Welfare prevents crime and saves money in the long run: report

Dropping children from cash welfare rolls when they turn 18 greatly increases the likelihood that they’ll face criminal justice charges in the coming years — potentially an even costlier development for the individuals, for society and the economy than the tax-provided services.

Those are the findings of a study published Tuesday in the Quarterly Journal of Economics, which dives into the longer-term effects of a 1996 overhaul to Supplemental Security Income (SSI) benefits for minor children.

That approach removes about 40% of recipients from the disability benefits ledger when they become “adults” at age 18. Minors of lower-income qualifying adult SSI participants can collect benefits, because their age is considered their disability.

But the age-based removal, the study finds, does little to capture lingering mental and behavioral conditions, such as attention-deficit/hyperactivity disorder (ADHD). Those conditions, especially without care, can limit job potential and force individuals toward theft and sex work, which is currently unregulated and illegal in the U.S.

The report dates to February, but has since been peer reviewed for wider distribution. The topic also found traction on a popular Reddit channel looking at social issues. It drew more than 2,000 comments by Tuesday afternoon.

“Traditionally, economists talk about the income effects of welfare programs in the context of the formal labor market — that welfare discourages work,” said the paper’s authors, Manasi Deshpande and Michael Mueller-Smith.

“What we find is that the income effect of welfare benefits can also manifest as reductions in criminal activity. In fact, in the SSI context, cash welfare has a much larger discouragement effect on criminal activity than it does on formal work,” they wrote.

‘Cash welfare has a much larger discouragement effect on criminal activity than it does on formal work.’

Deshpande is an economics professor at the University of Chicago, whose recent research has focused on public assistance programs and labor economics. Mueller-Smith is an assistant professor in the department of economics at the University of Michigan, whose work includes population studies and criminal justice.

One such paper proposing that benefits discourage work, by Gene Steuerle of the Urban Institute, suggests phase-outs of programs like cash welfare, food stamps, the Earned Income Tax Credit and Obamacare subsidies mean households making roughly $10,000-$40,000 can lose almost as much in government benefits as they gain in added income by working additional hours, which he argues discourages work but also wrongly targets the working poor that the programs are most meant to help.

The new report disagrees.

Based on the authors’ calculations, the administrative costs of crime alone almost eliminated the cost savings of removing young adults from the program.

Twice as likely to be charged with a crime

Using data from the Social Security Administration and the Criminal Justice Administrative Records System, the study authors estimated the effect of losing SSI benefits at age 18 on criminal justice and employment outcomes over the next two decades.

They found that terminating the cash welfare benefits meant that youth are twice as likely to be charged with an illicit income-generating offense than they are to maintain steady employment at $15,000 a year in the labor market.

And, relative to those who stay on SSI in adulthood because they can prove a need, the dropped children lose nearly $10,000 in what would have been annual benefits in adulthood.

As a result of these early criminal charges, the annual likelihood of incarceration increases by a statistically significant 60% in the two decades following SSI removal.

Currently, just over 3 million children under the age of 18 receive Social Security benefits, accounting for 6.5% of all individuals receiving Social Security and $1.2 billion in monthly benefit payments, government data shows. But Deshpande and Mueller-Smith stress that the immediate need for income once someone is no longer receiving welfare too often leads to illicit means to attain it.

The increase in illegal activity was concentrated in what the authors call “income-generating crimes,” including theft, burglary, fraud/forgery and prostitution.

As is the case for men, the largest increase in crime for women is in theft charges. But women also have large and precise increases in fraud and forgery charges, including identity theft, and prostitution charges, the findings show.

‘Cash welfare has a much larger discouragement effect on criminal activity than it does on formal work.’

— Manasi Deshpande and Michael Mueller-Smith

And once crimes were committed, subsequent crimes carried harsher penalties and limited further legitimate earnings potential.

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Jail is expensive — for taxpayers

The study looked at the broader costs beyond an individual’s income security.

While each person removed from the program in 1996 saved the government some spending on SSI and Medicaid over the next two decades, each removal also created additional police, court and incarceration costs.

Based on the authors’ calculations, the administrative costs of crime alone almost eliminated the cost savings of removing young adults from the program.

Specifically, each individual removed from SSI in1996 saved the government $37,700 in SSI spending and $8,400 in Medicaid spending over the next two decades, plus an additional $3,000 in tax revenue from higher earnings. Each removal creates $10,800 in police and court costs and another $30,200 in incarceration costs.

Total U.S. government spending on public prisons and jails tops $80 billion annually, plus another $3.9 billion is spent on private prisons and jails, according to the nonprofit Prison Policy Initiative.

Expand the discussion

The Reddit discussion expressed frustration with studies that look at decades of behavior, yet seem to spark little policy change. The discussion also moved into whether just maintaining SSI as recipients mature and attempt a workforce entry would be enough. Some responders suggested this topic dovetails with Universal Basic Income, which has gained traction in California and elsewhere.

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“Welfare payments help raise the socioeconomic status of people if done right,” one Reddit poster said. “Therefore, a robust welfare system will help reduce crime rates. A UBI would likely make a massive difference, too, if done properly.”