Raise the Minimum Wage, Reduce Crime?

A new White House report links higher hourly incomes to lower rates of law-breaking.

David Ryder / Reuters

American labor activists have mounted a national campaign to increase the minimum wage. They have made many arguments about the rising cost of living, the long-term effects of poverty, and the obstacles even faced by families who have two incomes. But in a new study, the White House has made a novel argument: Raising the minimum wage reduces crime by 3 to 5 percent.

The Council of Economic Advisers, which advises the president on national economic policy, recently unveiled key findings that cast doubt on the criminal-justice system’s ability to reduce and prevent crime. “Research has established that rising incarceration is not principally responsible for the reduction in crime, and that higher levels of imprisonment have occurred despite—not because of—changes in underlying criminal activity,” states the report. This is a significant finding: For decades, incarceration advocates promoted the opposite idea. So, if putting people in jails and prisons does not reduce crime, what does?

More education, more job opportunities, school enrichment activities, and a basic living wage are among the factors listed in the study. “Higher wages for low-skilled workers reduce both property and violent crime, as well as crime among adolescents,” the authors write. “The impact of wages on crime is substantial … a 10 percent increase in wages for non-college educated men results in approximately a 10 to 20 percent reduction in crime rates.” More concretely, the Council calculates that raising the minimum wage to $12 by 2020 “would result in a 3 to 5 percent crime decrease (250,000 to 510,000 crimes) and a societal benefit of $8 to $17 billion dollars.”

“The research on this is really clear and really consistent; it cuts across party lines,” said Jason Furman, the Council’s chairman and President Obama’s chief economist, at a White House forum. For example, the Council estimates that “a 10 percent increase in wages for non-college educated men leads to a 10 to 20 percent reduction in crime rates.”

The Council outlined several specific policy recommendations for state governments and private businesses in dealing with the formerly incarcerated. The Obama administration has already instructed the Office of Personnel Management—the government’s HR department, effectively—to delay criminal-background checks beyond initial job applications, for example. And the Departments of Justice and Labor will establish a National Clean Slate Clearinghouse to help legal-aid programs, public-defenders offices, and reentry-services providers with “record-cleaning and expungement.”

But there are some practical obstacles involved with these seemingly straightforward recommendations. Over 46,000 state and federal laws restrict “employment, occupational licenses, and business licenses for people with criminal records,” according to the report. Around 70 percent of employers conduct criminal background checks. Additionally, there are more than 1,000 mandatory license exclusions for people with records of misdemeanors and nearly 3,000 exclusions for felony records, per the American Bar Association. The Council also determined that “applicants with criminal records were 50 percent less likely to receive an interview request or job offer.” The combined results of these practices are multiple, leaving people to struggle with chronic underemployment, a purgatory of low-wage jobs, stagnant skill sets, and a lack of professional mobility. Most drastically, it means that formerly incarcerated people earn considerably less than other workers—between 10 and 40 percent less, according to Council’s report.

The irony is that many among the currently incarcerated might not have ever committed crimes if more employment and higher wages were available. Even summer jobs for disadvantaged young people have a meaningful impact on the crime rate; in one case, the probability of incarceration dropped by 10 percent for those who participated in such programs in New York City, according to the Council. In some instances, the Council writes, “states with more flexible labor-market conditions for individuals with criminal records may have lower recidivism rates.” Offering a higher minimum wage and improved standard of living to those who most need it isn’t just about reducing poverty—it would have a quantifiable impact on the country’s overall crime rate.