Understanding Criminal Record Penalties in the Labor Market
June 2025
Working Paper Number:
CES-25-39
Abstract
This paper studies the earnings and employment penalties associated with a criminal record. Using a large-scale dataset linking criminal justice and employer-employee wage records, we estimate two-way fixed effects models that decompose earnings into worker's portable earnings potential and firm pay premia, both of which are allowed to shift after a worker acquires a record. We find that firm pay premia explain a small share of earnings gaps between workers with and without a record. There is little evidence of variable within-firm premia gaps either. Instead, components of workers' earnings potential that persist across firms explain the bulk of gaps. Conditional on earnings potential, workers with a record are also substantially less likely to be employed. Difference-in-differences estimates comparing workers' first conviction to workers charged but not convicted or charged later support these findings. The results suggest that criminal record penalties operate primarily by changing whether workers are employed and their earnings potential at every firm rather than increasing sorting into lower-paying jobs, although the bulk of gaps can be attributed to differences that existed prior to acquiring a record.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
earnings,
employee,
employ,
employed,
effect wages,
wage gap,
effects employment,
earn,
wage earnings,
employment earnings,
earnings employees,
crime
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Internal Revenue Service,
Social Security Administration,
Ordinary Least Squares,
National Longitudinal Survey of Youth,
North American Industry Classification System,
American Community Survey,
Longitudinal Employer Household Dynamics,
AKM,
Protected Identification Key,
University of Michigan,
Census Bureau Disclosure Review Board,
Federal Statistical Research Data Center,
COVID-19
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Understanding Criminal Record Penalties in the Labor Market' are listed below in order of similarity.
-
Working PaperIndustry Wage Differentials: A Firm-Based Approach
August 2023
Working Paper Number:
CES-23-40
We revisit the estimation of industry wage differentials using linked employer-employee data from the U.S. LEHD program. Building on recent advances in the measurement of employer wage premiums, we define the industry wage effect as the employment-weighted average workplace premium in that industry. We show that cross-sectional estimates of industry differentials overstate the pay premiums due to unmeasured worker heterogeneity. Conversely, estimates based on industry movers understate the true premiums, due to unmeasured heterogeneity in pay premiums within industries. Industry movers who switch to higher-premium industries tend to leave firms in the origin sector that pay above-average premiums and move to firms in the destination sector with below-average premiums (and vice versa), attenuating the measured industry effects. Our preferred estimates reveal substantial heterogeneity in narrowly-defined industry premiums, with a standard deviation of 12%. On average, workers in higher-paying industries have higher observed and unobserved skills, widening between-industry wage inequality. There are also small but systematic differences in industry premiums across cities, with a wider distribution of pay premiums and more worker sorting in cities with more highpremium firms and high-skilled workers.View Full Paper PDF
-
Working PaperLocation, Location, Location
October 2021
Working Paper Number:
CES-21-32R
We use data from the Longitudinal Employer-Household Dynamics program to study the causal effects of location on earnings. Starting from a model with employer and employee fixed effects, we estimate the average earnings premiums associated with jobs in different commuting zones (CZs) and different CZ-industry pairs. About half of the variation in mean wages across CZs is attributable to differences in worker ability (as measured by their fixed effects); the other half is attributable to place effects. We show that the place effects from a richly specified cross sectional wage model overstate the causal effects of place (due to unobserved worker ability), while those from a model that simply adds person fixed effects understate the causal effects (due to unobserved heterogeneity in the premiums paid by different firms in the same CZ). Local industry agglomerations are associated with higher wages, but overall differences in industry composition and in CZ-specific returns to industries explain only a small fraction of average place effects. Estimating separate place effects for college and non-college workers, we find that the college wage gap is bigger in larger and higher-wage places, but that two-thirds of this variation is attributable to differences in the relative skills of the two groups in different places. Most of the remaining variation reflects the enhanced sorting of more educated workers to higher-paying industries in larger and higher-wage CZs. Finally, we find that local housing costs at least fully offset local pay premiums, implying that workers who move to larger CZs have no higher net-of-housing consumption.View Full Paper PDF
-
Working PaperSize Matters: Matching Externalities and the Advantages of Large Labor Markets
April 2025
Working Paper Number:
CES-25-22
Economists have long hypothesized that large and thick labor markets facilitate the matching between workers and firms. We use administrative data from the LEHD to compare the job search outcomes of workers originally in large and small markets who lost their jobs due to a firm closure. We define a labor market as the Commuting Zone'industry pair in the quarter before the closure. To account for the possible sorting of high-quality workers into larger markets, the effect of market size is identified by comparing workers in large and small markets within the same CZ, conditional on workers fixed effects. In the six quarters before their firm's closure, workers in small and large markets have a similar probability of employment and quarterly earnings. Following the closure, workers in larger markets experience significantly shorter non-employment spells and smaller earning losses than workers in smaller markets, indicating that larger markets partially insure workers against idiosyncratic employment shocks. A 1 percent increase in market size results in a 0.015 and 0.023 percentage points increase in the 1-year re-employment probability of high school and college graduates, respectively. Displaced workers in larger markets also experience a significantly lower need for relocation to a different CZ. Conditional on finding a new job, the quality of the new worker-firm match is higher in larger markets, as proxied by a higher probability that the new match lasts more than one year; the new industry is the same as the old one; and the new industry is a 'good fit' for the worker's college major. Consistent with the notion that market size should be particularly consequential for more specialized workers, we find that the effects are larger in industries where human capital is more specialized and less portable. Our findings may help explain the geographical agglomeration of industries'especially those that make intensive use of highly specialized workers'and validate one of the mechanisms that urban economists have proposed for the existence of agglomeration economies.View Full Paper PDF
-
Working PaperCriminal court fees, earnings, and expenditures: A multi-state RD analysis of survey and administrative data
February 2023
Working Paper Number:
CES-23-06
Millions of people in the United States face fines and fees in the criminal court system each year, totaling over $27 billion in overall criminal debt to-date. In this study, we leverage five distinct natural experiments in Florida, Michigan, North Carolina, Texas, and Wisconsin using regression discontinuity designs to evaluate the causal impact of such financial sanctions and user fees. We consider a range of long-term outcomes including employment, recidivism, household expenditures, and other self-reported measures of well-being, which we measure through a combination of administrative records on earnings and employment, the Criminal Justice Administrative Records System, and household surveys. We find consistent evidence across the range of natural experiments and subgroup analyses of precise null effects on the population, ruling out long-run impacts larger than +/-3.6% on total earnings and +/-4.7% on total recidivism. Failure to find changes in outcomes undermines popular narratives of poverty traps arising from criminal debt but argues against the use of fines and fees as a source of local revenue and as a crime control tool.View Full Paper PDF
-
Working PaperEstimating the Impact of the Age of Criminal Majority: Decomposing Multiple Treatments in a Regression Discontinuity Framework
January 2023
Working Paper Number:
CES-23-01
This paper studies the impact of adult prosecution on recidivism and employment trajectories for adolescent, first-time felony defendants. We use extensive linked Criminal Justice Administrative Record System and socio-economic data from Wayne County, Michigan (Detroit). Using the discrete age of majority rule and a regression discontinuity design, we find that adult prosecution reduces future criminal charges over 5 years by 0.48 felony cases (? 20%) while also worsening labor market outcomes: 0.76 fewer employers (? 19%) and $674 fewer earnings (? 21%) per year. We develop a novel econometric framework that combines standard regression discontinuity methods with predictive machine learning models to identify mechanism-specific treatment effects that underpin the overall impact of adult prosecution. We leverage these estimates to consider four policy counterfactuals: (1) raising the age of majority, (2) increasing adult dismissals to match the juvenile disposition rates, (3) eliminating adult incarceration, and (4) expanding juvenile record sealing opportunities to teenage adult defendants. All four scenarios generate positive returns for government budgets. When accounting for impacts to defendants as well as victim costs borne by society stemming from increases in recidivism, we find positive social returns for juvenile record sealing expansions and dismissing marginal adult charges; raising the age of majority breaks even. Eliminating prison for first-time adult felony defendants, however, increases net social costs. Policymakers may still find this attractive if they are willing to value beneficiaries (taxpayers and defendants) slightly higher (124%) than potential victims.View Full Paper PDF
-
Working PaperRe-assessing the Spatial Mismatch Hypothesis
April 2025
Working Paper Number:
CES-25-23
We use detailed location information from the Longitudinal Employer-Household Dynamics (LEHD) database to develop new evidence on the effects of spatial mismatch on the relative earnings of Black workers in large US cities. We classify workplaces by the size of the pay premiums they offer in a two-way fixed effects model, providing a simple metric for defining 'good' jobs. We show that: (a) Black workers earn nearly the same average wage premiums as whites; (b) in most cities Black workers live closer to jobs, and closer to good jobs, than do whites; (c) Black workers typically commute shorter distances than whites; and (d) people who commute further earn higher average pay premiums, but the elasticity with respect to distance traveled is slightly lower for Black workers. We conclude that geographic proximity to good jobs is unlikely to be a major source of the racial earnings gaps in major U.S. cities today.View Full Paper PDF
-
Working PaperU.S. Long-Term Earnings Outcomes by Sex, Race, Ethnicity, and Place of Birth
May 2021
Working Paper Number:
CES-21-07R
This paper is part of the Global Income Dynamics Project cross-country comparison of earnings inequality, volatility, and mobility. Using data from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics (LEHD) infrastructure files we produce a uniform set of earnings statistics for the U.S. From 1998 to 2019, we find U.S. earnings inequality has increased and volatility has decreased. The combination of increased inequality and reduced volatility suggest earnings growth differs substantially across different demographic groups. We explore this further by estimating 12-year average earnings for a single cohort of age 25-54 eligible workers. Differences in labor supply (hours paid and quarters worked) are found to explain almost 90% of the variation in worker earnings, although even after controlling for labor supply substantial earnings differences across demographic groups remain unexplained. Using a quantile regression approach, we estimate counterfactual earnings distributions for each demographic group. We find that at the bottom of the earnings distribution differences in characteristics such as hours paid, geographic division, industry, and education explain almost all the earnings gap, however above the median the contribution of the differences in the returns to characteristics becomes the dominant component.View Full Paper PDF
-
Working PaperThe Long-Term Effects of Job Mobility on the Adult Earnings of Young Men: Evidence from Integrated Employer-Employee Data
June 2005
Working Paper Number:
CES-05-05
The paper follows a population of 18-year-old men to examine the impact that early job mobility has on their earnings prospects as young adults. Longitudinal employer-employee data from the state of Maryland allow me to take into consideration the endogenous determination of mobility in response to unobserved worker as well as firm characteristics, which may lead to spurious results. The descriptive portion of the paper shows that mobility patterns of young workers differ considerably with the characteristics of the firm; however, growth patterns are not significantly different on average. Workers employed in high-turnover firms (such as those in retail and services) experience more job turnover but similar rates of wage growth compared to workers employed in low turnover firms (such as those in manufacturing); however, their wage levels remain below and the wage gap actually increases over time. Regression results controlling for unobservable show that employers in the low-turnover sector discount earnings of workers who displayed early market mobility. By contrast, I find no evidence that mobility has negative effects for workers that remain employed in the high turnover sector.View Full Paper PDF
-
Working PaperBetween Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects
February 2020
Working Paper Number:
CES-20-08
We find that most of the rising between firm earnings inequality that dominates the overall increase in inequality in the U.S. is accounted for by industry effects. These industry effects stem from rising inter-industry earnings differentials and not from changing distribution of employment across industries. We also find the rising inter-industry earnings differentials are almost completely accounted for by occupation effects. These results link together the key findings from separate components of the recent literature: one focuses on firm effects and the other on occupation effects. The link via industry effects challenges conventional wisdom.View Full Paper PDF
-
Working PaperComputing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data
March 2002
Working Paper Number:
tp-2002-06
In this paper we provide the exact formulas for the direct least squares estimation of statistical models that include both person and firm effects. We also provide an algorithm for determining the estimable functions of the person and firm effects (the identifiable effects). The computational techniques are also directly applicable to any linear two-factor analysis of covariance with two high-dimension non-orthogonal factors. We show that the application of the exact solution does not change the substantive conclusions about the relative importance of person and firm effects in the explanation of log real compensation; however, the correlation between person and firm effects is negative, not weakly positive, in the exact solution. We also provide guidance for using the methods developed in earlier work to obtain an accurate approximation.View Full Paper PDF
