Earlier this week, This Land Research released a study conducted by Scioto Analysis looking at the impact that raising the minimum wage in Oklahoma would have on crime rates. Crime and public policy is one of my favorite applications of economic theory, and I think it is extremely important to understand the incentives behind crime if we want to address its root causes.
In the study, we found that higher minimum wages would lead to reduced crime rates in Oklahoma. The main reason for this is that the effect of increased wages outweighed the effect of reduced employment in the majority of scenarios we simulated.
When we look at what types of crimes would be prevented by a higher minimum wage, we find the largest impact would be for young adults committing larceny. Intuitively, this makes a lot of sense. Larceny is non-violent and very often financially motivated, so if people have better outcomes in the labor market they might prefer to work in the legal market rather than steal.
However, when we look at the monetized value of the crime reductions, the vast majority of the social benefit came from a reduction in homicides.
A 2020 study found that there was a connection between higher state minimum wages and reductions in the number of firearm homicides. We used this insight to determine what a similar effect might mean for the number of homicides in Oklahoma, and we calculated it would lead to 55 fewer homicides on average.
Despite making up less than 1% of the total number of the avoided crimes, these 55 fewer homicides were responsible for almost 90% of the total social value of crime reductions due to the higher minimum wage. Conversely, the prevented larcenies accounted for nearly 70% of the total avoided crimes, but only 2% of the total social benefit.
I think there are two major takeaways from this particular finding, one for policy analysts and one for policymakers.
For analysts, this demonstrates the importance of looking for costly connections between a policy and an outcome, even if the connection between the two is small in magnitude. This doesn’t mean it is appropriate to shoehorn in a mortality impact where it doesn’t belong, but if there is empirical evidence to suggest a connection between the policy you are studying and some very important outcome, it is often worth exploring.
For policymakers, this shows how certain policies can have effects on things they are not designed to change. The purpose of this study was to highlight the connection between minimum wages and public safety, but most people who participate in the discussion about minimum wages are solely focused on the labor market impacts. Minimum wage policies are not implemented as crime reduction policies, it just so happens that they have a spillover effect.
We can learn a lot about policies when we focus on the social impacts. The total volume of homicides prevented is not close to the total number of other crimes, but because we know how much more severe a homicide is we see that preventing even a handful can lead to major benefits for everyone.