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Markets in Everything: Panhandling
In Memphis, a local FOX News reporter, Jason Carter, donned old clothes and hit the streets earlier this year, earning about $10 an hour. “Just the quasi-appearance of being homeless filled my cup,” Carter observed. That all the money is beyond the tax man’s clutches adds to the allure of professional panhandling.
Carter prepared for his stint on the street by surfing the Internet, where a variety of websites dispense panhandling advice. NeedCom, for example—subtitled “Market Research for Panhandlers”—offers tips from Baker and other pros on how to hustle. The website’s developer, Cathy Davies, wants it to get people “thinking about panhandling as a realistic economic activity, rather than thinking that panhandlers are lazy or don’t work very hard.”
More here, overly sensationalistic but interesting in parts.
Thanks to Tim Groseclose for the pointer.
Posted by Alex Tabarrok on August 25, 2008 at 01:30 PM in Economics | Permalink
Comments
http://www.youtube.com/watch?v=kBqiee2RM60
Posted by: Jake at Aug 25, 2008 2:42:18 PM
Is there a site yet dedicated to matching prospective panhandlers with particular places? In other words, is there an entrepreneurial opportunity here to establish a franchising business model?
Posted by: Ironman at Aug 25, 2008 2:46:52 PM
Ironman: a reporter for one of the Toronto papers did the same thing about ten years ago, and discovered that the panhandling "business" there is run by a sort of mafia that controls who can panhandle where, and to which panhandlers have to pay a "tax", or protection fee. The reporter found that many beggars made in excess of $100 per day, and actually lived in nice houses in the suburbs.
Hence, I never give a penny to a panhandler. I never did before I read that article, but after reading it, I stopped feeling bad about not giving money to beggars. Then I became a heartless economist, and became proud of not giving money to panhandlers.
Posted by: bartman at Aug 25, 2008 3:58:23 PM
Can you guys spare a dime?
Posted by: Yancey Ward at Aug 25, 2008 4:02:08 PM
If you can earn $10 an hour as compared to $5.85 at the minimum wage what does this do to the argument that the minimum wage cost people employment. This makes it look like the reason minimum wage employment is falling is that individuals have much better opportunities.
Posted by: spencer at Aug 25, 2008 4:11:13 PM
bartman: Too funny! Although it certainly stands to reason - any business opportunity will eventually be recognized and acted upon. The more controlled or illegal the opportunity, the sooner organized crime will do it!
Posted by: Ironman at Aug 25, 2008 4:24:14 PM
spencer: You're a bit behind - as of 24 July 2008, the federal minimum wage is now $6.55 per hour.
As for minimum wage employment falling, that has a lot to do with teenagers being driven out of the job market as a response to the increase, which is important since they used to make up over 25% of those who earned minimum wage. Those Age 16-19 now have the double whammy of fewer available jobs (represented by a shrinking workforce in that age range) and a higher rate of unemployment as well.
It's funny - back in July 2007, when the federal minimum wage was increased to $5.85 from $5.15 per hour, the shift that occurred from July 2007 to August 2007 was like seeing someone throw a switch. Especially remarkable in that economic growth from July 2007 through September 2007 clocked in at 4.8% (according to the recently revised figures.)
It will be interesting to see if something similar happens again with the latest increase.
Posted by: Ironman at Aug 25, 2008 4:39:28 PM
I checked out the NeedCom site - the article completely misrepresents it.
NeedCom was apparently built as an art project, and you'd have to have a broken irony detector not to pick up on that from the site:
http://www.pbs.org/weblab/needcom/
There's a link to the artist's statement, so it isn't even a hoax.
Maybe the art project became an actual forum for professional panhandlers later on?
The author's research skills aren't very inspiring.
Posted by: Nick at Aug 25, 2008 5:00:04 PM
what about Bum fights?
Posted by: Mr. Beefy at Aug 25, 2008 6:57:31 PM
I don't give to panhandlers, but I give large tips to minimum wage workers, even if they have jobs that doesn't usually call for tips. This eliminates the problem of incentivising panhandling. The woman who wants to normalize panhandling as a legitimate career choice is out of her mind. Panhandlers don't provide any service or good in exchange to the "customer" other than (for some people- not me in this case) the satifaction of giving. Overall, they have a negative effect, because they only encourage more people to stop doing productive work, and to start panhandling.
Posted by: adina at Aug 25, 2008 7:22:28 PM
In the late 90s I heard from a quite trustworthy friend that she knew a panhandler in Seattle's U District who did $60,000 a year from his wheelchair. It supported his wife and two kids.
Panhandlers do indeed provide a valuable product -- guilt absolution. Why should we dis their living any more than we do, say, crafters of hand-made Buddhist prayer books?
Posted by: Bob Knaus at Aug 25, 2008 8:05:20 PM
Guilt absolution?
Who instills the guilt in the first place? The sight (mostly created for dramatic effect) of the panhandler does. So eliminating a false sense guilt created by the absolutionist is hardly a service that adds anything. At best it is wash. At worst, it lessens the liklihood of somebody actually giving to a real charity, since they may already feel they've done their part for the day.
Posted by: Steve at Aug 25, 2008 9:17:36 PM
There was a comedy from a Hong Kong Studio about a decade ago about panhandling turf wars.
Posted by: Hei Lun Chan at Aug 25, 2008 10:08:11 PM
"I don't give to panhandlers, but I give large tips to minimum wage workers, even if they have jobs that doesn't usually call for tips. This eliminates the problem of incentivising panhandling." -Adina, above
Beautiful!
Posted by: Jason Armstrong at Aug 25, 2008 10:53:27 PM
For an interesting story about this sort of thing, be sure to read about Sherlock Holmes and "The Man with the Twisted Lip" by Sir Arthur Conan Doyle.
Posted by: Ned at Aug 26, 2008 8:41:51 AM
The panhandlers should all be prosecuted for tax evasion, and arrested if the city they are "working" has panhandling laws. One news story I saw covered how the panhandlers are payed off, and then the customer says they will never return. The story made panhandling seem like an infection, as more came when a spot was profitable, and then the police had to be called in to make threats so that customers would return. The government should put video cameras on every street corner, like casinos have, that will count how much money is exchanged!
Posted by: brainwarped at Aug 26, 2008 10:15:20 AM
Why does a business with such low barriers to entry pay so well? Why hasn't the excess return been competed away?
-dk
Posted by: Dick King at Aug 26, 2008 11:24:17 AM
Dick King: because government regulation has created an opportunity for rent seeking, of course. In this case, the government limits the number of panhandlers that can compete for a given charitable revenue stream in a given location. Not explicitly, but implicitly - too many panhandlers will attract the attention of the cops, or of the locals who will then get the cops to do something about all the panhandlers.
In the absence of force, an equilibrium would be established where the number of panhandlers increased until they started driving away the donors, and the remaining revenue stream when divided by the number of panhandlers would provide wages comparable to other similar jobs.
Posted by: eddie at Aug 26, 2008 11:44:55 AM
But Ironman teenage employment contracted in the same way last economic downturn when there was no increase in the minimum wage. Out of the last 8 years teen employment fell in 6 of those years. So if the minimum wage is responsible for the recent drops in teen employment what caused the almost identical drops in earlier years when the minimum wage was not changed? You can not have it both ways.
Posted by: spencer at Aug 26, 2008 11:57:34 AM
I've seen enough examples of this in the tourist areas of San Francisco that I believe the overwhelming majority of these "bums" aren't really homeless at all. They do it because it's profitable. I even wrote to Herb Caen, who said he knew it but would be vilified if he wrote about it.
The "occupation" of panhandling is an example of the public good problem. If business owners, either singly or in a band, start bribing panhandlers to leave, they'll simply tell their friends: the bribes reduce the amount of time the panhandler must spend to profit from his craft.
Bear in mind that former SF mayor Frank Jordan (who had been a tough chief of police) was elected on a promise to kick the bums out of the tourist district and keep them out, but he was successfully stopped at every turn by the ACLU.
If I were one of the business owners, I would propose to the city that my block, or even the entire business district, be privatized and fenced off as a "mall" so that either the police, or rent-a-cops, can arrest any panhandler on sight for trespass, and make it stick despite the misguided efforts of the ACLU. I can't think of any other remedy that will work.
Posted by: John David Galt at Aug 26, 2008 12:00:05 PM
This is not a new notion. In Adam Smith's the Wealth of Nations he states that:
Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old cloaths which another bestows upon him he exchanges for other old cloaths which suit him better, or for lodging, or for food, or for money, with which he can buy either food, cloaths, or lodging, as he has occasion. (B.I, Ch.2, Of the Principle which gives Occasion to the Division of Labour in paragraph I.2.2)
And it is through this and other references to the "beggar" that Smith calls our attention to the fact that they are just as much a part of the economy as anyone else. He also here foreshadows the future role of charity as an economic factor.
Thanks!
Posted by: Rachel at Aug 26, 2008 12:43:22 PM
Adina: Interesting idea, but how do you know they make minimum wage? Cashiers and baggers at unionized grocery stores make more than minimum wage. As do most tradesman, UPS/Fedex drivers, just who making minimum wage do you tip?
Posted by: Gho Ghoghol at Aug 26, 2008 2:23:20 PM
"panhandling as a realistic economic activity, rather than thinking that panhandlers are lazy or don’t work very hard"
Yes! I tried to convince my daughter of this. Think about it: pick your own hours, no boss, drink at work if you want (might even raise your pay), outdoor work, leave when you want, decent pay, but terrible retirement and health plan (unless of course you ride a bike to work). You're basically a karma salesman.
Posted by: Eric H at Aug 28, 2008 8:55:02 PM
As a recent Civil Engineering Graduate from a mexican university who speaks 6 languages I can honestly say I've been tempted to become a panhandler. The highest wage I've been offered here in my country is 15,000 pesos... about USD$1500. A panhandler in San Pedro Garza Garcia (the richest county in latin america) receives on average 7 pesos every 5 minutes. Working 6 days a week, 8 hours a day, that translated into about USD$1600. Without a college degree or any special abilities. Plus, if you get a very generous "customer" who gives you 100 pesos, you can even take a 10 minute break... sounds way better than calculating reinforced concrete slabs.
Posted by: Don Nadie at Aug 31, 2008 4:48:42 AM
