Class Notes: School desegregation effects, foster care reduces crime, and more

This week in Class Notes:

• Foster care placement directly reduces crime among boys by encouraging birth parents to improve the home environment.
• Court-ordered desegregation had positive long-term impacts on the educational and labor market outcomes for Black Americans in the South
• In Uganda, fathers spend less overall on their daughters than their sons, unlike mothers who invest more in their daughters’ human capital.
• This week’s top chart shows that urban living exacts an economic penalty for non-college workers, largely because of high housing costs.
• The Washington Post Editorial Board argues that cancelling student debt will primarily benefit white-collar professionals.
• Check out our new piece about the factors of nominal wage growth, and the need for policies to spur real wage growth.
• For your calendar: Virtual events on economics and children, addressing the wealth gap, the impacts of inflation on low and middle class families, and the labor market for older workers.

Foster care placement directly reduces crime by encouraging birth parents to make improvements at home

Many studies have shown a positive relationship between foster care placement and adult crime, but these results are likely largely driven by selection bias and so do not imply causation. In Michigan, though, the process of foster placement is typically determined by a randomly-assigned welfare investigator. This allows E. Jason Baron and Max Gross to compare the outcomes of children who by chance were assigned a strict investigator and placed in foster care to those who were not placed because they got a lenient investigator. By focusing on children where investigators might have disagreed about placement, their causal estimates indicate that foster placement decreases the likelihood of being arrested by age 19 by 25 percentage points, which may be attributed to improvements in children’s safety, academic, and behavioral outcomes. The result is driven entirely by boys. The most likely mechanism for the reduction in crime is that birth parents make improvements for the 1.5 years (on average) that their children are in foster care. These findings are especially important given public policy initiatives to reduce the proportion of children being place in foster care.

Court-ordered desegregation had positive long-term impacts on the educational and labor market outcomes of Southern Black Americans 

Court-ordered desegregation of schools from the 1960s to the 1980s attempted to reduce racial inequality in educational access. Did it work? With a rich administrative dataset from census and American Community Survey samples, Garrett Anstreicher and co-authors compare the impact of changes in policy on students who were younger at the time of the order (and therefore exposed to more integration) to those who were older. They find that compared to being age 17 at the time of the order, being born five years prior to the order increased the probability of high school completion for Black students by 15 percentage points and increased total schooling by a year. These improvements did not consistently translate into higher rates of post-secondary schooling for Black students, but earlier exposure to desegregation did lead to stronger labor force attachment, lower rates of poverty and public assistance receipt, and 30% higher annual wage earnings. These results were concentrated in the South, with negligible effects in the North.

In Uganda, fathers spend less overall on their daughters than their sons, unlike mothers who invest more in their daughters’ human capital. 

Mothers and fathers might spend differently on their sons and daughters for two reasons. One might simply be a preference decision, where fathers care more about their sons than their daughters, while mothers do not, for example. Another might be that mothers are more likely to depend on their daughters for care as they age than their sons, which may lead them to spend more on daughters early on. To test these hypotheses, Rebecca Dizon-Ross and Seema Jayachandran examine household data in Uganda, and find that fathers typically prefer to spend less on daughters than sons, both on human capital goods and non-human-capital goods, while there is no difference for mothers. The results also reflect a degree of same-gender favoritism of parents, which suggests that as women gain more say in household decisions, household spending for daughters may increase, producing more gender equality in the future.

Top chart: Urban living exacts an economic penalty for non-college workers, largely because of high housing costs 

This chart shows how the urban wage premium, after housing costs, has become higher for those with some college education. For workers with a high school diploma or less the premium grew more slowly from 1970 to 2000 and by 2010 had sharply reversed. Less educated workers now face an economic penalty for being in an urban area, once housing costs are taken into account.

Source: American Enterprise Institute

Choice opinion: Cancelling student debt will primarily benefit white-collar professionals

“If union leaders are sincere in their talk about reversing the labor movement’s decades-long decline, they need to encourage the unionization bug to jump from Starbucks and Amazon to McDonald’s, Chipotle, Burger King, Walmart, Target, and elsewhere. There’s far too much inertia among labor officialdom—the folks who have tens of millions of dollars in resources—and not enough vision on how to optimize this moment,” writes Steven Greenhouse.

Self-promotion: Nominal wages have grown in our current tight labor market, but we need policies to spur real wage growth

Increasing nominal wages reflect a tight labor market, which in turn is driven by declining labor force participation among older workers and an increase in quits among low-wage workers. However, with rising inflation, it is important to generate more real wage growth for workers, especially since it has been stagnant in low-wage industries for decades. Our colleague Harry Holzer argues that one way to achieve higher real wages while restraining inflation is “to increase labor force participation (with family friendly policies) and education/training to improve worker productivity and wages over time.” Policies such as sector-based training programs and transparency about job openings and wages can also be useful in increasing wages.

For your calendar: Virtual events on economics and children, addressing the wealth gap, the impacts of inflation on low- and middle-class families, and the labor market for older workers

Program on Children Meeting, Spring 2022

NBER

May 12-13, 2022

District Dialogues: Addressing the Wealth Gap

Richmond Fed

Thursday, May 12, 2022 7:00 PM – 8:30 PM EDT

Inflation and Its Consequences for Families with Low- and Moderate-Incomes

Urban Institute

Thursday, May 19, 2022 4:00 PM – 5:15 PM EDT

The Labor Market for Older Workers, Spring 2022

NBER

May 19-20, 2022