The Persistent Wage Penalty: The Impact of a Criminal Record on Earnings
The Impact of a Criminal Background on Lifetime Earnings, with Potential Wage Reductions of Up to 30% Persistently.
A criminal record can have a lasting effect on an individual's income, leading to a significant pay cut that casts a shadow over their entire career.
New research and decades of audit studies reveal that an average worker with a record earns about one-third less than their peers, faces steeper unemployment periods, and is more likely to end up in low-paying jobs. In the U.S., annual earnings take a hit of 16% after a misdemeanor conviction, 22% after a non-custodial felony, and a staggering 52% after serving time in prison.
This trend is far from brief. Research shows that the wage penalty doesn't simply vanish when the record is cleared, but sticks around.
About 77 million Americans, or one-third of all adults, have a criminal record that may show up in an employment background check. The lost lifetime earnings for individuals with a criminal record can amount to around $484,000. Taken together, reduced wages for those with past convictions add up to over $372 billion every year, underscoring the broader economic costs.
The wage penalty also varies with the severity of the crime, with formerly incarcerated workers' pay cut in half, those with non-custodial felonies or misdemeanors losing about a quarter and one-sixth of their earnings, respectively.
Why Employers Pass on Ex-convicts
Employers' hesitation towards hiring individuals with criminal records primarily stems from two concerns: stigma and regulations.
Audit studies reveal that merely listing a prior felony can cut call-back rates in half, with a sharper drop for Black applicants, suggesting that employers are reluctant to offer even a first interview or invest in hiring and training such candidates out of fear of potential liabilities, safety risks, and damage to their reputation.
Many industries, such as healthcare, finance, education, and transportation, have explicit bans on hiring applicants with specific convictions. Additionally, a minor offense can shave off 16% of wages as it funnels workers into sectors with lower pay and limited prospects for advancement.
Demographic Disparities
Given that arrest and conviction rates are disproportionately higher for Blacks and Latinos, the wage penalty further widens existing racial pay gaps. Women with records tend to earn even less relative to similar women without records compared to men, due to overrepresentation in care-sector jobs that extensively use background checks.
The Bottom Line
A criminal record can result in a lifetime of lower earnings and long-term economic instability. Despite being a social justice issue, "second-chance" hiring and clean-slate record sealing can be sound economic policy, unlocking an untapped pool of talent and contributing to society's prosperity.
- The crypto mining industry, with its increasing popularity, is subject to various regulations due to concerns about energy consumption and environmental impact.
- In the general news and politics, discussions on the regulation of Initial Coin Offerings (ICOs) and their role in the crypto market have gained momentum.
- Recently, there has been a growing movement advocating for the use of tokens in underground economies, raising concerns about crime and justice in relation to these digital assets.
- Despite the low-paying jobs many ex-convicts must settle for, some have turned to crypto trading as an alternative means to supplement their income due to the lack of opportunities in the traditional job market.
