Thursday, February 19, 2015

The minimum wage can increase crime rates

In a 1972 article in the Journal of Political Economy researchers found a strong relationship between youth unemployment and crime rates. Other studies such as Fleisher (1966) and Freeman and Holzer (1986) found similar results. I am sure that there are more recent ones as well but I am not up to date on that literature.

Below is a chart showing the year over year, January unemployment rate for 16 - 19 year olds from 1990 to 2015 by year. (click to enlarge)

The most recent data available is for January 2015 and the rate was 18.8%. The rate increased drastically during the recession and peaked in 2010 at 26.1%.

There are many studies that show that higher minimum wages decrease the employment rate of unskilled, usually young, workers (see here, here, and here). I also showed the relationship between the real value of the minimum wage and white and black youth unemployment in an earlier blog post.

The negative outcome of increased crime rates is not usually brought up when increases in the minimum wage are being debated, but it is a real outcome. People who support a higher minimum wage need to be aware that they are pushing low skilled, often young, workers out of jobs and potentially into a criminal career. This is also consistent with economic theory, since the opportunity cost of committing a crime is lower for unemployed, low skilled people than for people with jobs and higher skilled people.

The U.S. prison system is already overcrowded; politicians don't need to create more criminals by making it harder for young people to find jobs and gain skills. Public policy needs to encourage economic growth so that young people are able to find jobs and gain experience that will help them lead productive lives. Having a job also makes it more costly to commit a crime. The minimum wage is a hindrance to youth employment and needs to be tossed on the scrap heap.

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