I recently asked my economics class whether they thought college students should use food stamps. For many of them, this is not just a hypothetical question. An informal survey revealed that approximately 1 in 5 students were currently using them. Many others appeared to be eligible, but had not signed up for the program for one reason or another. Some were simply unaware of their eligibility, and at least one student was discouraged by the 20 page application. But many of them reported that choice was based on their personal values. This led to a lively discussion in which students expressed a wide variety of opinions. Most arguments expressed by the students could be classified as on of the following 4 types:
1. The need argument: College is expensive, and low income students need all the help they can get.
2. The opportunist argument: It is irrational to turn down free money.
3. The individual responsibility argument: Students can and should provide for their own needs.
4. The net donor argument: Since college students expect to have higher than average lifetime earnings, they expect to pay more in taxes over their lifetime than they receive in benefits. Therefore, they should take advantage of every government program for which they are eligible.
The need argument is not persuasive. Students are not “needy” in any real sense; they just have a cash flow problem. According the U.S. Census bureau data from 2004, the average college graduate makes $51, 206 per year, compared to the $27,915 reported for those with high school diplomas. Food stamps provide about $2000 per year in benefits. If credit markets are functioning properly, students could borrow against future earnings to cover this shortfall. If borrowing constraints are unreasonably tight, then the the appropriate policy response would appear to make credit more available, not more food stamps. In fact, government does intervene extensively in the student loan market, and as a result, student access to credit has remained high in spite of the recent financial crisis. Note, I am not endorsing current policy, just pointing out that the wide availability of credit weakens the “need” argument.
The opportunist argument is more difficult to refute, but it is it is surprisingly unpopular with students. Most of them have ethical beliefs which cause them to distinguish between different types of opportunities. Finding a $20 bill on the sidewalk is considered good luck and most people will gladly keep it. Finding and keeping a wallet with a $20 bill and an identification card inside is a different story.
For the most part, students who favor the individual responsibility argument felt that dealing with the financial challenges using their own resources was honorable and contributed to their personal development. Students felt that it would be possible for them to cover a $2000 shortfall by taking steps appropriate to their circumstances. The opportunities vary from student to student, but these were some of the commonly cited strategies: cutting back on unnecessary spending, asking family for more assistance, working more hours, taking advanced placement tests during high school, or borrowing. Many also objected to “reverse Robin Hood” effect of the redistributing wealth to college students who have expected lifetime earnings that are higher than average.
Students who support the net donor argument counter that the food stamp decision should not be viewed in isolation, but in the larger context of the welfare state. They believe the rules of the welfare state are biased against those with high lifetime incomes. Many also cited their lack of confidence in the future of social security, and felt that the current system was rigged against their generation. They ask how one can be expected to borrow against future income, when government will confiscate a significant portion of it? In a sense, they are treating the welfare state as a substitute for private credit markets. However, unlike private credit markets, they expect to withdrawl significantly less than they deposit.
I was left with two distinct impressions after this particular discussion. First, regardless of their choice, students felt strongly that it had to conform to clear ethical standard of behavior. Financial considerations were of secondary importance. Secondly, in spite of their different conclusions, they seemed to agree on a particular ethical standard- no one should take more than they give.
So if they agreed that ethics were important, and if they agreed on a particular standard, how can we account for their different conclusions? Their conclusions depended strongly on how they viewed themselves and their position in society. Those that considered themselves an anonymous component of an impersonal system over which they had no personal control supported the net donor argument. Those that focused more on their individual circumstances and their ability to influence them by their own actions were more likely to support the individual responsibility argument.
It doesn’t take much imagination to foresee the future of a society in which one of these two perspectives becomes the dominant view.
-posted by Dale Matcheck