CLEMSON, South Carolina — A higher minimum wage and earned income tax credits (EITCs) can mean the difference between a return to prison for recently released convicts or making a living outside of crime, according to research by a Clemson University economics professor.
Michael Makowsky, assistant professor in the John E. Walker Department of Economics, found that for every dollar increase in the minimum wage, one percentage point could be shaved off the number of those returning to prison. In states where earned income tax credits wage subsidies are available, there was an even bigger effect on recidivism, though only for women.
“The bulk of prior research on minimum wages has focused on the demand side and the potential effects it might have on fewer people being hired,” Makowsky said. “We wanted to look at the supply side and, in particular, how the minimum wage affects crime and the recidivism rate.”
The research by Makowsky and Amanda Agan, an assistant professor of economics at Rutgers University, examined records from nearly 6 million criminal offenders released from prison between 2000 and 2014. Also taken into account were more than 200 state and federal minimum wage increases and earned income tax credit programs in 21 states.
“People who were released where the minimum wage was raised had a lower recidivism rate. And in those states that chose to subsidize wages of adults with custody of dependents, women experienced an 11.4 percent drop in recidivism,” Makowsky said. “These aren’t trivial numbers when you’re talking about whether or not a person returned to prison.”
According to the National Corrections Reporting Program database, approximately 600,000 men and women are released from prison each year. About 17 percent return to prison within one year and 35 percent within three years.
Makowsky said the stigma of having a criminal record has a significant impact on a person’s employability and, consequently, their lifetime earnings.
“These people are making huge life decisions on thin economic margins and they are doing it with the mark of a criminal record that will never leave them,” he said. “So when they look at economic opportunities, they aren’t just making a decision between job A and B, they are making a judgment on A, B or making a living in the criminal marketplace.”
The researchers’ observation of decreases in recidivism were solely for property or drug-related crimes. Violent crime remained largely unchanged.
“Minimum wages and EITCs are only affecting criminals who are trying to generate or support an income,” Makowsky said. “In short, it’s not affecting a violent criminal’s choice between doing legal or criminal work.”
Though Makowsky and Agan’s study shows recidivism is affected by incremental increases in minimum wages, it is unclear what, if any, effect large-scale increases would have on someone returning to prison.
“We can say that incremental minimum wage increases should reduce the rates of recidivism, but we need to be cautious about large minimum wage leaps,” Makowsky cautioned. “Increasing EITC benefits, and extending them to those without children, may not be everyone’s preferred policy, but it is the likely lower risk option.
“With large minimum wage increases, you’re fundamentally changing the labor market and the implications are significant for those released from prison. If an employer has to pay $15 an hour, those with a criminal record are likely to be the ones that aren’t hired or the first ones fired and that’s not going to leave them a lot options when it comes time to putting food on the table.”
Rick Uhlmann is with the College of Business of Clemson University.