Does an increase in the minimum wage really reduce criminal recidivism?

The minimum wage often a contentious topic amongst the left and right has recently added another dimension to it with a National Bureau of Economic Research (NBER) study done by, Amanda Y. Agan of Rutgers University and Michael D. Makowsky of Clemson University, that looks at the effects of the minimum wage on criminal recidivism. The study also delves into the benefits of the Earned Income Tax Credit (EITC) on reducing recidivism, but notes that the primary beneficiaries of the EITC are women due to them being more likely to file for tax while holding custody.

Nonetheless, the study finds the minimum wage to be a potent weapon to wield in the fight against reoffenders. Here’s an excerpt from the paper, “For recently released prisoners, the minimum wage and the availability of state Earned Income Tax Credits (EITCs) 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. Using administrative prison release records from nearly six million offenders released between 2000 and 2014, we use a difference-in-differences strategy to identify the effect of over two hundred state and federal minimum wage increases, as well as 21 state EITC programs, on recidivism. We find that the average minimum wage increase of $0.50 reduces the probability that men and women return to prison within 1 year by 2.8%. This implies that on average the effect of higher wages, drawing at least some released prisoners into the legal labor market, dominates any reduced employment in this population due to the minimum wage. These reductions in returns to incarcerations are observed for the potentially revenue generating crime categories of property and drug crimes; prison reentry for violent crimes are unchanged, supporting our framing that minimum wages affect crime that serves as a source of income. The availability of state EITCs also reduces recidivism, but only for women.”

The metric that is bound to grab attention is the 2.8% decrease in the probability of returning to prison within 1 year given an increase of $0.50 in the average minimum wage. While the metric certainly jumps out, it’s quite misleading given the conflicting research surrounding the effects of the minimum wage, and given where you find yourself on the political spectrum and how self fulfilling, your self fulfilling bias really is. The conflicting research though is something that the authors do pay attention to when they mention that there might be adverse effects associated with an increase in the minimum wage which might result in depressing the job market and leading to lower employment figures. In this case an increase in the minimum wage might have the opposite effect and lead to greater recidivism. 

While it does make perfect logical and empirical sense that an increase in the average wage would lead to a decrease in crime/recidivism as recently released offenders might find it in their best interest to find employment rather than reoffend. It also leads you to question if that’s only the case if it’s a causation of greater economic growth, given a better standard of living is bound to reduce recidivism regardless? 

Kevin Schnepel at the University of Sydney, in a not too recent IZA study also looked at how post prison opportunities reduce recidivism. While Schnepel didn’t look at the minimum wage he did look at transitional employment and the overall quality of employment. Schnepel found that while an increase in wages did have a strong impact on recidivism, it only worked if it was strongly correlated with job quality. 

Neither study though pays enough attention to the neighborhood effects when it comes to recidivism. Various studies have shown that neighborhood effect have the strongest impact when it comes to crime and per capita income even after controlling for results by gender, race, and income brackets. For example a department of corrections (DOC) study found that ‘prison visitation was negatively related to rearrest, with offenders that received visitors 23% less likely to be rearrested.” 

All of this, begs the question of why the study gained so much prominence despite its various flaws (something that its authors acknowledge)? The answer simply lies in how contentious the political climate right now is and how saliency bias plays an important part in our lives. A bias whose effect seems even more pronounced in this current political climate. The minimum wage was used at the cost of failing to gather other relevant data, primarily because of how readily available it was and how it seemed to positively correlate with dissertation requirements set before. While this working paper marks an important breakthrough in studying the effects of the minimum wage it shouldn’t distract us from more important reforms that are a result of better meta data and stronger causations. Reforms such as right to crime and criminal justice reform that have proven to reduce crime and recidivism. After all, we shouldn’t forget that this is still a “working” paper and hence there’s still a long way to go before its findings could be used to influence public policy. 

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