Raising the Minimum Wage Can Reduce Recidivism: Study

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Raising the minimum wage can reduce recidivism rates for the formerly incarcerated, who may otherwise be tempted to return to higher paying criminal activities such as property theft and drug offenses rather that join the labor market, according to a new study.

Researchers analyzing data on nearly six million prisoners in state-run facilities from 2000 to 2014, found that an eight percent increase in minimum wage leads to a two percent decrease in prisoner re-entry rates.

Moreover, for every one dollar increase in minimum wage, there is a four percent decrease in recidivism, said the authors of the study—Amanda Y. Agan, an assistant professor of economics at Rutgers University, and Michael D. Makowsky, an assistant professor of economics at Clemson University—who used data from the National Corrections Reporting Program and the Bureau of Justice Statistics on prison admissions and releases to compile their results.

Citing studies that show recently released prisoners “tend to have lower human capital and interrupted work histories,” Agan and Makowski argued that their findings suggest the need for a broader approach to wage policies in the low-skilled labor market, where a majority of the formerly incarcerated would likely find employment.

“Understanding how (low-wage labor market policies) impact released prisoners can help us understand the mechanisms underlying recidivism and aid in breaking the revolving door of prison,” they wrote.

They added: “Rather than assume legal employment is the dominant option, we model the decision as a choice between legal and illegal activities.”

Notably, they found, higher minimum wages for formerly incarcerated men and women without a high school diploma can lead to even lower rates of recidivism.

Every dollar that an individual without a diploma makes leads to a seven percent decrease in re-entry, the researchers wrote.

“For other participants in the low-skill labor market (non-criminals), the next best alternative to legal employment [could be] leisure or school; the prospect of a higher minimum wage making employment more attractive is a private outcome with little consequences,” the study said.

“But for released prisoners, on the other hand, their next best alternative to legal employment may instead be criminal behavior.”

Generally, formerly incarcerated individuals face stigmas about their criminal activity, making it difficult to find work. As of 2016, there were 6,392 separate state restrictions on employment eligibility for those with felony records.

While the study found that increased wages led ex-offenders to commit fewer income generating crimes, they acknowledged that increasing the minimum wage had no significant effect on other crimes, such as ‘crimes of passion.’

The authors said their research was also not applicable to parole violations.

“Higher minimum wage in terms of reducing recidivism only applies to new crimes the offender may commit, not violations of his/her parole,” they wrote.

For women, access to state Earned Income Tax Credits (EITC) was also associated with lower re-entry rates.

A one percent standard deviation increase in state EITC corresponds to a six percent reduction in recidivism for women, their results showed.

“For recently released prisoners, the minimum wage and availability of EITC can influence both their ability to find employment and their potential legal wages relative to illegal sources of income, in turn affecting the probability they return to prison,” Makowsky and Agan concluded.

This is only applicable to women though, because of the availability of EITC to single mothers, they noted.

The above study is a working paper, and can be downloaded for purchase here, or by contacting the authors directly. Journalists who wish to receive a free copy should contact john@thecrimereport.org. This summary was prepared by TCR staffer Megan Hadley. Readers’ comments are welcome.

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