Welfare can discourage crime more than discouragement

Over the past few decades, developed countries have seen significant changes in social assistance programs. In the United States, the 1996 Welfare Reform Act reduced welfare programs and barred enrollment, including job requirements and re-certification. The austerity measures introduced in Europe during the Great Recession introduced similar cuts. Cuts in welfare programs have historically been motivated by concerns that such programs could discourage educational achievement and work – in effect, they could make people lazy. Studies on the impact of welfare programs on work have yielded mixed results. In general, they find that welfare programs discourage work to some extent, although often it is among individuals who cannot earn much even in the absence of the program (e.g. Maestas et al. 2013, Hoynes and Schanzenbach 2012, Garthwaite et al. 2014).

In a new study (Deshpande and Mারller-Smith 2022), we study the impact of welfare programs on a different kind of ‘work’: criminal activity that aims to generate income. Using a natural test created by the 1996 Welfare Reform Act, we found that the removal of young adults from the U.S. Supplemental Security Income (SSI) program increases the involvement of criminal justice, and in particular illegal activity for income generation purposes. We estimate that removing a young adult from SSI increases the number of criminal charges associated with an increase in income (theft, theft, robbery, drug distribution, prostitution, and fraud) by 60% over the next two decades. This increase in criminal activity leads to a 60% increase in the probability of being in prison in a given year over the same period.

Impact of supplemental security income on crime

We use a policy change made by the Personal Responsibility and Job Opportunity Act of 1996, commonly known as welfare reform. Among its many restrictions on welfare programs, the law included a rule that children receiving SSI benefits for disability must be re-evaluated for SSI under strict rules for adults over the age of 18. Under the new rules, any child, including the 18th birthday, was re-evaluated as an adult after enactment (August 22, 1996). Figure 1 illustrates the natural test we use. Most children who had an 18th birthday after 22 August 1996 were re-evaluated, and many were removed from SSI as adults. In contrast, almost all children, including 18th birthdays before this date, are protected from reassessment and adults are allowed to enter the program.

This rule thus created an unfortunate group of young adults just after the date of birth cut-off who, despite not having different health or earning potential compared to individuals just before the cut-off, were much more likely to be removed from SSI with age. Off 18. Since the only difference between young adults on both sides of the cut-off is their likelihood of review and removal, we can compare the results of adults on both sides to measure the effect of removal from SSI at 18 years of age. We focus on two main outcomes: formal employment (also assessed in Deshpande 2016) and the involvement of criminal justice (new in Deshpande and Muller-Smith 2022). To measure criminal charges and imprisonment, we create the first link of data from the Social Security Administration to the criminal record using data from the Criminal Justice Administrative Record System.

We see that SSI removal at the age of 18 increases the number of criminal charges by 30%. The panel below Figure 1 shows a sharp increase in the number of criminal charges in the cut-off, which means that there are more criminal charges against all young adults who have received reviews and have been removed from SSI. Importantly, the increase in charges is almost entirely centered on illegal activities that are for income purposes – such as theft, theft, robbery, fraud, drug distribution and prostitution. In the case of men the effects are centered on theft, robbery and drug distribution, while in the case of women they are centered on theft, fraud (e.g. identity theft) and prostitution. In contrast, the number of violent crimes or other non-income-generating crimes has increased very little.

Figure 1 The removal of SSI increases the involvement of criminal justice

Comments: The top figure plots the probability of getting a medical review at the age of 18 and the probability of receiving a review at the age of 18 (i.e., being removed from SSI at the age of 18). The figure below shows the total number of income-generating charges between the ages of 18 and 38 years. The sample is SSI children who have an 18th birthday within 18 months of the August 22, 1996 cut-off who live in a county with CJARS coverage. See Deshpande and Mueller-Smith (2022) for details.

This research suggests that many of these young adults try to replace their lost SSI income with income from illegal activity. In fact, over the next two decades of SSI removal, the impact of SSI removal on the likelihood of maintaining stable employment is almost double the likelihood of having criminal charges associated with an increase in income compared to the impact of SSI removal. Moreover, the effects of criminal activity are highly lasting: even as young adults reach the age of 40, the effects of removal from SSI at the age of 18 affect the likelihood of facing a criminal complaint. Much of the perseverance can be explained by the Great Recession, which seems to have widened the impact of SSI removal.

The increase in criminal charges as a result of the removal of SSI has real consequences for young adults and society as a whole. For young adults, SSI removal increases the probability of imprisonment in a given year from 5% to 8%, 60%. There is ample evidence that incarceration and having a criminal record have adverse consequences for future outcomes (Aizer and Doyle 2015, Mueller-Smith 2015, Mueller-Smith and Schnepel 2021, Agan et al. 2021, Augustine et al. 2021). Regarding the impact for society, we calculate that the cost of application and imprisonment almost excludes government savings from lower costs on SSI benefits. Furthermore, the cost of victims of increased criminal activity (Binder and Kettle 2022) is surprising: I 85,600 per SSI removal based on our calculations using conservative estimates.

Impact for welfare policy

What do the effects of removing young adults from SSI tell us about the impact of cash welfare in general? To be sure, a certain population of young adults removed from SSI: they were disabled as children and came from poor families. But other factors suggest that the results may be generalized to programs such as extended child tax credits or universal basic income. Like these proposed programs, SSI offers a great cash benefit for low-income families. The population of SSI recipients removed from SSI is more similar to the general population than the average SSI recipient. Furthermore, we find the effect of SSI removal on the involvement of criminal justice in each observable subgroup. Our results are consistent with other studies that suggest that income affects involvement in criminal justice (Akee 2008).

More generally, the results call into question the historical focus of welfare policy on job discouragement. We show that SSI actually discourages formal employment among young adults, with many of its major effects being discouraging criminal activity. For these young adults, it may not be possible to maintain stable employment in the formal labor market whether they receive SSI benefits or not. They may have insufficient jobs to absorb in the labor market, or they may have insufficient skills to compete for employment. Many tend to engage in criminal activity instead of recovering lost income after being removed from SSI, with surprising consequences for their own lives and the wider society.

References

Agan, A, J Doleac, and A Harvey (2021), “Misdemeanor Prosecution”, Working Paper.

Eiser, A and JJ Doyle (2015), “Juvenile Incarceration, Human Capital, and Future Crime: Evidence from Randomly Assigned Judges”, Quarterly Journal of Economics 130 (2): 759–803 (see also Vox column here).

Akee, R (2008), “Parental Income and Children’s Outcomes”, Vox Talk, 3 October.

Augustine, E, J Lacoe, S Raphael, and A Skog (2021), “The Impact of the Fellowship Diversion in San Francisco”, Working Paper.

Bindler, A and N Ketel (2022), “The far-reaching consequences of being a victim of crime”, VoxEU.org, 6 February.

Deshpande, M (2016), “Does welfare hinder success? The long-term effects of removing low-income youth from the disability list “, American Economic Review 106 (11): 3300–3330.

In Deshpande, M and M Muller-Smith (2022), “Does Welfare Prevent Crime? Results of criminal trial of youth from SSI ” Quarterly Journal of Economics.

Garthwaite, C, T Gross, and MJ Notowidigdo (2014), “Public Health Insurance, Labor Supply, and Employment Lock”, Quarterly Journal of Economics 129 (2): 653–696.

Hoynes, HW and DW Schanzenbach (2012), “Work Incentives and the Food Stamp Program,” Journal of Public Economics 96 (1): 151–162.

Maestas, N, K Mullen, and A Strand (2013), “Des Disability Insurance Receipt discourage Work? Uses tester assignments to estimate the causal effect of SSDI receipts “, American Economic Review 103 (5): 1797-1829.

Mueller-Smith, M (2015), “Crime and Labor Market Impact in Prisons”, worksheet.

Mueller-Smith, M and K Schnepel (2021), “Aversion to the criminal justice system”, Review of Economic Studies 88 (2): 883–936.

Leave a Reply

Your email address will not be published.