The Economics of Panhandling

A side-discussion over at Catallaxy about the book "Conspicuous Compassion" made me think harder about the economics of what the Americans call "panhandling". (Australians would call it begging, but somehow I prefer the US word. If you prefer, just substitute "begging" for "panhandling" in what follows.)

The question is this: how much does the typical panhandler earn?

Let’s start by assuming that panhandling is a competitive market. Given that there are no barriers to entry and minimal government regulation, this doesn’t seem a bad assumption here. In that case, the hourly wage of a panhandler should equal their marginal productivity as a panhandler. Moreover, if we assume that panhandling isn’t entirely different from other jobs, the hourly wage of a panhandler should approximately equal what they could produce each hour in other jobs.*

My guess is that for most of those who stand at a street corner, their non-panhandling wage would be pretty low. Which means that if the panhandling market is competitive, their wages as a panhandler will be low too. There will doubtless be a few who make a lot of money from panhandling (and they will typically be those whose non-panhandling wages would be high too). But it’s unlikely that there are too many living the life of Riley.

Of course, there another way to answer this question: does anyone know of any careful studies on the earnings of panhandlers?

* There are two factors that might affect the gap. On the one hand, since panhandling carries a social stigma, the hourly wage of a panhandler may be higher to reflect this (just as risky jobs typically pay more than safe ones). On the other hand, panhandlers do get to set their own hours, so some may be willing to take a lower wage to reflect this.

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12 Responses to The Economics of Panhandling

  1. Sinclair Davidson says:

    On the retail side of the market (i.e. the beggar in the street) I don’t know what ‘careful’ research has been done. I don’t know of any Australian work, but I’m sure something exists in the US.

    On the wholesale side of the begging market (i.e. ACOSS, CARE International, various religious groups etc.) there is a huge literature.

    As an aside, given my experience supervising Gaby Berman’s PhD on the wholesale market, and her difficulty getting data – not to mention her findings (some of which would have generated lawsuits if actually included in the thesis), I no longer give money to wholesale beggars.

  2. Ian McKendry says:

    Hi

    Can Sinclair give us a hint as to why he no longer donates to wholesale beggars? Like a lot of people i have various deductions each month for (doubtless) worthy causes and it would be interesting to get his take on that.

  3. Andrew Leigh says:

    Sinclair, when you say “huge literature”, can you point us to any particular studies that try to calculate the hourly wage of panhandlers/beggers? I’d be (pleasantly) surprised if this has been done.

  4. Sinclair Davidson says:

    Andrew, the ‘huge’ literature I refer to is the wholesale market. Any of the studies that investigate the expense ratio (Donantions/Expenses) of charaties answers your question – in the wholesale market. With access to charity financial statements a range of ratios can, and have been, compared across the sector. This, however, is does not answer your question about the ‘retail’ market. I don’t know of any such studies – I suspect they would exist.

    You should think about an ARC on this topic. How does begging and the minimum wage interact. Your earlier argument would seem to indicate that as the minimum wage increases so the return to begging might rise to and so lead to an increas in begging (cetris paribus and all that, there are also so income and substitution effects in there). My argument would indicate that as the min wage increases so the profits of begging fall and so we have less begging (CT and all that).

    This becomes a nice complex project in terms of unravelling all the CT conditions etc.

  5. Sinclair Davidson says:

    Ian

    I’m sure your causes are very worthy and as long as you get utility from giving then continue doing so.

    One of my PhD students was doing research into Australian charities (human welfare in particular) and needed access to their financial statements. Depending on their incorporation charities are required to make various aspects of their financial statements public. In particular, a large group are reqired to lodge their statements with ASIC. We went to ASIC, hopeful of paying the nominal fee and accessing the statements, to discover that few (very few) actually comply. ASIC, however, doesn’t have the reseources (nor the inclination, I suspect) to follow up. Now we shouldn’t blame ASIC, the charities have a legal duty – which they ignore. When we approached the charities themsleves for the information many were somewhat abusive. (We always made clear we were asking for information that legally was public).

    Many other charities did provide information that was so opaque as to be meaningless.

    The most unhelpful organisations were those associated with religion. In particular, here in Victoria religious charaties have managed to get themselves exempted from many of the reporting requirements of their non-religious competitors.

    All up the average attitude (arrogance basically) we encountered left me very disillusioned and angry. So I withhold my money from these organisations.

  6. Andrew Leigh says:

    Sinclair, we’re either talking at cross purposes, or I’m particularly daft today: but how does the donations/expenses ratio of charities tell us the hourly wage of street beggars?

    (Interesting to hear your stories on getting the charitable records, though.)

  7. Not related to the question but an oddity I saw in altstadt Nürnberg was panhandlers on their knees begging, but under their knees were cushions.

  8. Sinclair Davidson says:

    I’m happy to subscibe to the “daft theory” :). Charities are the wholesale market = heaps of stuff.

    street beggars are the retail market = nothing I know of.
    street beggars would make a great study.

  9. Jonny says:

    I have no way of verifying this info., but in Toronto,Ont., where I lived for years, there were sources that said some ‘panhandlers’ parked their cars away from Yonge st, changed into their ‘work’ clothes & walked from there.
    It was said these people sometimes stayed long hours, went back to their cars, & went home to expensive homes, & regular families. Seeing the bills they collected, it’s possible.
    Johnny

  10. There is obviously a third wedge: taxes… (I don’t think that panhandlers pay ’em…) Given the EITC, this might even be a negative wedge for some.

    In any case, there was a Harvard undergrad thesis about a decade ago looking at panhandler wages in Harvard Square. Apparently the wages were typically (but not uniformly) low. Afraid that I can’t remember more details right now…

    And Harvard Square is a pretty good gig – plenty of tourists, small ‘l’ liberals, and cold weather to help open the pursestrings. (That said, with free entry, there’s tonnes of competition there, driving that wage back towards the opportunity cost of time.)

  11. Mat says:

    1. There were a couple of newspaper articles on the wages of panhandlers in Toronto, Canada in one of the local newspapers about two or three years back — $8 Canadian an hour was the norm which is about minimum wage…there’s some risk. If you’re on welfare you get another $500 or so a month to live on. Double that if you’re on disability. Search the Toronto Star or Globe and Mail websites?

    2. The story about the car parking beggars in Toronto probably refers to a person called the “shaky lady” (as in palsy) who is alleged to have done rather well for a few years on the main throughfare (Yonge St.) but was exposed in a local newspaper along the lines described….driving a car, etc… She’s gone.

    3. In another country a long, long time ago I sort of co-owned a small beggar gang which mostly collected rice which was then resold wholesale. Their main real raison d’etre was to collect informaiton on government corruption for a monarchy (perpetrators identified in serious cases lost their posts), and the rice thing was meant to make the service self-financing. The leader of this group was the single smartest person I met in a decade in-country…he was trying to pay off a mortgage on a subsistance farm in the hills and buy a cow. They made wages that were about what they could have earned as general laborers. Expansion of the business by the leader was difficult. You had to hire new recruits for cash, then they slept somewhere all day and weren’t diligent collecting rice or info. It was a losing proposition.

    Since each house had a different type of rice (the market sold thirty or so) the rice collected ended up a mixture of many varieties and got a low wholesale price, holdig down self-employment earnings.

    I missed my chance with these guys; I should have taken photos and written articles in English with them; one of them was a real philosopher about life.

    MN

    P.S. Social work departments may know something about beggar takings. So might governments, since sometimes apparent beggars in poor countries are government employees watching things, paying for themselves doing so…I don’t mean just informants, but outright officers of one sort or another…for example maybe ex-soldiers who have lost legs, etc. If you look like a tourist and and look in their eyes right and start talking to them as to an extremely intelligent person, sometimes they’ll talk on the level. They probably won’t admit it’s a job, but they know you have spotted them as persons out of the ordinary and you’ll know you’re talking to someone with an original mind. If you’re a local, though, it’s less likely to work, and they play dumb. Traditional monarchies, for some reason are the place….remember the Haile Selassie regime in Ethiopia?

    I often thought from this experience that market research firms here might be able to use some beggars, increasing their income…

    Ever seen the site, http://www.lazybeggars.com … they might be doing better than average. I love it!

  12. Mat says:

    1. There were a couple of newspaper articles on the wages of panhandlers in Toronto, Canada in one of the local newspapers about two or three years back — $8 Canadian an hour was the norm which is about minimum wage…there’s some risk. If you’re on welfare you get another $500 or so a month to live on. Double that if you’re on disability. Search the Toronto Star or Globe and Mail websites?

    2. The story about the car parking beggars in Toronto probably refers to a person called the “shaky lady” (as in palsy) who is alleged to have done rather well for a few years on the main throughfare (Yonge St.) but was exposed in a local newspaper along the lines described….driving a car, etc… She’s gone.

    3. In another country a long, long time ago I sort of co-owned a small beggar gang which mostly collected rice which was then resold wholesale. Their main real raison d’etre was to collect informaiton on government corruption for a monarchy (perpetrators identified in serious cases lost their posts), and the rice thing was meant to make the service self-financing. The leader of this group was the single smartest person I met in a decade in-country…he was trying to pay off a mortgage on a subsistance farm in the hills and buy a cow. They made wages that were about what they could have earned as general laborers. Expansion of the business by the leader was difficult. You had to hire new recruits for cash, then they slept somewhere all day and weren’t diligent collecting rice or info. It was a losing proposition.

    Since each house had a different type of rice (the market sold thirty or so) the rice collected ended up a mixture of many varieties and got a low wholesale price, holdig down self-employment earnings.

    I missed my chance with these guys; I should have taken photos and written articles in English with them; one of them was a real philosopher about life.

    MN

    P.S. Social work departments may know something about beggar takings. So might governments, since sometimes apparent beggars in poor countries are government employees watching things, paying for themselves doing so…I don’t mean just informants, but outright officers of one sort or another…for example maybe ex-soldiers who have lost legs, etc. If you look like a tourist and and look in their eyes right and start talking to them as to an extremely intelligent person, sometimes they’ll talk on the level. They probably won’t admit it’s a job, but they know you have spotted them as persons out of the ordinary and you’ll know you’re talking to someone with an original mind. If you’re a local, though, it’s less likely to work, and they play dumb. Traditional monarchies, for some reason are the place….remember the Haile Selassie regime in Ethiopia?

    I often thought from this experience that market research firms here might be able to use some beggars, increasing their income…

    Ever seen the site, http://www.lazybeggars.com … they might be doing better than average. I love it!

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