Increasing The Minimum Wage Increases Crime, Obviously Enough

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It’s a reasonable contention that if the young make more in wages then they’ll nick less stuff in order to impress their paramours. They’ll be able to go and buy the bling that is. The thing about such contentions being that they have to be tested. Is that how it actually works out in a society full of human beings?

The answer being no. As Don Boudreaux points out:

Do minimum wages reduce crime? No – in fact, the opposite seems to be the case.

The paper is here.

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 crime using data from the 1998-2016 Uniform Crime Reports (UCR), National Incident-Based Reporting System (NIBRS), and National Longitudinal Study of Youth (NLSY). Our results provide no evidence that minimum wage increases reduce crime. Instead, we find that raising the minimum wage increases property crime arrests among those ages 16-to-24, with an estimated elasticity of 0.2. This result is strongest in counties with over 100,000 residents and persists when we use longitudinal data to isolate workers for whom minimum wages bind. Our estimates suggest that a $15 Federal minimum wage could generate criminal externality costs of nearly $2.4 billion.

As to why this happens. Losing a job because of the higher minimum wage leads to more crime to gain that bling. And yes, we really are sure that here, among the young and untrained, that minimum wage will lead to a reduction in jobs. As we mentioned a few days back:

We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps up by 40 percent at the discontinuity. Employment falls by 33 percent and total input of hours decreases by 45 percent, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6-1.1.

The answer is obvious. In order to reduce youth crime we need to reduce the minimum wage to what it ought to be anyway. Zip, zero, nada. Only those who love theft could argue otherwise.