The Labor-Supply Response of the Family

Abstract

Under income maintenance programs such as the negative income tax that has been the subject of the New Jersey-Pennsylvania experiment, cash benefits are determined on the basis of family income and family size. It follows, therefore, that the labor-supply response of the family as a whole, as well as the labor-supply response of individual family members, should be a focus of analysis. Recent theoretical literature in economics has emphasized the simultaneity of family decisions about work effort. Secondary workers are likely to make decisions about their level of work effort in light of the earnings opportunities of the primary earner, and vice versa. And this interdependence of work decisions is likely to be reinforced by the rules of income maintenance programs like those tested in the experiment.l Thus, this article is concerned with family labor-supply response.2 The obvious measure to use in such analysis is earnings. An earnings measure gives a straightforward way of weighting the importance of individual family members to get the total family response. It also provides the most direct translation of the family response into national cost implications. Here, however, an additional measure is used-family hours worked. There are two reasons for reporting an analysis of total family hours as well as earnings. First, there is reason to suspect the reliability of earnings differences reported between the experimental and control groups. The data are consistent with the hypothesis that initially some experimentals and some controls reported net rather than the requested gross earnings, but that the experimentals learned more rapidly than did the controls that the gross earnings were to be reported.