BIO

Julia is a freshman studying cell and molecular neuroscience on a pre-med track from Colchester, VT. While she is a STEM major, Julia is interested in other fields, particularly in regards to societal divides and opportunity disparities. She is an EMT and hopes to continue on to a career in emergency medicine after her time her at FSU!

Turning Down Higher Wages? A Lab-in-Field Experiment on Tax Code Notches and Labor Market Decisions

Abstract

Mani et al. (2013) find that poverty negatively affects cognitive function across different populations. In this paper, we extend their insights into a labor market environment by conducting a lab-in-field experiment in which participants from a student population choose a wage each round and complete a known number of real-effort tasks. Similar to Mani et al., we use an easy and hard prime and recruit subjects of both low and high income as measured by their Pell Grant eligibility to test whether poverty affects optimal labor market decision making. Optimal decision making is assessed by participants’ ability to maximize their earnings by weighing the loss of an experimenter benefit verses higher wages.
To supplement this analysis, we collect a variety of other measures from participants including executive function measurements of inhibitory control as well as demographic and other background information related to labor market exposure and poverty. We also conduct interviews with a subset of randomly selected participants to articulate their strategy during the game and how it relates to their own experiences navigating the intersection between labor markets and public assistance.
This research has important implications for the economic mobility of thousands of low-income Americans. Impoverished people seek to advance economically but fear losing public assistance, thus relinquishing opportunities for long-term growth. Ultimately, our research may encourage a simplification of our labor and benefits systems, as complexity only benefits those with the resources and cognitive capacity to deal with it, thus excluding already disadvantaged low-income individuals.

Keywords: Poverty, cognitive function