Policy Implications of the Marriage Premium
By Bryan Caplan
In the comments, Thomas Boyle fears that the marriage premium could become an excuse for bad policies:
Years ago we heard that homeownership was positively
associated with all sorts of socially desirable outcomes. Now we know
that public policy to promote homeownership had some pretty catastrophic
outcomes, that fell most heavily on those people the policy was
supposed to help.
We’ve heard that college attendance was positively associated with
all sorts of socially desirable outcomes. After decades of public policy
to promote college attendance, we are seeing some pretty catastrophic
outcomes, that fall most heavily on those people the policy was supposed
In the name of all that’s good and holy, don’t push for any more
public policy favoring marriage. If it has good outcomes, people can
respond to that incentive. It’s the basic premise of economics. When
public policy distorts the natural benefits, the overall outcomes get
worse – and, we note, the bad outcomes tend to fall most heavily on
those who can least afford it.
1. As my earliest post on the marriage premium acknowledged, you could say, “The marriage premium is comparable to the college premium, so public policy should promote both.” But you could just as easily say, “The college premium is comparable to the marriage premium, so public policy should promote neither.” I could be wrong, but I’m gambling that if people accept the parallels between college and marriage, they’ll lean in the latter desirable direction.
2. If government currently played zero role in marriage, Boyle’s fears would be easier to understand. But government currently does a great deal to discourage marriage. As a result, acceptance of the marriage premium could easily lead less government action rather than more. Repealing the marriage penalty in the tax code is an obvious place to start, but only scratches the surface. After all, what is the welfare state if not a massive, multi-pronged reduction in the incentive to marry and stay married? Accepting the reality of the marriage premium won’t convince many people to abolish the welfare state, but it would probably modestly tip public opinion in that direction.
3. If everyone correctly estimates the effect of marriage on their lives, then it’s admittedly hard to argue that the welfare state hurts people giving them incentives to stay single. If you point out, “The welfare state reduces your chance of capturing the benefits of marriage,” people could curtly respond, “Duh. I already factored that into my decision.” But as Scott Beaulier and I argue in “Behavioral Economics and Perverse Effects of the Welfare State,” this degree of rationality and self-control is rare. As a result, paying people for imprudence can indeed make them worse off:
A simple numerical example can illustrate the link between helping the poor and harming them. Suppose that in the absence of government assistance, the true net benefit of having a child out-of-wedlock is -$25,000, but a teenage girl with self-serving bias believes it is only -$5000. Since she still sees the net benefits as negative she chooses to wait. But suppose the government offers $10,000 in assistance to unwed mothers. Then the perceived benefits rise to $5000, the teenage girl opts to have the baby, and ex post experiences a net benefit of -$25,000 + $10,000 = -$15,000.
4. Doesn’t human irrationality argue for full-blown paternalism? It depends. As Beaulier and I explain:
[T]he behavioral perspective definitely argues for different government policies, but not necessarily for less government. There is however a contingent factor that pushes in favor of laissez-faire: the fixed costs of government programs. As long as any form of intervention – whether positive (e.g. giving the poor money) or negative (e.g. forbidding vagrancy) – has fixed costs, there exists a discrete range over which laissez-faire is optimal (Figure 3). If, ignoring fixed costs, the optimal policy involves only mild government action, then taking fixed costs into account, the optimal policy is no government action at
In graphical form:
Could the marriage premium become the intellectual underpinning for a giant sub-prime marriage crisis? Anything’s possible. The more likely scenario, though, is that understanding the marriage premium will make people a little less sure that government should push college, and a little more sure that government should avoid policies that discourage marriage. Nothing dramatic, but nothing to fear.