From MIT Professor Philip Greenspun's
review of University of Chicago economist Casey Mulligan's book,
The Redistribution Recession: How Labor Market Distortions Contracted the Economy.
If you live in an expensive city and are acquainted with families collecting welfare the book confirms what you might have noticed, i.e., that it would be irrational for the adults in the family to enter the workforce. Here in Cambridge, Massachusetts, for example, the welfare families that I have spent the most time with occupy apartments with a market rent of about $4,500 per month ($54,000 per year in post-tax income) in a building with a swimming pool, two gyms, and a variety of other luxurious facilities. Their health care is free through some combination of Medicaid, Obamacare, and a city-run health system. Their food is mostly free through food stamps. They can get cash from TANF and some similar programs. They would need to earn at least $160,000 per year pre-tax to obtain the same standard of living at market prices. However, even if someone were to offer the adults in the family a $160,000 per year job it would not be rational for them to accept it. If they were ever to lose that job it would take many years of paperwork, bureaucracy, and waiting lists to get back to their current welfare lifestyle....
With 363 pages of analysis and mathematical models, Mulligan shows that essentially all of what we have observed since 2009 can be explained by the following:
many able-bodied Americans will not work if they have a reasonably attractive alternative
the federal government, starting in 2009, made not working much more financially rewarding for tens of millions of working-age adults . . .
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