Intergenerational Poverty in America

Adriana Lleras-Muney
Economics Department
Office Hours: Tuesdays 1-3pm
Bunche 9373

Intergenerational Poverty in America

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Evaluating the effects of the minimum wage on adults and children.

The minimum wage remains a controversial policy but many countries and many states have minimum wage legislation in place and are continuously revising.

Your job: You are working as a consultant for a state senator who is thinking about increasing the minimum wage in California. The senator asks you to provide objective empirical evidence on what the previous increases in the CA minimum wage have done for children (for a history of increases in the minimum wage in CA please see https://www.dir.ca.gov/iwc/minimumwagehistory.htm). To do this you will investigate how the outcomes of adults and children change after minimum wages are implemented. You will be careful to think about which families will be impacted by minimum wages and which families are not.

You will write a three-page memo evaluating the effects of the minimum wages on various outcomes using data from the ACS available in the IPUMS website. If possible use figures to illustrate your findings. Do not turn in a systematic answer to the questions below, but a report summarizing your findings.

The questions below only are meant to provide you a rough template. DO NOT turn in point-by-point answers to these questions. Your grade will be determined by the overall quality of the memo. The clarity and organization of your writing as well as the technical analysis will be weighted equally.

Your memo will be 3 pages long at most (1-inch margins, use single spacing at 12-point font), excluding references and appendices (back up materials). All facts should either be computed by your group or be accompanied by appropriate citations.
Although long this report gives you an idea of what the writing style should be (https://lao.ca.gov/reports/2018/3903/sugary-drink-tax-112018.pdf)

I-Data
1-Who to study?
Do you want data on everyone living in CA?
Think about whether or not to extract data from other states. Are there any states that would serve as useful comparisons for CA? which ones?
Think about which groups in CA are not affected by minimum wages. They ca serve as useful comparisons. Who might you use?
Be careful about the sample size. Take the largest sample possible but do not crash your computer!
2-Which time period? Take as many years as possible: there are several changes in the minimum wage and it will be useful to study what happened over time.
3-What variables to look at? Extract information on any outcomes that are of interest. Think carefully about which variables to look at and only include a small subset. For adults make sure to include wages and employment. For children you can investigate school enrollment, whether or not they live in a household considered poor, whether they have insurance, and any other outcome of interest that is in the data.
Make sure that the outcomes that you are interested in studying can be compared overtime. The underlying survey questions must be either identical or similar enough that we can create similar variables across the years.

II-Analysis
1-Basic trends. Start by looking at simple time series: what is the evolution of adult and children’s outcomes? Does anything seem to happen right after the minimum wage changes?
2-Explore heterogeneity. Are these patterns the same for those at the bottom and at the top of the income distribution? For people working in different industries and occupations? Try to isolate children whose parents work in industries, occupations or types of jobs that are most likely to be affected.
3- Did the outcomes of families likely affected by the minimum wage change after the minimum wages was implemented? Do they also change for families that are likely not affected by the minimum wage? What do you learn from this comparison? (you might be familiar with this approach which is known as a difference in difference analysis.)

III-Check alternative sources
Make sure that you go online and see what other studies have said about the effect of the minimum wage increases on families in CA or elsewhere. If your data and analysis are different, try to understand the source of the difference. Make sure to cite these studies in your memo.

IV-Conclusion
What can we conclude on the basis of this analysis about the effect of the minimum wage changes on intergenerational mobility? Discuss. Make sure to state the limitations of what you are doing. What other data or information would you like to have to inform your views?

Grading
Late assignments get a grade of 0
This is a data assignment. Original figures, statistics and regression analysis are expected. Using figures and results from other people’s work is NOT acceptable.
Points will be deducted for not following instructions
Follow formatting requirements
Make sure you include citations when relevant
Figures and tables should include labels, have titles and be self-explanatory.
Unformatted computer output is not acceptable.
Reading of the existing literature on the topic is strongly encouraged.