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Minimum-Wage Hikes and Crime

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Minimum-Wage Hikes and Crime

How the “Fight for 15” could enable a wave of youth lawlessness February 23, 2021
Economy, finance, and budgets
Politics and law
Public safety

With Democrats in full control of the federal government for the first time in more than a decade, an increase in the minimum wage looks more likely than ever. Both President Joe Biden’s coronavirus stimulus proposal and a bill recently reintroduced by congressional Democrats propose raising the federal minimum to $15. Such a steep increase would have profound social and economic effects, boosting wages for some while driving others out of the work force. It could also contribute to another, less-expected consequence: a rise in crime.

A surprising body of research links increases in the minimum wage to increases in criminal offending by those most likely to lose jobs as a result of the wage hike. One analysis concluded that raising the federal minimum to $15 could create crime costs of up to $2.5 billion—a bill that would be borne disproportionately by the very people whom the wage hike is meant to help.

The minimum wage’s economic trade-offs are well known. It raises the take-home pay of some, while causing others—particularly teens, young adults, and less-skilled workers—to lose their jobs. The Congressional Budget Office has estimated that a $15 minimum would boost 17 million workers’ earnings by 11.8 percent, on average, but would also cost from 1 million to 3 million jobs.

Higher wages could make working more appealing than illegal activity for some. For others, put out of work by the hike, losing a job heightens the risk that they will go on to commit both property and violent crimes. After all, the people most likely to feel the economic downsides of a minimum-wage hike, in the form of lost jobs—the young—are also among those most likely to commit such crimes. Youths aged 16 to 24 make up just 12 percent of the population but were 23 percent of those arrested as of 2019; they account for a full third of those making less than $15 an hour. The CBO estimated that 16- to 19-year-olds alone would account for half of the job lost if the minimum wage reaches $15.

In one paper from last year, researchers evaluated decades of data to consider the relationship between minimum-wage hikes and crime among 16- to 24-year-olds, finding that the wage hikes tend to correlate with increased property crimes, particularly larcenies—a sign that some unemployed people decide to earn their keep through theft rather than finding another job. Minimum-wage hikes also lead to increases in disorderly-conduct arrests, indicating an increase in loitering and other idleness among teens and young adults. Based on this data, the researchers estimate that hiking the minimum to $15 would lead to an additional 423,000 property crimes, creating the aforementioned $2.5 billion in damages.

That analysis confirms other research. One paper, using slightly different data, linked a 1 percent increase in the minimum wage to a 1 percent to 3 percent increase in juvenile drug, property, and violent crime, with the violent offenses concentrated among those “with a clear monetary reward”—like auto theft and armed robbery. Another, by the same authors, links increases in the minimum wage to a higher risk of crime and idleness among a variety of younger workers, particularly those with prior gang affiliations. A third study found that a New York City summer employment programs cut teens’ risk of arrest by 17 percent, offering evidence that kids with jobs stay out of trouble.

Employment might deter crime for several reasons. One is opportunity cost: employment makes crime less appealing because the would-be offender risks his job along with everything else by offending. Employment may also have an incapacitating effect. Being at work, with a fixed schedule and mandatory place to be, limits opportunities for crime. Schools can have a similar influence: research shows that lower minimum dropout ages are associated with higher arrest rates.

Some argue that the loss of a job also induces crime out of economic necessity—those without jobs turn to stealing to feed their families, the thinking goes. But the minimum wage’s criminogenic effects concentrate not among the poorest, but among the youngest: 40 percent of low-wage workers, most of them teenagers, live with families with incomes three times the poverty level, the CBO notes. This is the same group made more prone to crime. The problem is not their poverty, but their opportunity for offending.

Some evidence suggests that higher minimum wages don’t always increase crime. One paper found that releasing felons into a higher minimum-wage jurisdiction leads to lower recidivism rates; another found that areas with higher minimum wages weather the crime caused by economic shocks better than those with lower minimums; a third revealed an anti-crime effect of living-wage ordinances, though that finding is sensitive to specification.

But even if the minimum wage at certain levels can reduce crime, it is likely that a sudden, large increase in the minimum wage—like a nationwide jump to $15 an hour—will cause crime rates to jump. One analysis, identifying a “u-shaped” relationship between the minimum wage and crime rates, identified the crime-minimizing wage as $8.70 an hour in 2018—well below what Democrats are asking for.

With unemployment well above pre-coronavirus levels and small businesses struggling, now is perhaps the worst time for a steep minimum-wage hike. That such a policy could lead to millions of dollars in costs from crime, and create thousands of new criminals, is all the more reason to oppose the policy as dangerous and misguided for American cities.

Photo: Михаил Руденко/iStock

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