Work and opportunity before and after incarceration

May 09, 2022

Abstract The tax code provides subsidies for employers to hire ex-felons, to promote employment among low-income workers, and to encourage economic opportunity in distressed areas. These incentives are motivated to different degrees by a belief that economic opportunity facilitates successful reintegration of ex-felons and deters entry into crime. In this paper, we offer a more comprehensive view of the labor market opportunities of ex-prisoners in the U.S. by linking data from the entire prison population to earnings records over a sixteen year period. These data allow us to examine employment and earnings before and after release and, for younger prisoners, their family income and neighborhood in childhood. After release, only 55 percent of former prisoners have any earnings and those that do tend to earn less than the earnings of a full-time job at the minimum wage. However, their labor market struggles start earlier, with similarly high rates of joblessness prior to incarceration and with most prisoners growing up in deep poverty. For example, boys who were born into families in the bottom 10 percent of the income distribution (families earning about $14,000 per year) are about 20 times more likely to be in prison in their 30s, compared to boys born into families in the top 10 percent (families earning more than $143,000 per year). A disproportionate share grew up in neighborhoods where child poverty rates are high, most parents are unmarried, few men are employed, and where most residents are African American or American Indian. The combination of high rates of incarceration and low employment rates among exprisoners implies that roughly one third of all not-working 30-year-old men are either in prison, in jail, or are unemployed former prisoners. We discuss the implications of these findings for the design of policies intended to encourage employment and rehabilitation of individuals with a criminal record.

Reading Notes:

Objective: To examine the employment and earnings of prisoners before prison and after release and to describe the family income and neighborhood in childhood for younger prisoners

Importance: Unique data - national administrative data on prisoner populations linked to IRS earnings/filing data

Background: Over 2.2 million individuals are incarcerated and 620,000 are released from prison annually. The tax codes provides subsidies for employers who hire previously incarcerated - Work Opportunity Tax Credit: $9,600 per employee. Only used to hire an average of 36,292 former prisoners a year between 2009-2013

Data & Key Variables: In 2012 BOP & state prison agencies were required to submit identifying data & incarceration dates to the IRS (2.9 million individuals)

Matched to earnings and tax filing records 1999-2014 [1040 & W2]

For prisoners born 1980-1986 matched to parent tax records - income, marital status, & neighborhood

Methodology: Descriptive statistics over time

Data are weighted based on the probability of observing an individual with valid identifying information at a point in time based on their sentence length, duration of state reporting and probability of having valid identifying information

Results: After release only 55% of prisoners have any earnings and those that have earnings earn less than the full-time minimum wage. Similar rates of joblessness pre-prison and most prisoners grew up in poverty

Estimate that 1/3 of all not working 30 year old men are in prison, in jail, or are former prisoners

Comments: No data on race, education, crime, recidivism/prior incarceration spells

Key Table/Figure:

Dani’s Reading Notes

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