Inequality in Wages

Penal population growth in the 1980s and 1990s made incarceration a common life event for disadvantaged and minority men. In the 13 years from 1985 to 1998, the prison and jail population grew by 7.3 percent, numbering 1.8 million by 1998 (Gilliard 1999). Penal expansion significantly affected unskilled African American youth. On an average day in 1996, more black male high school dropouts aged 20 to 35 were in custody than in paid employment (Western and Pettit 2000). By 1999, over one-fifth of blacks non college men in their early thirties had prison records. Although historically a rare event reserved for violent or incorrigible offenders, during recent year’s incarceration has become pervasive among socially marginal men.

The prison boom of the 1980s and 1990s coincided with growing polarization of the American labor market. Wage inequality increased during these decades, and wage declines were particularly large among men with little education. Wage decline or stagnation was especially marked among black and Hispanic men (Wright and Dwyer 2000).

The relationship between prison growth and falling wages among low-skill and minority men might be interpreted in several ways. Men with felony records have difficulty finding good jobs. A small research literature thus finds incarceration reduces earnings. Given increases in wage inequality through the 1980s and 1990s, however, the low earnings of ex-convicts may be an artifact of widespread wage stagnation among men with little schooling.

A strong causal inference about the negative effect of imprisonment on wages is also threatened by the fact that men with few economic opportunities may turn to crime. This link between crime and economic disadvantage has been shown in many ways. At the aggregate level, unemployment rates are found to drive variation in crime rates. At the individual level, unemployed men are more likely to engage in crime. Conversely, desistance from crime is associated with the social...