Question

Please read the article that I posted in week 5 folder titled “The Wages of Unemployment”. The author, Dr. Richard Vedder, indicated that in recent decades there was a steady rise in the employment-to-population ratio. However he also indicated that in the years since 2000 and until the date of the article, more than two-thirds of that increase in working-age population employed had been erased.

Dr. Vedder stated as follows “while there are a number of factors, the phenomenon is due mainly to a variety of public policies that have reduced the incentives to be employed”. Dr. Vedder identifies 4 policies: (1) Food stamps, (2) Social Security disability payments, (3) Pell grants, (4) Extended unemployment benefits. He discussed each individually and provided his point of view.

Please choose one of the above policies, discuss it and indicate whether you agree or disagree with Dr. Vedder’s opinion (Please note that much has been published since Dr. Vedder's articled first appeared and the employment situation has improved, so you will have a great variety of new sources to read and refer to in your post).

Food stamps is the one I need help with

Answer 1

This article by Richard Vedder published in the Wall street journal published on Jan. 15, 2013 6:36 p.m. ET. explains how people in USA are less reluctant to work. There are jobs available but people are willing less to work. labor force participation rate has gone down. This has mainly happened due to four factors: (1) Food stamps, (2) Social Security disability payments, (3) Pell grants, (4) Extended unemployment benefits

Food stamps: The eligible people in different States are first identified. These eligible people receive cash benefit on electronic benefit transfer (EBT) card. This card can be used to purchase day to day goods in local stores but not demerit goods like Tobacco.

This means that if my income is below a particular limit then government in that state will support me with cash benefit on the card. Hence I can fulfill my day to day needs. Hence, even when I have less income I can maintain average living standard. People may not find incentives to upgrade skills and get better jobs. It is like a free rider.