Bryan Caplan  

Policy Implications of the Marriage Premium

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In the comments, Thomas Boyle fears that the marriage premium could become an excuse for bad policies:

Years ago we heard that homeownership was positively associated with all sorts of socially desirable outcomes. Now we know that public policy to promote homeownership had some pretty catastrophic outcomes, that fell most heavily on those people the policy was supposed to help.

We've heard that college attendance was positively associated with all sorts of socially desirable outcomes. After decades of public policy to promote college attendance, we are seeing some pretty catastrophic outcomes, that fall most heavily on those people the policy was supposed to help.

In the name of all that's good and holy, don't push for any more public policy favoring marriage. If it has good outcomes, people can respond to that incentive. It's the basic premise of economics. When public policy distorts the natural benefits, the overall outcomes get worse - and, we note, the bad outcomes tend to fall most heavily on those who can least afford it.

My reaction:

1. As my earliest post on the marriage premium acknowledged, you could say, "The marriage premium is comparable to the college premium, so public policy should promote both."  But you could just as easily say, "The college premium is comparable to the marriage premium, so public policy should promote neither."  I could be wrong, but I'm gambling that if people accept the parallels between college and marriage, they'll lean in the latter desirable direction. 

2. If government currently played zero role in marriage, Boyle's fears would be easier to understand.  But government currently does a great deal to discourage marriage.  As a result, acceptance of the marriage premium could easily lead less government action rather than more.  Repealing the marriage penalty in the tax code is an obvious place to start, but only scratches the surface.  After all, what is the welfare state if not a massive, multi-pronged reduction in the incentive to marry and stay married?  Accepting the reality of the marriage premium won't convince many people to abolish the welfare state, but it would probably modestly tip public opinion in that direction.

3. If everyone correctly estimates the effect of marriage on their lives, then it's admittedly hard to argue that the welfare state hurts people giving them incentives to stay single.  If you point out, "The welfare state reduces your chance of capturing the benefits of marriage," people could curtly respond, "Duh.  I already factored that into my decision."  But as Scott Beaulier and I argue in "Behavioral Economics and Perverse Effects of the Welfare State," this degree of rationality and self-control is rare.  As a result, paying people for imprudence can indeed make them worse off:
A simple numerical example can illustrate the link between helping the poor and harming them. Suppose that in the absence of government assistance, the true net benefit of having a child out-of-wedlock is -$25,000, but a teenage girl with self-serving bias believes it is only -$5000. Since she still sees the net benefits as negative she chooses to wait. But suppose the government offers $10,000 in assistance to unwed mothers. Then the perceived benefits rise to $5000, the teenage girl opts to have the baby, and ex post experiences a net benefit of -$25,000 + $10,000 = -$15,000.
4. Doesn't human irrationality argue for full-blown paternalism?  It depends.  As Beaulier and I explain:
[T]he behavioral perspective definitely argues for different government policies, but not necessarily for less government. There is however a contingent factor that pushes in favor of laissez-faire: the fixed costs of government programs. As long as any form of intervention - whether positive (e.g. giving the poor money) or negative (e.g. forbidding vagrancy) - has fixed costs, there exists a discrete range over which laissez-faire is optimal (Figure 3). If, ignoring fixed costs, the optimal policy involves only mild government action, then taking fixed costs into account, the optimal policy is no government action at
all.
In graphical form:


behwel.jpg
Could the marriage premium become the intellectual underpinning for a giant sub-prime marriage crisis?  Anything's possible.  The more likely scenario, though, is that understanding the marriage premium will make people a little less sure that government should push college, and a little more sure that government should avoid policies that discourage marriage.  Nothing dramatic, but nothing to fear.


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COMMENTS (14 to date)
John Thacker writes:

The marriage penalty in the income tax currently only exists for high income dual income couples making similar amounts. The Bush tax cuts eliminated it for the lower brackets, making it so that a lot of taxpayers get a marriage benefit (those with disparate incomes).

I don't think that reforming the marriage penalty at the high end would encourage marriage all that much, considering that the upper middle class seems to be marrying and staying married at a high rate (higher than in the 80s), even if delaying marriage.

The real marriage penalty is, as you allude, in the way a lot of welfare programs work.

Doug writes:

If you think the widespread acceptance of the marriage premium will dismantle or even put a dent in the welfare state, you have no idea what you're up against.

Let's start with the biggest obstacle. Do you think the marriage premium is just blatantly ignored despite the evidence, because of some oversight on the part of the intelligentsia?

Might this just not just coincide with what is the most taboo subject in American discourse? What major sub-group of people marry at far lower rates, even controlling for education and socio-economic status?

Start talking about marriage rates, especially in conjunction with welfare utilization, and some very unpleasant truths rise to the surface very quickly. Even if you never mention race once, if your point gets any traction, the NYT, et al. will quickly label you "literally Hitler".

Suggesting that the welfare state be re-optimized to encourage, or at least discourage less, marriage will assuredly transfer resources along the demographic gradient of urban black women to blue collar white men.

This is clearly the reason that the, uh more socially aware, economists outside of George Mason don't touch this issue with a 10 foot pole. Or if they do, like Justin Wolfers, they come up with some ad-hoc non-sense about why we should ignore it.

Consider the people who build and maintain the welfare state. From the government bureaucrats who's fiefdoms are built on how much human chattel they can amass. To the left-wing sociology professors who's tenure depends on rationalizing how the squalor of the lumpen-proletariat isn't one iota their fault. To the Pravda reporters who can't go a week without reminding us that despite spending a third of GDP on transfer payments, somehow, somewhere, there's a poor starving, worm-ridden crack baby because... greedy Republicans.

Discouraging marriage is most definitely a feature, not a bug to these people. The less family ties that exist, the more the welfare state is necessary. And the more power and lucre they'll be able to mop up for themselves. Convincing them that marriage raises lifetime earnings by 20% will no more change their mind then convincing a lion that antelope meat is actually surprisingly high in cholesterol.

8 writes:

You also get to take on the feminists. Divorce, alimony and child custody all lean heavily in favor of women.

Glen Smith writes:

You can make a rational argument that formal education is primarily about human capital development. You cannot even make a rational argument that marriage is primarily about human capital development.

Thomas Boyle writes:

I'm flattered by the direct response!

In turn, on your 1st point, I think you're saying we're on the same page.

On your 2nd point, what John Thacker (12:49am) said.

On your 3rd point, I agree that, absent evident externalities, distorting the incentives is unhelpful. Rather than try to estimate "true costs", though, I'd think more in terms of confusing/misleading people. The mortgage that emphasizes the teaser rate would be my mental parallel, here.

I agree that it's hard to argue that the government is promoting marriage, on balance. It has tax benefits for married couples with one income (incentive), but tax costs for two incomes (disincentive - either to marriage, or to the second income); it offers wealth transfer and inheritance benefits for married couples (incentive); it imposes joint liability on married couples (thus, parents who are married are committing the financial equivalent of skydiving tandem - it's arguably rather irresponsible); family law and the associated processes are something no-one with human capital should ever let into their lives (disincentive: family law, conscription, and criminal conviction are the three de facto exceptions to the 13th amendment); welfare advantages are greater for single parents and/or people who live in smaller households (disincentive)... A lot of distortion going on.

But, here's the thing: why does the law recognize marriage at all? Why does it limit it to two people (and, under current federal law, to a man and a woman) - why not bigger groups who might benefit from these provisions (or might if they were coherent)? Clearly there's some notion of a public policy goal being promoted - but what?

B.B. writes:

Society can recognize the marriage premium as real and not an artifact and promote marriage. What has that got to do with government? Society is not the government, and government is not society.

There are many 'thinkers' out there is schools, churches, entertainment, media, books. Their attitudes and beliefs about marriage matter a lot for general society. When the elite dismiss marriage as pointless or an obstacle to fulfilment, those ideas "trickle down" to the lower classes, and they have.

An effort by serious thinkers to show that marriage in and of itself has positive consequences for general well being could change the thinking in society and so change behavior for everyone's benefit.

Thinking and talking, like you all are doing, doesn't need some government policy.

Tracy W writes:

Doesn't human irrationality argue for full-blown paternalism?

Only if you have someone non-human in mind to be the paternalists.

Doug writes:

"You cannot even make a rational argument that marriage is primarily about human capital development."

Anyone who cannot see how the marriage premium is causal has probably never been married. Having a spouse and children at home to feed, clothe and shelter is like a kick in the butt every morning.

It's a type of motivation that is simply not available to an unattached single. Someone who's marginal income is going to buying his kids braces or his baby new clothes is going to work a hell of a lot harder to get a promotion than when the extra money would be going to buy beer or the new Call of Duty.

Thomas Boyle writes:

Doug,

This motivation is a motivation to someone like yourself, who is motivated by putting braces on his kids or buying new clothes for the baby, i.e., the sort of person who values married life.

To someone who does not, family may simply turn out to be a very high marginal tax rate. Once the new Call of Duty - or anything else such a person may want - is rendered unattainable by the fact that a spouse and children consume all incremental income, you may see a very different behavior.

Mark V Anderson writes:

I think the legal benefits of marriage are wide and varied. That's why the gays want so much to do it. As was pointed out, the tax code is pretty neutral on marriage; it just depends on your particular circumstances.

But Bryan, I think you are changing the subject here. Your earlier post concerned the marriage premium in general. Any statistics on this will be talking about the middle 80%, just because that's how statistics work. But now you are talking about marriage for those who would otherwise receive welfare. Society definitely would benefit from more marriage at that level, since it is scarce there and would likely result in more two parent households and better guidance of poor kids. Your original discussion of the marriage premium is totally unrelated to this issue.

Glen S. McGhee writes:

Isn't Thomas giving us examples that confirm Goodhart's Law ?--
"Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes" (Goodhart's original 1975 formulation).

Know writes:

Where does having kids fit in? Is going to college, getting married, having kids, and staying married an economic maximization strategy? Would love to see the empirical evidence.

Someone from the other side writes:

Doug: That still is not human capital development. Kicking people to work harder is different than making them more productive as clearly there is more input required to deliver more when you work harder rather than smarter.

Not planning to get married, in any case. I prefer to amass and waste my money all by myself. That does not really stop me from working 65h+ hour weeks, though (it however does clearly help in enabling me to take 3 months vacation per year).

Jess writes:

Marriage is only valuable because we as a society build it up to be.

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