Dear Economist

A rat for an in-law

Dear Economist,

My son-in-law has been unemployed for a couple of months now. As far as I can make out, he’s enjoying a PlayStation lifestyle while being supported by the state and by my daughter, who has had to find a temporary job. What concerns me is that he’ll get used to this. Should I tell my daughter to apply pressure by quitting her job?

Yours sincerely,

Godfrey Pickens, Bedfordshire

Dear Mr Pickens,

The issue here is whether your son-in-law’s preferences will change over time – will he “get used” to a life of leisure, and so be less likely to work?

There are two competing views here. One is that he will become hooked on leisure (the “welfare trap” hypothesis) and will work less in future, even if his wife quits her job. The other, equally plausible in theory, is that he will become addicted to the extra income provided by his wife’s new job, and that if she quits he will go on to work harder than before.

Such competing hypotheses have been hard to test in the past. But economist John Kagel has succeeded in running a series of experiments that shed light on the matter. Kagel first forces his subjects to work for their income. Then, for a while, he provides them a substantial unearned income – a kind of welfare, if you will.

Unsurprisingly, they slack off at once. Later, he withdraws the welfare and observes whether they work more or less than before welfare had ever been paid. The answer: it makes very little difference.

This implies that your wife should keep working for a while and see what happens. No harm will result. The only question for you is whether Kagel’s findings apply to your son-in-law. Kagel’s subjects were rats. Do you think the parallel with your son-in-law is close enough?

Also published at ft.com

6th of August, 2005Dear Economist • Comments off