Freeman 2011 Why Do So Many Young American Men Commit Crimes and What Might We Do About It

Journal of Economic Perspectives— Volume 10, Number 1 — Winter 1996—Pages 25–42
Why Do So Many Young American Men

Commit Crimes and What Might We Do
About It?
Richard B. Freeman
I
n the past two decades or so, more and more American men, particularly the
young, the less educated and blacks, have been involved in crime, despite an
increased risk of imprisonment. From the mid-1970s to the mid-1990s, the
United States roughly tripled the number of men in prison or jail, so that by 1993
one man was incarcerated for every 50 men in the workforce. Incapacitation of so
many criminals should have gready reduced the crime rate: if the worst offenders
are in prison, they can't mug, rob or otherwise commit offenses against the citi-
zenry. But no such drastic reduction in crime occurred. The number of crimes
reported to the police roughly stabilized while the rate of victimizations (which
includes crimes not reported to the police) dropped far less rapidly than could
reasonably be expected. Noninstitutionalized men evidendy "replaced" incarcer-
ated criminals in committing crimes.
Why? What induces young American men, particularly less educated and black
men, to engage in crime in large numbers despite the risk of imprisonment? Is the
rising rate of criminal involvement related to the collapse in the job market for the
less skilled? Is "locking them up" the only efficacious way to fight crime?
In this essay I examine these questions. I show that participation in crime and
involvement with the criminal justice system has reached such levels as to become
part of normal economic life for many young men. I present evidence that labor
market incentives influence the level of crime and argue that the depressed labor
market for less skilled men in the 1980s and 1990s has contributed to the rise in
• Richard B. Freeman is Professor of Economics, Harvard University, and Research Fellow,

National Bureau of Economic Research, both in Cambridge, Massachusetts. This paper was
written while he was a visitor at the Centre for Economic Performance, London School of
Economics, London, Great Britain.
26 Journal of Economic Perspectives
criminal activity by less skilled men. Given the high costs of crime and imprison-
ment, even marginally effective crime prevention policies can be socially desirable.
Magnitudes of Criminal Involvement

The participation of American men in crime is staggering. Consider first the
number of men convicted of crime and sent to prison or jail. In 1993, 910,000 were
in state or federal prison; an additional 440,500 were in jail, for a total of 1,350,500
incarcerated.1 With a male workforce of 69.6 million or so, this is one man incar-
cerated for every 50 men in the workforce! This proportion is approximately the
same as the share of long-term unemployed men on the dole in many western
European countries. For every person incarcerated in the United States, approxi-
mately 2.1 were on probation and 0.5 were on parole—an additional 3,511,300
men with criminal involvement. All told, 7 percent as many men were "under the
supervision of the criminal justice system" (incarcerated, paroled or probated) as
were in the workforce.2
Most of those involved in crime are young. In 1993, 2.9 percent of 25- to 34-
year-old American men were incarcerated.3 Approximately 10 percent of men in
this age group were under supervision of the criminal justice system.
Many of those involved in crime are black. In 1993, about 7 percent of black
men over 18 were incarcerated. One black man was in prison for every eleven black
men in the workforce; and approximately one was under supervision of the criminal
justice system for every three to four black men in the workforce. Combine race
and age, and you find that 12 percent of black men aged 25–34 were incarcerated.
A disproportionate number of men in prisons are high school dropouts: the
1991 Survey of State Prison Inmates reports that two-thirds had not graduated high
school, though many had obtained a general equivalency degree (U.S. Department
of Justice, Bureau of Justice Statistics, 1993). Among 25- to 34-year-olds, approxi-
mately 12 percent of male dropouts were incarcerated in 1993.
Combine race, age and education: in 1993, 34 percent of high school dropout
25- to 34-year-old black men were incarcerated. Since many of those noninstitu-
tionalized will be put on probation or released on parole, a majority of the young
male black dropout population—which makes up 15 percent of black men aged
25–34—is under the supervision of the criminal justice system.4
1
The number of men in prison is from U.S. Bureau of Justice Statistics, Bulletin Prisoners in 1993; the
number of persons in jail is from U.S. Bureau of Justice Statistics, Bulletin Jail Inmates 1991—updated
by assuming a rate of growth similar to that for those in prison.
2
For those on probation or parole, I extrapolated 1990 or 1991 figures (Freeman, 1995) to get 2,690,400
probated after conviction for crime; 600,700 on parole, for a total of 3,291,100 probated or paroled.
3
The percentages I report are obtained by dividing the number of prisoners in a group by the nonin-
stitutionalized population plus the number of prisoners.
4
I have made these estimates by multiplying the number of dropouts in prison by the ratio of probatees
or parolees to prisoners for the overall male population. These numbers may be biased upward, since
judges may be less likely to sentence dropouts to probation than they would men with high school
educations or more.
Richard B. Freeman 27
When prisoners complete their sentences, a large number do not return to

society rehabilitated to enter the job market. Prisoners have high recidivism rates
(Needels, 1994). Many offenders sentenced to prison eventually return to society
with their labor market skills and opportunities reduced and their criminal skills
and opportunities enhanced. Young men who have been incarcerated have poor
employment records years into the future, controlling for many observable factors
and in comparison to their own preprison employment record (Freeman, 1992).
Criminality declines with age (raising questions about the extent to which incar-
ceration of aged criminals reduces crime), but crime is not a "teenage thing."
Rather, the population of offenders is a relatively permanent part of American
society—an "underclass" problem group that will not disappear naturally.
The numbers incarcerated or under supervision of the criminal justice system
in the United States are a decimal place beyond comparable statistics in other
advanced countries. In the United Kingdom, which has the highest rate of incar-
ceration in western Europe, approximately 50,000 men were in prison in 1993,
0.3 percent of the number in the workforce. The 1992 incarceration rate for the
entire population in the United States was five to 10 times that for western European
countries (Central Statistical Office, 1995, p. 167).
What is comparable in western Europe to the U.S. prison population are men
who have been unemployed and on the dole for a long time. In 1992, approximately
2 percent of the male workforce was unemployed for over one year in Europe's
largest economy, Germany. In the United Kingdom, the figure was 5.1 percent. In
France, it was 2.6 percent.5 Europe's long-term jobless are also removed from the
normal job market on a relatively permanent basis. Many leave unemployment to
obtain disability insurance or early retirement, rather than to return to the normal
job market.
The numbers incarcerated or under supervision do not measure the current
rate of criminal participation. Not every criminal is caught and arrested, much less
locked up. Persons under probation or parole may commit some crimes, but those
not yet under supervision of the criminal justice system commit many as well.
One way to determine participation in crime is through household surveys,
which ask respondents whether or not they committed crimes over some time pe-
riod. A surprisingly large number of young men self-report criminal involvement,
especially in samples that cover poor inner-city neighborhoods or that oversample
the disadvantaged. In one widely used survey, the National Longitudinal Survey of
Youth (which oversamples youths from poorer family backgrounds), 41 percent of
young men admitted in 1980 that they had committed crimes in the previous year.
In the 1989 Boston Youth Survey, 23 percent said that they had committed crimes
(Freeman, 1992, Table 6.3). Studies that seek to verify self-reported criminal
5
These estimates are obtained by multiplying the percentage of male unemployed who are unemployed
for over a year from OECD, Employment Outlook, July 1994, Table Q, with estimates of male unemployment
from OECD, Quarterly Labour Force Statistics, Number 4, 1994. The estimated male unemployment rate is
from register data.
behavior (say, by checking police records on arrests) find that white youths give
reasonably accurate reports, but that black youths understate their criminal involve-
ment (Hindelang, Hirschi and Weiss, 1981).
Another way to estimate the number of persons in the noninstitutional pop-
ulation involved in crime is to divide numbers of crimes by crimes committed per
criminal (called lambda by criminologists). Because estimates of the number of
crimes per criminal differ greatly, there is a wide band of uncertainty around this
calculation. Studies of prisoners suggest an average number of crimes of approxi-
mately 60 to 180 per year (Marvell and Moody, 1994, Table 1), though one may be
suspicious of self-reported numbers on the order of 180. But because a small num-
ber of criminals report committing a large number of crimes, the median number
of offenses per prisoner is just 12–15 per year. Since prisoners are a high-offending
group, moreover, their crime rates should exceed those of the nonincarcerated
population. Criminologists also estimate crimes per criminal by asking persons ar-
rested how many times they were arrested and dividing the number of arrests by
police data on the arrests per crime. These estimates suggest a rate around 11
(Marvell and Moody, 1994, p. 112). Finally, we have numbers of crimes reported
by youths on household surveys. In the NLSY, nonincarcerated youths who admit
having committed crimes report seven crimes over the year.
Given 15 million crimes reported to the police, 60–180 crimes per criminal
implies that there are just 83,000 to 250,000 criminals; 12 crimes per criminal im-
plies one million persons in the noninstitutional population committing crimes in
a year; 7 crimes per criminal implies 2.1 million persons committing crimes. Since
2.3 million arrests are made for "serious crimes" each year and some 8.5 million
arrests are made for "nonserious crimes," I regard as reasonable the estimate that
about 2 million noninstitutionalized persons commit crimes each year. The bottom
line is clear: crime is a substantial activity among men in the United States. Given
the age, race and education background of those incarcerated or arrested, it is a
major activity among important subgroups.
Trends in Criminal Participation
As noted at the outset, mass incarceration of criminals should have reduced

crime substantially. That it did not implies that there was a major increase in crim-
inal activity among the noninstitutionalized population. How big was this increase?
For the period from 1977 to 1992, I estimated the trend in criminal activity by the
noninstitutional population through a three-step procedure.
First, I calculated the reduction in crime due to the increased incapacitation
of criminals under conservative assumptions about the number of crimes the newly
incarcerated would have committed had they been on the street. As a simple ex-
ample, assume a population of 100, in which there are 40 crimes committed a year,
so that the crime/person ratio is .40. If each criminal commits 10 crimes, there are
four criminals in the population. When the government apprehends and imprisons
Why Do So Many Young American Men Commit Crimes? 29
Figure 1
The Rising Propensity to Commit Crime, 1977–1992
(1977=100)
two criminals, the crime/person ratio should, by the incapacitation effect, fall
roughly in half, to .204 (20/98).
Second, I compared this expected number of crimes to the actual number of
crimes as reported by the Uniform Crime Report of the FBI or National Crime
Survey on victimization.6 In the illustration given a moment ago, any crime rate
beyond .204 implies that those not previously committing crimes are now doing so
or that those committing crimes now commit more.
Third, I divided crimes committed to the predicted number to obtain an index
of the "Propensity to Commit Crime." This propensity reflects both the rate of
participation of noninstitutionalized men in crime and the intensity of criminal
activity. In the illustrative example, if 30 crimes were committed instead of the
predicted 20, then the propensity would have risen 50 percent; if 40 crimes were
committed, the propensity would have risen 100 percent. If the number of crimes
committed per criminal remains constant, then changes in the calculated propen-
sity must reflect a greater amount of criminal participation.
Figure 1 shows the trends resulting from these calculations, with the propensity
to commit crime in 1977 being normalized at 100. Using 1977 as a base year is
designed to choose a year not too far in the past, but prior to the large increase in
the jail and prison population. One line in Figure 1 shows the results of basing this
calculation on 10 crimes committed per person incarcerated, a figure based on the
Uniform Crime Report statistics. The calculations indicate that if the propensity to
commit crime had not increased, then the increase in the prison/jail population
should have more than halved the number of crimes committed per male. But
between 1977 and 1992, the crimes committed per male rose modestly. Thus, the
6
These are the two major sources of data on the volume of crime. Each year the FBI gathers the number
of crimes reported by police, which is used to create the Uniform Crime Rate index. Each year the
National Crime Survey asks households about victimizations for crimes. The two data sets differ in levels—
the UCR gives fewer crimes than the victimization survey, because people do not report all victimizations
to the police, and in trend. For efforts to reconcile the two series, see Boggess and Bound (1993).
propensity for criminal activity by noninstitutionalized men increased by 163

percent.
The second line on Figure 1 reports similar calculations using the victimization
data. In this calculation, based on the National Crime Survey, I assume the number
of victimizations per criminal to be 30. The result is an estimate that criminal pro-
pensity increased by 80 percent from 1977 to 1992. Alternative estimates of crimes
per incarcerated person give different magnitudes to the rise in propensity without
altering the message: the rate of criminal activity among noninstitutionalized men
rose sharply in this period.
Labor Market Causes of Crime
The correlates and causes of crime are complex and varied: among the factors
considered by criminologists are age, sex, family background, intelligence, biomed-
ical factors, community conditions, race, crime control strategies and economic
factors (Wilson and Petersilia, 1995). Without downplaying this complexity, I want
to direct attention to the proposition, dear to the heart of economists, that labor
market incentives influence the supply of men to crime, and, in particular, that
collapse of the job market for less skilled men during the 1980s and 1990s may have
contributed to their increased rate of criminal activity.
For the change in the labor market to help explain the high and rising rate of
criminal participation among American men, it is necessary that a) the economic
rewards from crime rose relative to those from legal work; and b) young men re-
spond significantly to relative rewards.
The Relative Rewards of Crime

The pecuniary returns to crime depend on legitimate earnings opportunities,
criminal earnings opportunities, the likelihood that crime will succeed, and the
penalty that a criminal will pay if caught.
It is well established that the legitimate earnings opportunities of low skill
men deteriorated substantially from the mid-1970s through the 1990s. Real earn-
ings fell sharply for the least educated and for those in the bottom rungs of the
earnings distribution. The exact magnitude of the decline in earnings depends
on the specific measure of earnings chosen, the deflator, years picked, the age
and skill group chosen and so on, but drops on the order of 20–30 percent that
accelerated in the 1990s are a reasonable estimate (Mishel and Bernstein, 1994).
Despite the putative job-creating effects of reduced pay, there was no offsetting
improvement in hours worked or employment/population rates for the less
skilled. To the contrary, hours worked over the year fell among those in the
bottom rungs of the wage distribution (Juhn, Murphy and Topel, 1991); and
employment-population rates for this group worsened in the 1970s, though not
in the 1980s (Blackburn, Bloom and Freeman, 1990). The implication is that
demand for less skilled male labor plummeted.
On the other side of the incentive equation are criminal earnings. Because
criminals are not forthcoming about their incomes, we do not have good estimates
of how much crime pays, much less of how criminal earnings have changed over
time.7 However, responses to survey questions on perceived criminal opportunities
suggest that criminal rewards have increased, at least among youth. In 1980, the
NBER Inner City Youth Survey asked youths in Boston, Chicago and Philadelphia
whether they thought they could make more "on the street" than in a legitimate
job. It also asked them about their perceptions of the availability of criminal op-
portunities. The 1989 Boston Youth Survey, conducted at the peak of the booming
''Massachusetts Miracle" job market, asked the same questions. Between these
dates, the proportion of youths who reported that they could earn more on the
street went up, from 31 percent in the three cities and 41 percent in Boston in 1980
to 63 percent in Boston in 1989. Similarly, the proportion who said they had
"chances to make illegal income several times a day" roughly doubled over the
period, to reach nearly 50 percent in 1989 (Freeman, 1992).
Youths who made money from crime in the 1980 NBER Survey of Inner City
reported average annual criminal earnings of $1,807 per year, whereas in the 1989
Boston Youth Survey annual youths reported average criminal earnings of $3,008—
which, deflated, implies a real increase of some 5 percent.8 Annual criminal earn-
ings are, the reader will note, not large. Even young men who said they committed
crimes weekly in 1989 reported earning just $5400 over the year. But transformed
into "hourly rates," these figures imply hourly earnings from crime of around
$10.00 for criminal activity in Boston in 1989. This exceeds the $7.50 youths re-
ported from legitimate work and the $5.00 or $6.00 or so in take-home pay they
would get from that work after Social Security and tax deductions.9
Estimates of the earnings for adult criminals tell a similar story. Reuter,
MacCoun and Murphy (1990) surveyed drug dealers in Washington, D.C., and
found that they earned $2000 per month net of expenses, which translated into
$30 per hour, making drug selling "much more profitable on an hourly basis than
are legitimate jobs available to the same person" (Reuter, MacCoun and Murphy,
1990, p. viii). They further estimated that the illegitimate earnings of drug dealers
exceeded their legitimate earnings by enough to make it financially worth their
7
One difficulty is that most criminals are self-employed, and thus do not face a market wage but rather
an earnings opportunity schedule in which hourly pay depends on the hours of work they choose. In
the Boston Youth Survey, those who committed a single crime in the past year earned $752, whereas
those who reported committing crimes once a week or more earned $5376, or $100 or so per week—
considerably less per crime. A second reason in determining the income level of criminals is that self-
reported criminal earnings may be inaccurately reported: Wilson and Abrahamse (1992) suggest that
the incomes that inmates claim to have earned from various crimes are far higher than those crimes
could plausibly yield.
8
Here, I take an average of the 1979 and 1980 deflators for the earnings in the Inner City Survey, since
the survey covered both years. Using the 1979 deflator gives an estimated 3 percent drop in earnings,
which is far short of the drop in legitimate earnings.
9
The Earned Income Tax Credit would raise the pay of those with family responsibilities modestly. But
few young men in the crime-prone groups have families and are potential recipients of this support.
while to spend one year in jail for every two years they sold drugs. Using the 1986
Survey of Prison Inmates, I found that criminals who said all of their earnings came
from crime made $24,775 per year (Freeman, 1992), a figure comparable to Reu-
ter's $2000 a month, but so few criminals reported that all their earnings were from
crime to make this an unrepresentative statistic. On the other hand, Wilson and
Abrahamse (1992) stress that criminal earnings from burglary/theft, robbery and
swindling are not that high and may fall short of the legitimate earnings available
to those criminals (though not necessarily on an hourly basis).
A potentially important factor contributing to criminal earnings and crime is
the demand for drugs, which may have increased in the period due in part to the
development of new products and sources of drugs. A huge proportion of persons
arrested for nondrug crimes—from 50 to 80 percent—tested positive for drugs in
1992 (U.S. Bureau of the Census, 1993, Table 315). A substantial proportion of
prisoners have been incarcerated for drug offenses. Some persons commit crimes
to make money to buy drugs: Boyum and Kleiman (1995) note that 39 percent of
cocaine and crack users claim to have committed crime to get money to buy drugs.
Others commit the crime of trying to meet the market demand. While we lack any
valid time series measure of the shift in demand for drugs, most analysts believe
that this has raised criminal earnings opportunities.
The pecuniary returns to crime depend on an additional factor: the probability
that the individual succeeds with the crime. If a youth is caught, he is likely to gain
little from the crime. If he is incarcerated, he obtains no legitimate earnings during
his sentence and, likely as not, will have fewer legitimate earnings opportunities
upon release. Since the probability of incarceration increased in the 1980s, it is
possible that the relative rewards to crime actually fell, despite the sharp drop in
legitimate earnings. To assess this possibility, I have examined Langan's (1991, Ta-
ble 4) estimates of the increase in the chance of imprisonment for various crimes
from 1974 to 1986. The largest increase is 9.1 percentage points for robbery. Langan
(Table 1) finds that the median time served before release in prison in 1986 was
15 months. Thus, the increase in incarceration would cut a criminal's legitimate
earnings by 11 percent (1.25 × .091) if he were fully employed during the period.
This falls far short of the 30 percent drop in real earnings from legitimate work.
A more detailed analysis would contrast the effects of the fall in legal earnings
and of the increased risk of incarceration on lifetime incomes. This might involve
various long-term factors: how imprisonment raises the likelihood of more severe
sentences in the future; the reduction in future legal employment opportunities; a
possible increase in future illegal opportunities (!); and so on. But given the mag-
nitude of decline in legitimate earnings, and probable increase in criminal earn-
ings, I doubt that the increased chance of incarceration would tip the balance of
the income calculation toward steering young men away from criminal activity.
If incarceration carries with it substantial nonpecuniary costs (prisons are not
pleasant places unless you are a high-earner, white-collar criminal), the increased
chance of incarceration might still have deterred crime. But as more and more
young men from low-income neighborhoods are incarcerated, many observers be-
lieve that one traditional nonpecuniary cost of imprisonment—the stigma attached

to having a criminal record by friends and neighbors—has weakened greatly. If the
stigma of incarceration falls with the proportion incarcerated, the effect of prison
as a deterrent to crime is weakened.
My bottom-line assessment of the pecuniary side of the calculus is that earnings
from crime increased relative to earnings from legal work in the 1980s, and that
the hourly rewards to crime exceeded the hourly rewards from legal work. The next
question is whether the magnitude of supply response to the change in returns is
large enough to have contributed significantly to the rise in criminal propensity.
Responses to the Return to Crime

There is diverse evidence that young men respond to economic incentives for
crime and that their response may be sufficiently large to play a role in the rise in
criminal propensity.
First, the demographics of the criminal population show that those who commit
crimes consist disproportionately of persons with low legitimate earnings prospects—
the young, the less educated, persons with low test scores, and so on. It is at least
plausible that these characteristics are a greater limitation on earning in legal activities
than in illegal activities. In fect, some evidence from the NLSY suggests that schooling,
age and test scores pay off more in the normal job market than in crime.10
Second, joblessness seems associated with greater crime (Chiricos, 1987; Free-
man, 1983, 1995). For example, areas with high unemployment tend to have high
crime rates, though coefficients of response are not large. Time series studies also
generally find that unemployment or related measures of aggregate labor market
activity are associated with rises in crime, though this cyclical relation has little to
do with secular changes in crime. Comparisons of individuals show that those who
commit crimes are more likely to do so when they are unemployed. Longitudinal
evidence shows, moreover, that persons engaged in "serious violent behavior" are
more likely to terminate this if they are employed than if they are unemployed
(Elliot, 1994, Table 1).
Third, greater inequality is associated with higher rates of crime (Chiricos,
1987; Freeman, 1983, 1995). Even homicide rates are correlated with measures of
inequality across cities (Land, McCall and Cohen, 1990). In the most comprehen-
sive study, Lee (1993) found a substantive positive relation between levels of earn-
ings inequality and crime rates across metropolitan areas in 1970 and 1980. His
estimates suggest that the increased inequality in the 1980s induced a 10 percent
increase in crime, as measured by the FBI's Uniform Crime Report index. However,
when Lee compared changes in inequality with changes in crime among metropolitan
10
Since criminal earnings are poorly measured, it is not easy to document this claim. In the NLSY, I
regressed the share of income from illegal sources on number of crimes reported, weeks worked in the
year and three human capital measures: years of schooling, age and AFQT score. The coefficients on all
three human capital measures were negative and significant, implying that schooling, age, and AFQT
lowered illegal income relative to legal income.
areas, he found no relation. Perhaps this is because measures of changes in in-

equality reflect noise in the data, or perhaps it is a clue that the cross-area relation
reflects an omitted area variable rather than a true link from inequality to crime.
Fourth, individuals who commit crime have lower perceptions of the riskiness
of crime, higher assessments of the relative earnings of criminal behavior and lower
legitimate hourly pay. Using the NBER Inner City Youth Survey, Viscusi (1986)
found that perceptions of risk and earnings opportunities influenced the supply of
young blacks to crime. Using the same survey, I found a significant positive relation
between criminal participation and whether individuals thought they could earn
more on the street than in the job market (Freeman, 1987). Using the NLSY, Grog-
ger (1994) estimated a supply elasticity to crime with respect to wages near unity
for young men, which, applied to the observed drop in real earnings of less skilled
young men, predicted a 23 percent increase in crimes committed by these youths
from the mid-1970s to the late 1980s, which he points out is of comparable mag-
nitude to the 18 percent increase in the index arrest rate for young men over the
period.
Table 1 shows that one does not need complicated calculations to find a re-
lation between the relative rewards to crime and future criminal behavior. In 1980,
the NLSY asked respondents the proportion of their income that came from illegal
activity. Those who had a high proportion of income from crime presumably had
relatively high criminal pay compared to legitimate pay (controlling for time
worked at legitimate jobs and the number of crimes committed) and thus should
be more involved in crime than others and more likely to end up incarcerated in
the future.11 As the table shows, the proportion of income from illegal sources in
1980 does in fact help explain incarceration years into the future (more refined
calculations correcting for time worked at legitimate jobs, crimes committed and
so on, confirm this finding).
Fifth, time worked by men in the lower deciles of the earnings distribution fell in
the 1980s as their real earnings fell (Topel, 1993; Juhn, Murphy and Topel, 1991;
Freeman, 1995), with a magnitude that suggests a nonnegligible supply elasticity. Juhn,
Murphy and Topel (Table 9) estimate that the elasticity of labor supply with respect
to wages of young men in the lower deciles of the earnings distribution is on the order
of 0.20 to 0.30. The finding that low-paid men worked less as their real wages fell is
consistent with an increased allocation of time to crime, though it does not imply that
they did in fact allocate their increased nonwork time to crime.
Sixth, many youths combine crime and work or shift between them readily. Be-
cause most criminals are self-employed, and because the U.S. job market has consid-
erable flux, crime and legitimate work are not dichotomous choices for most young
men. Joe holds a job, robs someone he meets on a dark empty street and sells drugs
on the weekend. Harry sells drugs for a while, decides the street is too dangerous, gets
11
Because the NLSY has never repeated the crime module that was included in 1980, evidence on future
crime behavior is limited to whether or not the respondent was interviewed in jail or prison.
Table 1
Criminal Earnings in 1979 and Future Incarceration
a legitimate job for a while, loses that job and goes back to selling drugs. Ethnographic
research shows that legal and illegal work often overlap among young drug sellers: for
example, Fagan (1992) and Reuter, MacCoun and Murphy (1990) point out the phe-
nomenon of "doubling up" of legal work and cocaine sales. This and other evidence
(Hageborn, 1994) indicates that for many young men, illegal work may be temporary
or transitional work that supplements difficult low-wage or otherwise unsatisfactory
work. For others, legal work provides options to riskier illegal work or perhaps broadens
markets for sellers of illegal goods or services.
Table 2 records the employment status of young men in the NLSY according
to four measures of criminal activity: committing a crime; earning illegal income;
being charged with a crime; and being incarcerated in the following year. The
sample is limited to out-of-school youths not involved in military service. The crimes
are limited to a subset of economic crimes, including shoplifting, stealing, using
force to obtain things, selling drugs, conning someone, stealing an automobile,
breaking into a building or aiding a gambling operation.12 The data show that those
involved in crime have lower rates of employment than those not involved in crime.
But the magnitude of the employment gap is modest for those with low levels of
criminal involvement: a three-point difference between those who committed and
those who did not commit crime; a seven-point difference between those with pos-
itive incomes from crime and those without such income; a 13-point difference
between those charged with crime and those not charged. Only among youths who
end up incarcerated a year later are crime and work roughly mutually exclusive:
here the difference in employment rates is 35 points.
12
This leaves out some violent nonproperty crimes. Their inclusion increases the numbers committing
crime without changing the results.
Table 2
Percentage Employed in Survey Week in 1980 by Criminal Behavior of Out of
School Nonmilitary Youth
The ethnographic reports and NLSY data show that for many youths the line
between legal and illegal work is not a sharp one: both are ways to make money.
This pattern could readily make the supply of youths to crime highly elastic. Assume
that young men have reservation wages for legitimate work and for criminal work.
Opportunities for both types of earnings activities arise intermittently, and youths
act on them when the expected rewards exceed their reservation wages. In the
NBER Inner City and Boston Youth surveys, many young men in inner-city poverty
areas reported frequent illegal and legal earnings opportunities. Someone may
need help selling stolen goods; a car with a stereo may be parked on a deserted
street; the local fast-food franchise or supermarket may be hiring. If the opportunity
is there, and if the likely gain exceeds the reservation wage, someone will act on it.
In sum, while we do not have a well-determined elasticity of the supply of youths
to crime (any more than we have well-determined elasticities of demand or supply
of many consumer goods), a collage of evidence supports the notion that young
men respond substantially to the economic returns to crime. If the supply is rea-
sonably elastic, moreover, it is easy to see why the standard incapacitation model—
lock them up, they can't commit crime, so crime falls—failed to fit U.S. experience
in the 1980s and 1990s. An infinitely elastic supply of crime implies a zero incapac-
itation effect, since each criminal locked up is replaced by another.13 The incapac-
13
If the supply of crime is upward-sloping, the replacement will be less than one-for-one, dependent on
the magnitude of the elasticities of supply and demand. Let S = aW + S be the supply of youths to
crime, where W is the relative reward to crime. Assume that when more persons commit crimes, the
rewards to crime fall according to a "demand" relation: D = –bW+ D' measure criminal opportunities.
Market equilibrium is S = D -(aD + bS')/(a+b). When incarceration reduces the supply of criminals
by dS', the change in the number of criminals is b dS /(a+b) rather than dS'. The replacement effect is
a/(a+b).
itation model may also fail to work well because legal earnings fell (as has happened
since the 1970s), and/or criminal opportunities increased (perhaps because of a
growth in the market for illegal drugs) and offset incapacitation effects. By focusing
on the individual rather than the market, standard incapacitation models overstate
the effect of increased imprisonment on crime. But even a zero incapacitation effect
does not mean that society fails to gain from locking up criminals: there may still
be a substantial deterrence effect from incarceration that would reduce the supply
curve of young men to crime.
To identify the "true" effects of higher rates of imprisonment on crime, it is
necessary to examine the relation between crime and changes in the prison pop-
ulation. Using a comparison across states, Marvell and Moody (1994) estimate that
a 10 percent increase in the prison population reduces crime by 1.6 percent; Spel-
man (1994) gives comparable estimates. Levitt (1995) uses state litigation suits
about prison conditions as an instrumental variable—more suits exogenously re-
duce the prison population—and finds that a 10 percent increase in the prison
population reduces crime by 4 to 6 percent. These estimates of the reduction in
crime due to increased imprisonment include labor supply responses (deterrence
of crime due to greater risk; replacement of criminals due to greater opportunities),
in addition to the traditional incapacitation effect.14
Crime, Incarceration and Economic Life
There are two indicators of the aggregate cost of crime to society. At one
extreme, imagine a society that spent nothing on crime control. The aggregate cost
of crime to legitimate society would then be the loss of property, lives and misery
due to crime.15 At the other extreme, imagine a society that spends so much for
crime control that no crimes are committed. The cost of crime would then be the
opportunity cost of crime control resources—prison, police, private spending—
that could be spent on other activities. As an example of this second cost of crime
to society, consider this description in the New York Times (April 12, 1995, p. A21)
of the fiscal situation in California: "In 1995 California spent more on prisons than
on higher education. Spending on prisons rose from 2 percent of the state budget
in 1980 to 9.9 percent in 1995 whereas spending on higher education shrunk from
14
It's worth noting that the resultant estimates of the reduction in reported crimes or victimizations due
to incapacitation are in the ballpark of the lower estimated range crimes per criminal reviewed earlier;
that is, the median number of 5–15 crimes per criminal, not the 60–180 crimes per criminal reported
in prisoner surveys.
15
I use the word "legitimate" to justify including property losses as part of the cost of crime. From one
perspective (mine), my picking your pocket is not a social loss; it is simply a transfer of income. Some
calculations of the cost of crime exclude the property loss. Others include it. For certain purposes, we
may want to distinguish between "Robin Hood" crimes that redistribute money from one person to
another (picking pockets, for instance) and crimes that are purely destructive (arson, assault). The
question in part hinges on the definition of society.
12.6 percent in 1980 to 9.5 percent. The number of inmates increased from 23,500
to 126,100 over the period and 17 new prisons were built. This was before the state's
'three strikes and you're out' law."
All societies are somewhere between these two extremes. The potential losses
from crime lead to some spending on crime control. The costs of crime control
lead to some "acceptable" level of crime. At the social optimum, society would
spend just enough on crime control so that the marginal dollar spent (adjusted for
deadweight loss of raising the dollar) equals the marginal reduction in social costs
of crime. This requires knowledge of how social costs vary with the number of crimes
and of the effectiveness of different crime control programs.
Estimates of the average cost of crime, much less of the marginal cost, are
difficult to make. The National Crime Survey estimates the direct monetary losses
of crimes by asking victims to estimate losses from theft or damage, medical ex-
penses and any pay losses due to injury. The 1992 estimate was that the average
burglary cost $834, the average auto theft, $3990, the average robbery, $555, and
so on (Klaus, 1994). The average crime was estimated to cost victims working time,
as well. The total economic loss to victims of crime, including medical costs and
lost work time, was estimated to be $532 per crime, or $17.6 billion for all reported
crimes in that year. This is 0.3 percent of GDP.
Some criminologists have expanded these estimates to find a more inclusive
cost of crime, based on jury evaluation of nonpecuniary costs (Cohen, 1988), and
offer a more extensive medical evaluation of injuries, including psychological prob-
lems (Miller, Cohen and Rossman, 1993). These estimates are rough ones. Jury
cases may involve greater misery than other victimizations. Some estimates include
the lost legitimate earnings of incarcerated criminals, which may affect the well-
being of spouses or children—56 percent of male prisoners have children under
the age of 18 (U.S. Department of Justice, 1991, p. 10)—and which may lead to
social transfers to their families. Others exclude lost earnings of the criminal, on
the argument that the criminal consumes most of those earnings (Levitt, 1995).
None include the suffering of the families of criminals. For all their problems, these
estimates are undoubtedly closer to the truth than figures limited to the money
stolen, and they exceed reported monetary losses by massive amounts. For example,
the estimated average pain and suffering and cost of risk of death created by a
robbery is approximately 11 times the direct monetary loss (Cohen, 1988, Table 3).
Estimates of the cost of pain, suffering, and economic loss for the average crime
are on the order of $2,300 (Dilullio and Piehl, 1991) to $3,000 (Levitt, 1995).16
With 14.1 million crimes committed in 1993, according to the Uniform Crime Re-
port, this cumulates to $32 billion to $42 billion, or 0.5 to 0.7 percent of GDP.
Of course, the crimes actually reported to police and recorded in the Uniform
Crime Report are far less than the number of victimizations. It's not clear whether
16
Levitt (1995) reports $45,000 as the estimated cost per criminal and estimates that criminals commit
15 crimes per year, for the $3,000 per crime estimate that I use.
the average victimization would cause a loss higher or lower than the average crime.
Some victimizations—such as the robbery of bicycles—cost less; others like rape,
child abuse or domestic violence not reported to police may cost more. If the cost
of an average crime is kept at the same rate, but multiplied by the number of
victimizations reported, the social cost reaches 1.2 to 1.6 percent of GDP.
Finally, there is the additional loss of production by the incarcerated (which
accrues largely to them). Prisoners are low skill, and many would be jobless if they
were free, but not committing crimes. Still, 2 percent of even low-skill male workers
would add perhaps 0.5 to 0.7 percent to GDP, giving a total cost of around 2 percent
of GDP due to crime. These costs underlie the case for allocating considerable
resources to crime control activities, including prison or alternative sentencing, and
for any social programs that can prevent crime.
The resources that the state and individuals spend to control crime are more
directly measurable. Most resources to control crime are public. Total expenditures
on the criminal justice system in 1990 was $74 billion, or 1.3 percent of GDP. Total
employment in the system was around 2 percent of U.S. employment. Within the
criminal justice system, corrections (which includes prisons) are a major cost item.
In 1990, $25 billion were spent on corrections. With 1.14 million persons in prison
or jail in that year, the average cost is $22,000 per person.17 Of course, the public
cost must also be multiplied by the deadweight loss created by distortions of taxation
or deficit financing.
Another big ticket item is private crime prevention resources. Private security
guards are one of the fastest growing occupations in the United States, accounting
for 0.6 percent of employment in 1992. Both households and offices undertake
many crime prevention measures. Individuals allot additional resources through
such diverse decisions as taking a taxi instead of walking home from the movies;
locating a business in the suburbs instead of a central city, and so on. My guesstimate
is that on the order of 0.6 percent of GDP is spent on private crime prevention,
ranging from guards to various protective devices.
All told, approximately 2 percent of GDP is allotted to crime control activities.
From one perspective, this is simply part of the overhead of running a modern
society and trying to enforce rules of conduct and protect citizens. From another
perspective, it is pure waste. Measured in terms of spending, if we could make
contracts with potential criminals to forego crime or devise policies to train them
or to subsidize their employment so that they would forego crime, one might think
that we could spend up to 4 percent of GDP—that is, the 2 percent presently lost
to crime and the 2 percent spent on controlling crime—and still improve social
well-being. This would amount to an average of about $54,000 for each of the 5
million or so men incarcerated, put on probation or paroled. In fact, the favorable
benefit-cost assessment of the Job Corps and of the highly publicized Perry
17
Annual current operating expenditures for prisoners are on the order of $15,000 (Piehl and DiIulio,
1995). Estimates of the amortized value of prisons are on the order of $4,000 to $5,000 (Cavenaugh and
Kleiman, 1990, Table 2).
Pre-School program depend in part on large estimated savings in criminal justice

expenses due to reduced crime by participants. These assessments should be ad-
justed downward to allow for the probable replacement of one youth with another
in the criminal market: they overestimate the gains from preventive activity focused
on current criminals. Still, the magnitude of the numbers does suggest the potential
value of programs to assure that potential criminals have better access to legitimate
employment opportunities.
Criminologists have argued in recent years about whether prison pays on the
margin. In a much-disputed study published by the National Institute of Justice,
Zedlewski (1987) reported the benefits of imprisonment exceeded the costs of im-
prisonment by 17 to 1. But this estimate was based on each criminal otherwise
committing 180 crimes; at more moderate estimates, the benefit-cost ratio of im-
prisonment exceeds one for the median number of crimes per criminal (12–15),
but falls below one for those in the lower quartile or so of the distribution of crimes
(DiIulio and Piehl, 1991). Consideration of the labor supply responses to criminal
opportunities, which suggest sizable replacement of incarcerated criminals by oth-
ers, supports the lower estimates.
The debate on whether prison pays indicates that crime costs are high enough
to justify incarceration of offenders at current U.S. levels, though perhaps not at
much higher levels, and that alternative sentencing procedures would be cost-
effective for some current prisoners (Piehl and DiIulio, 1995). Clear and Braga
(1995) offer a useful overview of these alternatives: house confinement, electronic
surveillance, parole, and so on. The high costs of crime also suggest, however, that
even a marginally effective and relatively costly jobs/crime prevention program for
crime-prone groups would also pass a benefits-cost test. While I know of no "magic
bullet" jobs or crime prevention program, it is a myth that all such programs in-
variably fail. Some have marginal positive effects. For instance, meta-analyses show
that the average juvenile delinquency program has some deterrent effect, albeit
modest (Lipsey, 1990). At least some anticrime early intervention programs also
succeed, again on a small scale (Mendel, 1995).
In any case, if I am correct that the collapse of the job market for less skilled
men contributed to their increased involvement in crime, and if the supply of youth
to crime is sufficiently elastic that the criminal justice system can at best cap the
crime rate at rising costs, it is difficult to see any long-term solution to crime that
does not include some improvement in the labor market opportunities for less
skilled youth. To make legitimate work more attractive to youths than crime re-
quires, to be sure, increasing the likely penalty for crime, as has been the focus of
recent U.S. policy, but it also could benefit from enhancing the rewards for legiti-
mate work. A combined carrot and stick policy—increased resources for police to
prevent crime; incarceration of criminals during their most crime-intensive years
(not at ages 40–60, as "three strikes and you're out" may do); and increased legit-
imate opportunities for the less skilled—would seem to offer a way to deter at least
some young men from committing crimes. The problematic part of any such policy,
however, is the carrot part: finding legitimate opportunities for these young men.
How to improve the job market for less skilled young American men, and reverse
the huge decline in their earnings and employment opportunities, is the problem of
our times, with implications both for crime and many other social ills.
• Research for this paper was partially funded by the Rockefeller Foundation.
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Freeman 2011 Why Do So Many Young American Men Commit Crimes and What Might We Do About It

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Journal of Economic Perspectives— Volume 10, Number 1 — Winter 1996—Pages 25–42

Why Do So Many Young American Men

• Richard B. Freeman is Professor of Economics, Harvard University, and Research Fellow,

Magnitudes of Criminal Involvement

When prisoners complete their sentences, a large number do not return to

Trends in Criminal Participation

As noted at the outset, mass incarceration of criminals should have reduced

propensity for criminal activity by noninstitutionalized men increased by 163

Labor Market Causes of Crime

The Relative Rewards of Crime

lieve that one traditional nonpecuniary cost of imprisonment—the stigma attached

Responses to the Return to Crime

areas, he found no relation. Perhaps this is because measures of changes in in-

Crime, Incarceration and Economic Life

Pre-School program depend in part on large estimated savings in criminal justice

February 1994. 13, 21–25.

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