Minimum Wage Hikes Increase Crime, National Bureau of Economic Research Study Finds

Ryan Bourne – March 22, 2019

Do minimum wage increases raise crime rates? They do for younger workers and property crimes, finds a new paper by Zachary S. Fone, Joseph J. Sabia and Resul Cesur.

Back in 2016, President Obama’s Council of Economic Advisors (CEA) claimed raising the minimum wage to $12 per hour could prevent up to half a million crimes annually. The basic idea was simple: there is good evidence criminal behavior is negatively related to wages. The CEA thought raising the minimum wage would raise the opportunity cost of low-paid workers engaging in crime.

Implicitly they were saying this crime-reduction effect would dominate any impact of job losses or hour reductions leading to more property crime, for economic reasons, or violent crime, for despair-related reasons. But this new paper suggests the CEA’s intuition on the balance of the effects was wrong, for younger workers especially.

The economists use three large crime datasets over a two-decade period to undertake regression analysis of the effect of minimum wages on different crime rates. They control for policing characteristics, crime policy, demographics, health and social welfare policies, minimum high school dropout ages and government lifestyles regulation. Doing so presents robust evidence that minimum wage hikes do not reduce crime. In fact, they increase property crime arrests among 16-24 year-olds – the group for whom the minimum wage is most likely to bite.

Their regressions find little evidence minimum wage hikes affect violent or drug crime, or net crime among older individuals. But the impact on young people is positive and strongest when the minimum wage hikes are larger. Digging deeper, they find that the property crimes spike is driven by larcenies rather than burglaries, motor vehicle theft or arson. The results are strongest for counties with populations over 100,000 and are likely driven by the traditional labor demand impact of minimum wage hikes (fewer jobs or reduced hours).

The results they obtain of the crime responsiveness to minimum wage hikes implies that a 10 percent increase in the minimum wage between 1998 and 2016 led to nearly 80,000 additional property crimes committed by 16-to-24-year-olds. This would imply that implementing the $15 per hour Raise The Wage Act today could generate another 410,000 property crimes.

This article was reprinted from the Cato Institute.

Image Credit: Wikimedia Commons | CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)

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