Policy Lessons from Three Labor Market Experiments Gary

This paper discusses the design, administration, and findings of three social experiments or demonstrations conducted in the past decade: the Seattle-Denver Income Maintenance Experiment (SIME-DIME), the National Supported Work Demonstration (NSWD), and the Employment Opportunity Pilot Project (EOPP). All three projects tested forms of public intervention designed to affect the work effort and incomes of low-income families. In all cases, the effect of the intervention on the earnings of disadvantaged groups was a central issue. The success of the projects was mixed, with respect both to adequacy of design and to the importance and reliability of the findings obtained. For some interventions and target groups, statistically significant earnings effects were found; for other interventions and groups, no impact could be reliably detected. Both SIME-DIME and NSWD contributed substantially to the appraisal of the particular intervention on which they focused. EOPP was less carefully designed and, in part for political reasons, was poorly executed. Its findings are less reliable, and consequently less important, than those from the other two,projects. The concluding section of the paper attempts to describe some fundamental lessons that can be learned from the projects. That section considers the larger political and economic implications of the research. In addition, it suggests several criteria for evaluating proposed demonstrations or experiments before they are initiated. Policy Lessons from Three Labor Market Experiments Social experimentation began in earnest when the New Jersey Negative Income Tax Experiment was launched in 1967. For the next fourteen years, government agencies and philanthropic organizations sponsored a wide variety of experiments and demonstrations involving innovations in social policy; none were more important than those concerning the controversial issues of income support and work. In this paper we consider three of the most important social policy experiments: the Seattle-Denver Income Maintenance Experiment, the National Supported Work Demonstration, and the Employment Opportunity Pilot Project. These projects have yielded findings of broad significance to social policy, though the significance of their findings is only dimly perceived by policy makers and interested scholars. Our purpose in this review is briefly to describe the experiments and state the main policy conclusions that can be drawn from them. In the final section we discuss some conclusions about the effects and value of social experiments in general. THE SEATTLE-DENVER EXPERIMENT The Seattle-Denver experiment was the largest and most comprehensive of the NIT experiments. It was begun in Seattle in 1970 and in Denver in 1971 under contracts between the states of Washington and Colorado and the U.S. Department of Health, Education, and Welfare. The experiment was administered by Mathematica Policy Research, an organization that had already gained valuable administrative experience running the New Jersey experiment. The Stanford Research Institute designed the experiment and