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Higher wages reduce crime more than incarceration

Cogent new analysis from top US Economist Jason Furman says higher wages is a more effective crime reduction tool than imprisoning more criminals

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Economic Perspectives on Incarceration and the Criminal Justice System

A fascinating new paper was published by the White House last week (25 April 2016); entitled Economic Perspectives on Incarceration and the Criminal Justice System, it consists of the slides from a presentation by Jason Furman Chairman of the Council of Economic Advisers to Obama’s administration whom you can follow on Twitter: @CEAChair.

[Many thanks to Rob Allen for bringing it to my attention.]

The growth in incarceration

Mr Furman’s paper starts by setting the context of a huge growth in incarceration in the US since 1980.

Furman 1

He makes the point that incarceration has grown despite a big fall in crime rates.

Furman 2

Exactly the same phenomenon has taken place in the UK over the last twenty years, a substantial growth in the prison population with a corresponding dramatic fall in crime.

Incarceration poor at reducing crime

Mr Furman goes on to summarise the economic research which has found that imprisoning more people is unlikely to have much impact on reducing crime:

  • Since the U.S. has the largest prison population in the world, further increasing incarceration is not likely to materially reduce crime.
    • When incarceration rates are high, further incarceration entails incapacitating offenders who are on average lower risk.
    • Research finds that the impact of incarceration on crime is small, and decreases as the incarcerated population grows.
  • Economic research suggests that longer sentence lengths have little deterrent impact on offenders.
    • A recent paper estimates that a 10 percent increase in averagesentence length corresponds to a zero to 0.5 percent decrease in juvenile arrest rates.
  • Emerging research finds that longer spells of incarceration increase recidivism.
    • A recent study finds that each additional sanction year causes an average increase in future offending of 4 to 7 percentage points.

The wider impact of incarceration

He continues by setting out the wide range of “collateral consequences” for individuals with criminal records, their families and communities:

  • Having a criminal record makes it more difficult to find employment.
    • Recent job application experiments find that applicants with criminal records were 50 percent less likely to receive an interview request or job offer, relative to identical applicants with no criminal record, and these disparities were larger for Black applicants.
  • Criminal sanctions can also have negative consequences for individuals’ health, debt, transportation, housing, and food security.
  • The probability that a family is in poverty increases by nearly 40 percent while a father is incarcerated. Parental incarceration is a strong risk factor for antisocial and violent behavior, mental health problems, school dropout, and unemployment.

Cost-benefit analysis

Being an economist, Mr Furman naturally sets out a cost benefit analysis of different criminal justice policies. He estimates the social cost of crime (based on 2014 crime figures at 2015 costings) as $3.079 TRILLION in the USA.

His review of the literature suggests that sentencing changes and increased use of prison are the least effective policies:

Furman 3

Higher wages cut crime better than increased incarceration

It is Mr Furman’s conclusion though which is making headlines:

Higher wages are more effective at reducing crime than increased incarceration

Furman 4

If we translate this analysis to the UK, it may be that George Osborne’s “National Living Wage” — a commitment to raise the minimum wage to £9 per hour by 2020 — is a more powerful crime reduction tool than any of Michael Gove’s proposed reforms.

Of course, if Mr Gove can reduce the prison population, he may be able to substantially offset the cost of the minimum wage — reducing the average numbers in prison by 10,000 would save over £350 million per year and still mean that we imprison our citizens at a rate one third higher than France and one half higher than Germany.

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