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Will Raising the Minimum Wage Help End Mass Incarceration?

Sure, why not?

By Jared Keller


(Photo: Wisconsin Jobs Now/Flickr)

The Obama administration has a plan to end mass incarceration, and it’s anything but conventional.

In a new report examining various policy options to reduce mass incarceration, the White House Council of Economic Advisors (the brain trust tasked with helping President Barack Obama craft his economic agenda) predicts that increasing the federal minimum wage from $7.25 to $12 an hour by 2020 would result in a drop in the national crime rate by up to five percent. People turn to crime because of their economic circumstances, the logic goes: Pay people more, and they won’t need to engage in larceny, theft, robbery, and the like.

“If we reform our criminal justice system, our communities will be safer, and our economy will be stronger,” White House adviser Valerie Jarrett told the Washington Post on Tuesday in the most boilerplate of statements. “The statistics are very clear.”

Actually, they aren’t, because there isn’t really anything close to methodological transparency in this White House report. Nonetheless, it’s an interesting proposition: Is there a direct correlation between wages and crime?

Research suggests this correlation isn’t just a policy moonshot. A 1997 paper issued by the National Bureau of Economic Research on the relationship between market wages and youth crime in the United States found that young Americans’ behavior was “very responsive” to price incentives. The study examined data from a national longitudinal survey of 12,686 young men and women from 1979 through 1994 and compared their responses to questions about criminal activity to fluctuations in the mean market wage and workday estimates at the time. The research found that, as real wages for young men fell by 20.3 percent (according to the Bureau of Labor Statistics), criminal activity saw an 18 percent increase.

Is there a direct correlation between wages and crime?

Later research has moved beyond youth crime to the broader population. A 2002 analysis in the Review of Economics and Statistics of the U.S. labor market between 1979 and 1997 examined the relationship between falling wages and crimes committed by unskilled men more generally. The researchers found that, between 1979 and 1997 (and in data collected by the 1980 and 1990 censuses), America saw a 21 percent rise in the property crime rate and a 35 percent rise in the violent crime rate, alongside a 20 percent decline in wages for unskilled workers.

Despite this data, there are some economists who reportedly still doubt the potential benefits of raising the minimum wage on the labor market. As I wrote when Los Angeles adopted its $15 rate, the CBO report found that raising the minimum wage to $10.10 would eliminate some 500,000 jobs; even a tinier increase to $9 would still kill 100,000 jobs. While some policymakers argue that a slow, gradual increase like the 2020 deadline proposed in the CEA report would give business and lawmakers time to build out “channels for adjustment” and adapt to the new economic environment, there remains the concern that higher wages would simply mean fewer jobs for those unskilled workers already disenchanted with the decline of American manufacturing and, in turn, more potential criminals on the streets.

Except this isn’t totally true. The 2002 Review of Economics and Statistics study found that, while both wages and unemployment influence criminal activity, wages “played a larger role in the crime trends over the last few decades.” Similarly, a 2003 study in the Journal of Human Resources that examined data from England and Wales between 1975 and 1996 found a strong association between a low-wage labor market and criminal activity, even when accounting for fluctuations in unemployment. While unemployment and crime are certainly closely related, it turns out that wages, rather than job openings, are a stronger incentive for unskilled (and potentially criminal) elements than relative employment levels.

This isn’t the most efficient way to reduce crime, of course: The White House report concedes that putting more police officers on the street — as Bill Clinton’s now-infamous 1994 crime bill did — is the most effective means of deterring criminal activity (a la Broken Windows). In fact, the U.S. “has 35 percent fewer officers relative to the population than do other countries on average,” according to the Washington Post. But more police inherently means more arrests, which means more Americans winding their way through the judicial system and, eventually, ending up in the swollen network of state and federal prisons.

In a country that imprisons more people than anywhere else on the planet, all options should be on the table.