For Immediate Release July 16, 1997
From:
Dennis Brown
219-631-7367
[email protected]
Government social welfare programs have helped create a less secure labor environment for the typical American worker by inadvertently harming family values, according to a new study by two University of Notre Dame economists.
In ìThe Market Value of Family Values,î Ralph Chami and Connel Fullenkamp, assistant professors of finance and business economics, describe how government programs often work against parents' attempts to instill traditional values such as work ethic in their children. They argue that the labor market reacts to a decline in personal values by increasing layoffs and decreasing wages for many workers, and they conclude that government programs that interfere with the transmission of family values should be redesigned.
The study starts with an examination of family income transfers in promoting values. Familial support, which includes gifts from parents to children throughout their lives as well as death bequests, totals hundreds of billions of dollars annually and commonly is given for one of two reasons ó the benefactorÃs altruistic desire to make the recipient happy, or a desire to impart values or behaviors to the recipient. Sociological and psychological research indicates that when given for altruistic reasons only, gifts often have a disincentive effect that leads recipients to expend less effort to work hard or behave appropriately. But parents also use their gifts to reward hard work and good behavior. These incentives slowly transmit the parents' values to the child over the course of growing up.
The authors note that government social programs typically serve as a ìsafety netî to protect recipients from hardship or misfortune. ìIn this respect,î they write, ìgovernment transfers function very much like transfers from altruistic parents to their children: they are compensatory in nature." Public transfers therefore produce the same disincentive effects on young people's behavior and values as altruistic family transfers. Government social programs, because of their size and availability, can undo what parents try to accomplish through their own transfers.
The result, they write, is a decline in values, such a work ethic, that the labor market prizes. As a consequence, they continue, the market has attempted to ìreimpose ... discipline and realign incentives through layoffs and contracts that provide less security for workers.î Ultimately, they write, "...compensatory government transfers may have the unintended effect of lowering" the well-being of recipients.
The study appears in the current issue of the Cato Journal. The authors presented their findings at the Western Economics Association, July 9-13 in Seattle. They currently are working on a follow-up study that examines how government social programs can be redesigned to reinforce family values and improve conditions in the labor market.
Chami earned his masterÃs and doctoral degrees from Johns Hopkins University and taught there for three years. He was a consultant in the European department of the World Bank prior to joining the Notre Dame faculty in 1991. He received a 1995 Amoco Teaching Award for outstanding undergraduate instruction at Notre Dame. Fullenkamp holds masterÃs and doctoral degrees from Harvard University, where he served as a research assistant and teaching fellow for three years. He was selected as a Truman Scholar by the Harry S. Truman Scholarship Foundation in 1985 and came to Notre Dame in 1992.
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