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Crime and the minimum wage

Author

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  • Christine Braun

    (European University Institute)

Abstract

How does the minimum wage affect crime rates? Empirical research suggests that increasing a worker's wage can deter him from committing crimes. On the other hand, if that worker becomes displaced as a result of the minimum wage, he may be more likely to commit a crime. In this paper, I describe a frictional world in which a worker's criminal actions are linked to his labor market outcomes. The model is calibrated to match labor market outcomes and crime decisions of workers from the National Longitudinal Survey of Youth 1997, and shows that the relationship between the aggregate crime rate and the minimum wage is U-shaped. The results from the calibrated model, as well as empirical evidence from county level crime data and state level minimum wage changes from 1995 to 2014, suggest that the crime minimizing minimum to median wage ratio for 16 to 19 year olds is 0.91. However, the welfare maximizing minimum to median wage ratio is 0.87, not equal to the crime minimizing value. The median wage of 16 to 19 year olds in the United States in 2018 was $10, suggesting that any federal minimum wage increase up to $8.70 may be welfare improving. (Copyright: Elsevier)

Suggested Citation

  • Christine Braun, 2019. "Crime and the minimum wage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 122-152, April.
    • Handle: RePEc:red:issued:18-265
    DOI: 10.1016/j.red.2019.02.002
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    1. Hill, Seth J, 2023. "Minimum Wages and Homelessness," OSF Preprints z2fqj, Center for Open Science.
    2. Eric Melander & Martina Miotto, 2023. "Welfare Cuts and Crime: Evidence from the New Poor Law," The Economic Journal, Royal Economic Society, vol. 133(651), pages 1248-1264.
    3. Pallab K. Ghosh & Gary A. Hoover & Zexuan Liu, 2020. "Do State Minimum Wages Affect the Incarceration Rate?," Southern Economic Journal, John Wiley & Sons, vol. 86(3), pages 845-872, January.
    4. Sinha, Avik & Sengupta, Tuhin, 2020. "Governance Quality and Tourism: Moderation of Social Determinants of Crime," MPRA Paper 102212, University Library of Munich, Germany, revised 2020.
    5. Fone, Zachary S. & Sabia, Joseph J. & Cesur, Resul, 2023. "The unintended effects of minimum wage increases on crime," Journal of Public Economics, Elsevier, vol. 219(C).
    6. Amanda Y. Agan & Michael D. Makowsky, 2023. "The Minimum Wage, EITC, and Criminal Recidivism," Journal of Human Resources, University of Wisconsin Press, vol. 58(5), pages 1712-1751.
    7. King Yoong Lim & Pengfei Jia & Ali Raza, 2018. "Crime, Human Capital, and the Impact of Different Taxation," Working Papers 220851234, Lancaster University Management School, Economics Department.
    8. Billy, Alexander & Packard, Michael, 2022. "Crime and the Mariel Boatlift," International Review of Law and Economics, Elsevier, vol. 72(C).
    9. Maham Furqan & Haider Mahmood, 2020. "Does education reduce homicide? A panel data analysis of Asian region," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1197-1209, August.
    10. David Neumark, 2024. "The effects of minimum wages on (almost) everything? A review of recent evidence on health and related behaviors," LABOUR, CEIS, vol. 38(1), pages 1-65, March.
    11. Mascarúa Lara Miguel A., 2022. "Imperfect Law Enforcement, Informality, and Organized Crime," Working Papers 2022-16, Banco de México.
    12. M. Antonella Mancino, 2022. "A Search Model Of Early Employment Careers And Youth Crime," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 329-390, February.
    13. Otsu, Yuki & Yuen, C.Y. Kelvin, 2022. "Health, crime, and the labor market: Theory and policy analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    14. Griffy, Benjamin & Masters, Adrian, 2022. "Labor market policy in the presence of a participation externality," European Economic Review, Elsevier, vol. 144(C).
    15. Jiménez, Bruno, 2023. "The Political economy of the minimum wage," Labour Economics, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Crime; Minimum wage; Unemployment;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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