and taxes the household would receive and pay if each member aged 15 or more received additional earnings of $10 per month. The changes in income that would result if all household members age 15 or older took a half-time, minimum-wage job are also calculated. Typical cumulative marginal tax rates on poor households are found to be about 27 percent, but this masks considerable variation across states as a result of differences in program eligibility rules, state income taxes, and state AFDC policies. The tax burdens resulting from taking a half-time minimum-wage job also vary greatly across states, and participants in AFDC and food stamps face median marginal tax rates significantly above the rates for all poor households. A consistent result, however, is that typical tax rates on the poor rarely exceed 60 percent when income changes resulting from incremental changes in monthly earnings are calculated. The authors conclude that for most poor households, tax rates are not so high as to diminish the possible effectiveness of such policies as the Earned Income Tax Credit, which try to make work more attractive than welfare.

Academic Achievement in American Cities: Comparison of Public Comprehensive, Public Magnet, Catholic, and Non-Religious Private High Schools
Adam Gamoran

Full Text: DP 1039-94

Problems with our public urban high schools are intensifying, and many see magnet schools and private schools as the answer. But are those schools really better at increasing the academic skills of students? Using the National Educational Longitudinal Survey, the author estimates the effect of attending a magnet school, Catholic School, or secular private school on the achievement of urban students in math, reading, science, and social studies; he compares these estimates to the achievement of students who attend comprehensive public high schools. He finds that magnet schools are more effective than regular schools at raising the proficiency of students in science, reading, and social studies; Catholic schools have a positive impact on math skills, while secular private schools do not offer any advantage, net of preexisting differences among students. Further analyses test the sensitivity of the results to assumptions about independence and selectivity; these show support for the magnet school advantages in reading and social studies, but raise doubts about the Catholic school effects in math and the magnet school effects in science.

Wages, Racial Composition, and Quality Sorting in Labor Markets
Barry T. Hirsch and David A. Macpherson

Full Text: DP 1038-94

This paper examines the relationship between wage rates and the racial composition of jobs, using large cross-sectional and longitudinal samples constructed from monthly Current Population Surveys for 1983-92. Support is found for a "quality sorting" model that posits an equilibrium in which the racial composition of jobs serves as a skill index of unmeasured labor quality. Estimation of standard wage-level equations shows that wages of both black and white workers are substantially lower in occupations with a high density of blacks. Consistent with the quality sorting hypothesis, the magnitude of the relationship is reduced sharply after accounting for occupational skill measures. Longitudinal wage-change estimates controlling for person-specific quality indicate little if any causal effect of racial composition on wages. Estimates of racial discrimination are reduced only moderately after accounting for racial composition; unexplained differentials occur within occupations or reflect inter-occupational differences uncorrelated with racial composition and occupational skill measures.

The Clinton Welfare Reform Plan: Will It End Poverty as We Know It?
Robert H. Haveman and John Karl Scholz

Full Text: DP 1037-94

The central elements in President Clinton's proposal to reform the welfare system are: increasing the earned income tax credit, improving the child support system, educating and training the poor, and limiting the amount of time people can receive assistance. The authors commend the first two components of the president's plan but question the likely effectiveness of the last two: even with the education, training, and child care programs that the president has proposed, few welfare recipients will be able to command wages that would lift them out of poverty, and successful education and training programs would cost more than the government appears willing to spend. They recommend that the president consider giving tax credits to, and subsidizing the wages paid by, employers who hire low-wage workers and assist young people and poor families to save for future opportunities. In their view, poverty will not be alleviated by only getting tough on welfare recipients; instead, labor market interventions should be adopted so as to expand opportunities for low-wage, low-skilled workers.

Demographic Change, Children's Families, and Child Support Policy in the United States
Judith A. Seltzer

Full Text: DP 1036-94

This paper describes recent demographic trends affecting families in the United States and considers how these trends may alter the definition of "family." The paper focuses on trends that affect minor children's family experience. Demographic changes have increased the percentage of children for whom family membership and household membership do not coincide. As a result, rights to children and adults' responsibilities for children are less clearly defined now than in the past. This greater ambiguity affects child well-being because children's access to resources, both time and attention as well as material goods, depends on their ties to adults. U.S. family policies, such as the recent child support reforms, work against demographic trends by emphasizing biological over social ties and reinforcing the importance of biological parents' responsibilities to children.

The Dynamics of Homelessness
Irving Piliavin, Bradley R. Entner Wright, Robert D. Mare and Alex H. Westerfelt

Full Text: DP 1035-94

This study explores transitions between homeless and domiciled states. It describes the timing of departures from and returns to homelessness, and it tests theoretical propositions linking individual attributes and experiences to these transitions. Four theoretical frameworks guide the analyses: institutional disaffiliation, human capital deficiencies, personal disabilities, and acculturation. The data come from a longitudinal study of homeless individuals in Minneapolis. Various individual attributes are linked with leaving homelessness, including recent employment, welfare receipt, job training, identification with other homeless people, and homeless history. Fewer attributes are linked with returns to homelessness: work history and gender. These findings provide some evidence for existing explanations for homeless transitions, and they suggest promising avenues for further research on the dynamics of homelessness.

Trends in the Size of the Nation's Homeless Population During the 1980's: A Surprising Result (Revised June 1995)
Irwin Garfinkel and Irving Piliavin

Full Text: DP 1034-94

There are good national estimates of the number of homeless people in shelters in 1984, 1988, and 1990, but only in 1987 is there a reliable estimate of the number of people sleeping in streets. The large increase in the sheltered homeless population between 1984 and 1987-88 could reflect a shift of the homeless from street to shelters rather than a growth in total homelessness. Data from a number of local studies of homeless populations in U.S. cities in the 1980s have made it possible to estimate the ratio of the number of homeless on the street to the number of homeless in shelters and thereby to estimate the size of the national homeless population over this period with some degree of accuracy. Our estimates indicate that the expansion of shelters over the decade did have the effect of reducing the proportion of the homeless living on the street. Still, when we combine the estimated ratios with the estimates of the shelter population in 1984, 1987, 1988, and 1990, we find that homelessness about doubled between 1984 and 1987. We also find that homelessness declined between 1987 and 1990. At its peak, the number of people literally homeless on any given night was less than 400,000. Finally, our results also provide evidence that pure enumerations or censuses of the homeless population lead to undercounts. Both sample censuses and retrospective interview studies provide more complete counts.

Incorporating Labor Supply Responses into the Estimated Effects of an Assured Child Support Benefit
Daniel R. Meyer and Rebecca Y. Kim

Full Text: DP 1033-94

Assured child support benefits are an important component of many proposals to reform the child support system. The authors estimate the likely effects of assured benefits on poverty and welfare participation when (a) parents eligible for child support work the same number of hours as they currently work and (b) parents eligible for child support change the number of hours they work in order to maximize their income and leisure time. They find that in each situation assured benefits will reduce poverty rates and the poverty gap; welfare caseloads and expenditures will also fall. When parents are allowed to change the number of hours they work, the impact of assured benefits will be about the same, but the costs of the assured benefit program will increase.

Interstate Variation in Welfare Benefits and the Migration of the Poor: Substantive Concerns and Symbolic Responses
Sanford F. Schram and Gary Krueger

Full Text: DP 1032-94

Nearly all states are thinking about reforming their welfare systems, and several states--particularly those that offer high welfare benefits--are taking action. A major concern is that poor people are moving to high- benefit states in order to receive the benefits offered by those states. It is unclear, however, if this "welfare migration" is extensive enough to break the budgets of high-benefit states. Nevertheless, legislators in those states are seeking to stop it, usually through two-tier benefit schedules whereby new arrivals to a state are temporarily paid the welfare benefits they would have received had they remained in their original state. The authors discuss the extent to which two-tier benefit schedules represent substantive reform or symbolic action. In their estimation, current strategies for welfare reform fail to address the causes of poverty and welfare dependency and may only intensify the antagonism many Americans feel toward the poor.

Migration among Low-Income Households: Helping the Witch Doctors Reach Consensus
James R. Walker

Full Text: DP 1031-94

Do states with high welfare benefits attract low-income people from other states? Using data from the County to County Migration Flow Files from the 1980 census, I investigate this question by reintroducing migration rates into the definition of welfare migrants and examining situations in which a person moves from one state to a neighboring state whose welfare benefits are appreciably higher. I find no compelling evidence in support of the welfare magnet theory; my results are as likely to validate as they are to refute the hypothesis.

"Time to Do the Chores?" Factoring Home-Production Needs into Measures of Poverty
Robin A. Douthitt

Full Text: DP 1030-94

Currently, income is the only resource that the government takes into account when measuring poverty. But in order for a family to maintain an adequate standard of living, its members must not only have money, but the time to do certain kinds of work in the home: child care, food shopping, meal preparation, laundry, housecleaning, and the like. With this in mind, the author recalculates poverty rates using a method developed by Vickery (1977) in which time is factored in as a resource. She finds that poverty rates increase dramatically when time is factored in as a resource, because working parents, especially single parents, often do not have enough time to perform essential tasks. Data are from the 1985 American Time Use survey.

Child Support Enforcement for Teenage Fathers: Problems and Prospects
Maureen Pirog-Good and David H. Good

Full Text: DP 1029-94

The NLSY data indicate that about 7.3 percent of teenage males become fathers and that very few of these fathers live with their children. Father absence and the concurrent increase in female-headed households are closely associated with the impoverishment of children. Most absent teen fathers never come into contact with the child support enforcement program, and the extent to which they financially support their children informally is not well understood. While the income of absent teen fathers is low in the teen years, it increases over time, as does the potential for collecting child support. Nevertheless, men who were absent teen fathers earn less in early adulthood than men who deferred parenting until age twenty or later and teen fathers who lived with their children. Early establishment of paternity and greater standardization in the treatment of adolescent fathers by the child support enforcement program are recommended. Further, the substantial and persistent income deficit experienced by adolescent fathers who live apart from their children raises an interesting dilemma. While children may benefit financially and psychosocially from living with two parents, the lower income of men who were absent teenage fathers may make them poor marital prospects. This raises doubts about the recent recommendations of some scholars that we should bring back the shotgun wedding.

Do Welfare Magnets Attract?
Russell L. Hanson and John T. Hartman

Full Text: DP 1028-94

Some scholars and many policymakers claim that poor people, in order to improve their lot, move to states that offer high welfare benefits. The authors test the validity of this claim using data from six Current Population Surveys: 1982-1984 and 1986-1988. They find no evidence to support the so-called welfare magnet hypothesis. Poor people do not move from one state to another to receive more public assistance. In fact, the poor hardly move from their home state at all. True, low-income persons who move to states with generous welfare benefits are more likely to go on welfare than are poor people who move to low benefit states, but their numbers are too small to affect a state's welfare expenditures. The authors also find that low-income people who already live in high benefit states are no more likely than the poor who live in low benefit states to participate in welfare programs.