Saul Schwartz

AFDC and the Formation of Subfamilies

This paper analyzes the relationship between AFDC benefits and a single mothers propensity to reside in a subfamily-i.e., within another family rather than in her own independent household. We find that some states pay lower benefits to mothers living in subfamilies. In those states, a single mother may forego a substantial amount of AFDC benefits if she chooses to reside in a subfamily rather than establish her own household. Using data from the 1984 Current Population Survey, we address the question of whether differences in AFDC benefits affect the probability that a mother will reside in a subfamily. We find that the lower benefits paid to subfamilies have discernible but small effects, and that the overall level of AFDC benefits has no effect.

The Relative Earnings of Vietnam and Korean-Era Veterans

Using Current Population Survey data for 1967 and 1979, this paper compares the earnings of Vietnam veterans to those of Korean veterans (in both cases, relative to nonveterans) at similar points in their work lives—twelve to sixteen years after their discharge. In both 1967 and 1979, the unadjusted average annual earnings of veterans and nonveterans were similar. But an analysis that controls for such factors as education, age, race, and marital status shows that Vietnam veterans were worse off than their nonveteran contemporaries in that their rate of return per year of education was much lower. By contrast, Korean veterans were economically indistinguishable from nonveterans.

Student loans in Canada: an analysis of borrowing and repayment

Abstract This paper reports the results of an econometric analysis of the borrowing and repayment patterns of Canadian bachelors level university graduates, using data from the National Graduates Survey (NGS) of the class of 1990. After confirming the intuition that the level of borrowing is determined by supply-side rather than by demand-side factors, we analyze the repayment experience of the graduates. We calculate that the fraction of graduates who reported problems repaying their student loans was, overall, quite small, falling in the 7–8 percent range. Among both men and women, graduates with low current earnings and those in fields likely to have low lifetime earnings reported significantly greater problems with repayment. Holding other variables constant, women reported more difficulty in repayment than men. Overall, it would seem that women borrowed only slightly less than men, repaid as quickly as men (despite lower earnings), but reported having significantly more difficulty in repayment.

Merit aid to college students

Abstract Merit scholarships are an increasingly popular institutional attempt to maintain both the number and the quality of students in the face of declining enrollments. This paper argues that merit aid is a bad idea, both for the society as a whole and for individual institutions. From societys point of view, merit aid will simply give financial aid dollars to students who would have gone to college anyway and will take those dollars away from needy students who might then not be able to attend. From the institutional perspective, the prospect of attracting more able students is empirically small, and to the extent that it exists, short-lived.

The Impact of the Self-Sufficiency Project on the Employment Behaviour of Former Welfare Recipients

The Self-Sufficiency Project (SSP) was a Canadian research and demonstration project that attempted to “make work pay” for long-term income assistance (IA) recipients by supplementing their earnings. The long-term goal of SSP was to get lone parents permanently off IA and into the paid labour force. The purpose of this study is to evaluate the impact of SSP on employment and non-employment durations and its overall effect on employment rates. We focus on generating estimates of the “effect of the treatment on the treated” (TOT) where the “treated” are those in the program group who qualified for the earnings supplement by finding a full-time job during the qualifying period (a group we call the “take-up” group). To obtain a consistent estimate of TOT we follow the work of Ham and LaLonde (1996) and Eberwein, Ham and Lalonde (1997) in estimating a joint model of non-employment and employment durations that controls for unobserved heterogeneity and non-random selection into work and into the take-up group. We find evidence of significant impacts of SSP on non-employment and employment durations. Simulation results show a TOT on the employment rate at 52 months after baseline of approximately 4 percentage points; a 10 percent increase compared to the control group. Further, this estimate of TOT using the results from our econometric model is 5 percentage points higher than the estimate from the raw data.

Earnings Capacity and the Trend in Inequality among Black Men

The major purpose of this article is to estimate the potential earnings of black men supposing that they were to work full time, full year-that is, at their earnings capacity-at two widely separated points in time. The effect of changes in earnings capacity on changes in the distribution of annual earnings is then computed. In both 1967 and 1979, roughly three-quarters of the inequality in observed earnings is due to differences in earnings capacity. But about two-thirds of the change in inequality for black men is due to changes in employment status, while the remaining one-third is due to changes in earnings capacity.

Bankruptcy for the Poor

For two reasons, the conventional wisdom is that the poor are not heavy users of the insolvency system. First, creditors are reluctant to extend credit to the poor because the risks of non-payment are high. Not having been able to borrow, the poor are not over-indebted and are therefore not in need of bankruptcy protection. Second, some poor debtors - lone parents on social assistance for example - are judgment-proof meaning that judgments for money recoveries obtained by their creditors are of no effect because these debtors do not have sufficient non-exempt property or income to satisfy the judgment. Developments in two areas may challenge the conventional view. Undoubtedly, credit is now widely available across the spectrum of income groups. Even a short-term, low-wage job can bring a credit card to the doorstep of the poor and the slogan no credit, no problem testifies to the availability of retail credit. In addition, we now know that poverty is often a temporary state for many Canadians, with many moving in and out of low-income. Accordingly, the judgment-proof state is not a permanent condition, but a temporary status for many. While this may be welcome news in some respects, it means that debts can be accumulated during periods of relative economic well-being only to go unpaid when a job ends or when hard times return. These developments suggest the possibility that some of those who are poor at any point in time are in fact in need of bankruptcy protection. They have debts that they are unable to pay and little likelihood of being able to repay in the near future. We begin the paper by presenting evidence from the 1999 Survey of Financial Security on indebtedness among families in the lower income deciles. We then turn to the main question: should the Canadian bankruptcy process be more readily available to poor debtors. We draw on two sources to shed light on this question: a) a comparative analysis (considering England and Wales, the United States, Australia and New Zealand) and b) a series of semi-structured interviews with Canadian bankruptcy trustees and other insolvency professionals.

Does Canada Need Trade Adjustment Assistance

Trade adjustment assistance (TAA) is government aid to those affected by trade agreements. We review the history of TAA in Canada and ask whether Canada needs to reintroduce it in response to the recent intensification of trade negotiations. In light of the compensation offered by the federal government in connection with the Canada–European Union Comprehensive Economic and Trade Agreement (CETA), we examine how TAA fits in with the evolution of Canadian federalism in the trade policy area. Based in part on interviews with provincial trade negotiators, we conclude, first, that the compensation is an outcome of Canadian federalism. Second, we argue that while there is no reason to reintroduce a federal TAA program for workers, compensation for provinces is necessary to facilitate their cooperation with the implementation of trade treaty provisions. Third, we suggest that a more transparent rationale for such compensation would be superior to the ad hoc compensation observed in CETA.

Is Postsecondary Education Affordable

T he evolution of higher education from a privilege for the elite to an economic and social necessity for broad segments of the population has created financing challenges, along with new opportunities, for students and their families. Governments that were able to provide free or low-priced access to universities for the select few have found it necessary to charge rising levels of tuition, even as less-affluent citizens aspire to enroll. In a number of countries—including Canada, Chile, and England—students have taken to the streets to protest tuition policies. Students are less militant in the United States; but there, as elsewhere, rising college prices and stagnating incomes have led to the widespread perception that postsecondary education is “unaffordable” for more and more people. Yet, it is not obvious what “unaffordable” means. What price is relevant—the published price of postsecondary study, the price people actually pay, or the price people should be expected to pay? Efforts to increase educational opportunity can be hindered if policymakers do not have a clear idea of the meaning of an “affordable” or “unaffordable” education.