The Minimum Wage, EITC, and Criminal Recidivism

56 Pages Posted: 1 Oct 2018

See all articles by Amanda Agan

Amanda Agan

Rutgers University, New Brunswick - Department of Economics

Michael D. Makowsky

Clemson University - John E. Walker Department of Economics

Date Written: September 2018

Abstract

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.

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Suggested Citation

Agan, Amanda and Makowsky, Michael D., The Minimum Wage, EITC, and Criminal Recidivism (September 2018). NBER Working Paper No. w25116. Available at SSRN: https://ssrn.com/abstract=3258254

Amanda Agan (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

Michael D. Makowsky

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

HOME PAGE: http://michaelmakowsky.com

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