Working Paper: NBER ID: w25647
Authors: Zachary S. Fone; Joseph J. Sabia; Resul Cesur
Abstract: An April 2016 Council of Economic Advisers (CEA) report advocated raising the minimum wage to deter crime. This recommendation rests on the assumption that minimum wage hikes increase the returns to legitimate labor market work while generating minimal adverse employment effects. This study comprehensively assesses the impact of minimum wages on arrests using data from the 1998-2016 Uniform Crime Reports (UCR) and the 1998-2016 waves of the National Longitudinal Survey of Youth 1997 (NLSY97). In contrast to the CEA claim, our results provide no evidence that minimum wage increases reduce arrests. Instead, we find that raising the minimum wage increases property crime arrests among 16-to-24-year-olds, with an estimated elasticity of approximately 0.2. This result persists when we use longitudinal data to isolate workers for whom minimum wages bind. Auxiliary analyses using the Current Population Survey (CPS) suggest that our findings are likely driven by adverse labor demand effects of the minimum wage. Our estimates suggest that a $15 Federal minimum wage could generate criminal externality costs of nearly $2.5 billion.
Keywords: Minimum Wage; Crime; Labor Demand; Youth; Economic Policy
JEL Codes: J01; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum wage increases (J38) | Property crime arrests (K42) |
| Adverse labor demand effects (J23) | Property crime arrests (K42) |
| Minimum wage increases (J38) | Adverse labor demand effects (J23) |