Does Welfare Reduce Crime?

 welfare and crime 9 1

A new study examines one program’s impact on employment and incarceration.

There have been myths and tropes about welfare since it was created. We often hear critics say that welfare discourages people from working—but are these claims really true?

This debate often plays out through theory and anecdotes, yet it’s rare to get good data about the true effects of welfare. The new paper by University of Chicago economist Manasi Deshpande does just that.

It’s a first-of-its-kind study that tells a clear story about the life-long effects of one kind of welfare on employment and criminal involvement.

The findings are thorough, surprising, and Deshpande hopes they will entirely reframe the debate about welfare in America.

Here, Deshpande explains the work and what makes the findings so important:

Transcript:

Paul Rand: Big Brains is supported by the University of Chicago Graham School. We open the doors of UChicago to learners everywhere. Experience the university’s distinctive approach to inquiry through our online and in person courses in the liberal arts, culture, science, society, and more. Learn with [inaudible 00:00:21] instructors and extraordinary peers in small interactive classes. Autumn registration is open now. Visit graham.uchicago.edu/bigbrains.

Some debates in American politics never seem to end. Our parents, our grandparents, and sometimes even their parents had the same arguments that we have today. One of those debates is about welfare

Tape: Today, a hope of many years standing is in large part fulfilled.

Paul Rand: Ever since welfare was established by President FDR’s 1935 New Deal, Americans have been on two sides of the issue.


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Tape: They’re paying people on welfare today for doing nothing. They’re laughing at our society.

Tape: We shouldn’t even be stigmatized with the word ‘welfare’. For the rich it’s called subsidy.

Tape: It’s unfair to the hardworking taxpayer to make him take care of people that’s just as capable of working as he is.

Tape: This is a complicated mechanism that is extremely necessary.

Paul Rand: Does welfare decrease employment and lead to complacency?

Tape: The so-called ‘welfare queen’ has been used to demonize those on public assistance for decades.

Paul Rand: Or does it help people get on a better path?

Tape: Cut off welfare tomorrow? What will they do? What will be their immediate response? At what price to their small children?

Paul Rand: This debate often plays out in the realm of theory and anecdote. It’s rare for academic research to give us good clean data about some of the true effects of welfare. However,

Manasi Deshpande: This the first study studying the effects of SSI on crime.

Paul Rand: That’s Manasi Deshpande, an economist at the University of Chicago and the author of a new groundbreaking study that investigates the relationship between welfare and crime prevention.

Manasi Deshpande: There had been a series of articles published about supplemental security income, in particular, The Children′s Program. That even though this program is providing income to low income families who have children with disabilities, that maybe it’s actually doing some harm in terms of discouraging educational achievement. And I read these articles and it was clear that there was no real empirical evidence about the effects of this program. And it seemed important to me to have actual empirical evidence rather than just anecdotes to base public policy on.

Paul Rand: It’s a first of its kind study that tells a clear story about the lifelong effects of one kind of welfare, supplemental security income or SSI.

Manasi Deshpande: It’s useful for our study, that the variation that we’re using is very convincing. That there is very little question that we are identifying the effect of SSI on criminal justice involvement, because we have this very nice natural experiment.

Paul Rand: And the findings are incredibly surprising.

Manasi Deshpande: I think it’s been received with some surprise that the effects are so big.

Paul Rand: From the University of Chicago podcast network, this is Big Brains, a podcast about the pioneering research and the pivotal breakthroughs that are reshaping our world. On this episode, does welfare prevent crime? I’m your host, Paul Rand. The word ‘welfare’ gets thrown around in policy debates. But this single word stands for a whole bunch of different programs from SNAP to TANF to EITC. In this study, Deshpande was looking specifically at SSI.

Manasi Deshpande: That’s right. SSI is supplemental security income.

Paul Rand: The program dates back to the 1970s.

Tape: Whether measured by the anguish of the poor themselves or by the drastically mounting burden in the taxpayer, the present welfare system has to be judged a colossal failure.

Paul Rand: And it was conceived by the Nixon administration.

Tape: My purpose tonight, however, is not to review the past record, but to present a new set of reforms, a new set of proposals, a new and drastically different approach to the way in which government cares for those in need.

Manasi Deshpande: It was founded in 1972 as a way of replacing the kind of patchwork of programs that existed at the state and local levels that provided cash assistance to people with disabilities in the United States.

Tape: Across this country, those in their thirties and their forties who were on welfare are probably lost, not all of them, but many of them, they would agree. And all of the sociologists tell you that. But the ones that can be saved, those in the early teens and the younger ones, these are the ones that we must concentrate on.

Manasi Deshpande: It’s a program that provides cash assistance and Medicaid access to people who have disabilities and low income and assets.

Paul Rand: And what is considered, in this case, a disability?

Manasi Deshpande: When the program was founded in 1972, the eligibility criteria were more restricted. And as time went on, especially for adults in the 1980s, the rules were changed to include conditions like mental conditions for adults, things like back pain. And then for children, the big change occurred in 1990 when there was a Supreme Court decision, Sullivan versus Zebley.

Speaker 11: The Social Security Act authorizes these for a child who suffers from an impairment of “comparable severity” to one that would render an adult disabled. An adult is disabled if he is prevented from engaging in any substantial gainful activity.

Manasi Deshpande: That allowed mental conditions to qualify children for SSI.

Speaker 12: In 1974, in fleshing out the statutory standard of comparable severity. The secretary, after a two year study in the initial implementation of the SSI child’s program with the aid of physicians and other experts, identified those impairments that have an impact on a child’s growth and development that is comparable to the effect that an impairment has on an adult’s ability to work.

Manasi Deshpande: And so that includes conditions like ADHD and autism spectrum disorder, and much of the growth in the children’s program since 1990 has come from those types of mental and behavioral conditions. And it’s also a program that, if you have a disability that lasts for your entire life, you couldn’t principal stay on this program for your entire life. Whereas, especially after welfare reform, traditional welfare, TANF benefits are time limited.

Paul Rand: And there are a lot of people who are receiving these benefits.

Manasi Deshpande: It serves about 5 million adults and about 1 million children in the United States.

Paul Rand: That’s nearly the same amount as the entire population of Chicago doubled.

Manasi Deshpande: I think the main thing is to understand that SSI is a very means tested program. And so in addition to recipients having a mental or physical disability, these recipients are also disadvantaged in terms of socioeconomic status, in terms of income. Recipients have to have low income and assets. And so people who receive benefits from SSI are often disadvantaged in two ways, both in terms of their disability and in terms of their income and socioeconomic status.

Paul Rand: And, if you can, break down what is the average size annual benefit of SSI?

Manasi Deshpande: The maximum SSI benefit right now is around $10,000 a year.

Paul Rand: So nobody’s getting rich off of this?

Manasi Deshpande: That’s right. Now, relative to the earnings of this population, SSI benefits for these children are about half of household income. So you can imagine that when these children lose SSI benefits at 18, it’s not a huge amount of money in absolute terms, but relative to their household income and potentially relative to their own potential earnings. This is a large amount of money.

Paul Rand: But does this program work? While designing studies to answer this question is extremely difficult, but something happened in 1996 that made Deshpande’s research possible.

Manasi Deshpande: 1996, as many people remember was the year that President Clinton signed welfare reform into law.

Speaker 13: When I ran for president four years ago, I pledged to end welfare as we know it. I have worked very hard for four years to do just that.

Manasi Deshpande: The better known provisions of welfare reform were the changes that were made to AFDC or TANF, but the lesser known provisions were changes to supplemental security income or SSI.

Speaker 13: A long time ago, I concluded that the current welfare system undermines the basic values of work, responsibility and family. Trapping generation after generation independency and hurting the very people it was designed to help.

Manasi Deshpande: What happened to SSI is part of welfare reform is that it made a number of changes to the children’s program.

Speaker 13: Today, we have a historic opportunity to make welfare what it was meant to be, a second chance, not a way of life.

Manasi Deshpande: There was a lot of concern in Congress about how quickly SSI child enrollment was increasing. And especially again, these mental and behavioral conditions like ADHD. I think there were a lot of policy makers and politicians who felt that conditions like ADHD should not qualify children for disability benefits. And so welfare reform included a number of measures to remove children from the program. And also when these children reached the age of 18 to make it more difficult for those children to qualify for adult benefits.

Paul Rand: And this break opened up an opportunity for a study because it created a treatment group and a control group.

Manasi Deshpande: The way that welfare reform tried to restrict SSI benefits is by requiring social security to review the eligibility of all children who received SSI at the age of 18. And so now, essentially, SSI children had to re-qualify for this program under the adult criteria. And the really nice thing for our paper is that these rules were only enforced for children who had an 18th birthday after the date that President Clinton signed welfare reform into law, which was August 22nd, 1996. And so what that means is there’s a very nice natural experiment that’s created here, where kids who receive SSI who had an 18th birthday on August 21st, 1996, did not receive this review when they turned 18. They were just allowed to go onto the adult program. Whereas, kids who had an 18th birthday on August 22nd, 1996 or later, had to get this review and many of them were removed from the adult program.

            And so you have this very nice natural experiment where the kids on either side of this birthday cutoff are basically exactly the same. And then I started working with Michael Mueller Smith, who’s a crime economist at University of Michigan and founded a data project called the Criminal Justice Administrative Records System or CJARS. And after several years of working together, we were able to link social security records on SSI recipients to criminal records from several states.

Paul Rand: They were able to collect these records not just over the first few years of losing these welfare benefits but decades.

Manasi Deshpande: And so we can look not just at the immediate effects of losing these welfare benefits, but also at long term effects of losing these benefits.

Paul Rand: And what they found is that...

Manasi Deshpande: When young people are removed from SSI, when they lose welfare benefits, there is a very large increase in their criminal justice involvement in adulthood.

Paul Rand: And the debate between welfare disincentivizing work or keeping people out of crime, Deshpande now had the empirical evidence that she was looking for.

Manasi Deshpande: We found that it is accurate to say that SSI, to some extent, discourages people from working. Because we see when these young people lose SSI benefits, some of them do go and recover that income in the formal labor market, but that’s a very small fraction, less than 10%. A much larger fraction of them are responding to the loss of SSI benefits by engaging in crime than are responding by engaging in work in the formal labor market.

Paul Rand: Overall, they found a statistically significant 20% increase in criminal charges of people who lost their benefits. But even more enlightening when they looked at charges for crimes having to do with income generation, the number rose to 60%.

Manasi Deshpande: So these are charges like theft, burglary, drug distribution, prostitution, identity theft. They are not so much charges like violent crime, which suggests to us that the main reason that criminal justice involvement is going up is because these young people who lose SSI benefits are trying to recover the income in some way. They may not have the skills or the ability to recover that income in the formal labor market. Many of them are turning to illicit activity to recover that income. In fact, more of them are turning to illicit activity to recover that income than are turning to formal work.

Paul Rand: Does that surprise you?

Manasi Deshpande: In some ways it’s surprising because I think the main thing that was surprising was the magnitude of these effects on criminal justice involvement. I think it’s reasonable to expect that we would see some increase in criminal justice involvement when people lose substantial amount of income. I think what was surprising to me was to compare the effects on criminal justice involvement to the effects on formal work. I would’ve expected to see some increase in both formal work and criminal justice involvement, but what we really see here is much larger increases in criminal justice involvement due to the loss of welfare benefits than we see in increase in formal work. And I think the other thing that’s very surprising is the persistence of the effects. So because this reform happened in 1996, and we can see them for several decades after, we can see that this was not just an immediate increase in criminal justice activity right after they lose welfare benefits when they turn 18.

            So you might think that as they’re trying to adjust to the loss of welfare benefits, they might engage in some crime and then they sort of figure out how to earn money in the formal labor market and then we see a reduction in crime after that. But that’s not what’s happening. Instead, what’s happening is we see an immediate increase in criminal justice involvement and then persistence of that effect for the next 20 years. So even 20 years later, we still see elevated levels of criminal justice involvement, criminal charges and incarceration among the young people who were removed from SSI benefits.

Paul Rand: Interestingly, they also found that these effects differed between men and women.

Manasi Deshpande: So the effects for men and women were pretty interesting to us. Usually, criminal justice involvement among men is higher than it is for women. But what we see in this study is that the effect of losing SSI is actually much higher for women than it is for men. So even though baseline levels of criminal justice involvement are higher for men than for women, the effect of losing SSI is higher for women than for men.

Paul Rand: But what’s causing this counterintuitive reversal?

Manasi Deshpande: For men, we see things like theft, burglary, drug distribution. For women, we see theft, but also identity theft and prostitution. And it’s worth noting too, that we can only see increases in charges. We can’t see actual incidents. We can’t see actual crime incidents or incidents of behavior that is considered criminal activity. And so, especially for something like prostitution, it’s very likely that the increase we see is just a small fraction of the true increase in the number of incidents that are happening as a result of being removed from SSI.

Paul Rand: And then I guess the question starts becoming is, if they are committing some of these crimes, the likelihood that they’re going to be incarcerated goes up, I can’t imagine is not the case.

Manasi Deshpande: That’s right. We see a 60% increase in the annual likelihood that someone is incarcerated as a result of losing SSI benefits. And so it’s a pretty large increase in the likelihood that they will be incarcerated either in a given year or in their lifetimes.

Paul Rand: And the 60% number we talked about in terms of chances of being incarcerated, is that for men? Because there’s a different number for women if I read that correctly.

Manasi Deshpande: That’s right. That’s an overall number. That’s the full population, including both men and women, but the percentage increase is larger for women than it is for men.

Paul Rand: For women, the annual likelihood of being incarcerated increases a massive 220%. It’s a staggering number. Deshpande hypothesizes that a powerful force between all of these effects is path dependence.

Manasi Deshpande: Once you start engaging in criminal activity, for example, it may be hard to change that path. A number of reasons, one is that you might just develop some expertise in doing that kind of activity and the better you become at it, maybe the more you do it. Another reason might be that if you develop a criminal record, that criminal record might prevent you from going back into the formal labor market even if you want to. And so that’s then going to cut off opportunities in the formal labor market. And so then maybe crime is the only path available to you. So this idea of persistence, that it’s not just that we see a temporary increase in criminal activity after young people lose benefits. But in fact that we see a lot of persistence in the increase in criminal justice involvement.

            In particular, we see a story of specialization, a small fraction of young people respond to losing SSI benefits by working more in the formal labor market, a much larger fraction respond to losing SSI benefits by in engaging in criminal activity. Almost no one response to SSI benefits by doing both, they are choosing either one path or the other. We don’t see people switching from a crime response to a work response. We do see some people initially working and then turning to crime. We do see a little bit of that, but we don’t see anything in the opposite direction.

Paul Rand: One of the most prominent arguments for cutting welfare is the idea that taxpayers are being forced to give up their hard earned money to people who aren’t putting up their own work. But could these incarcerations actually be costing the taxpayer even more than the SSI benefits themselves? That’s after the break.

            Hello, Big Brains listeners. The University of Chicago podcast network is excited to announce the launch of a new show it’s called Entitled. And it’s about human rights. Co-hosted by lawyers and new Chicago law school professors, Claudia Flores and Tom Ginsburg. Entitled explores the stories around why rights matter and what’s the matter with rights. Big Brains is supported by the University of Chicago Graham School. Are you ready to open the door to new learning in your life? Experience inquiry that is steeped in the UChicago tradition of powerful discovery and exploration. Select from courses and programs in their liberal arts, culture, science, society, and more. Customize your lifelong learning journey with UChicago Graham, online and in person offerings are available. Learn more at graham.uchicago.edu/bigbrains. Manasi Deshpande is an economist. So when she saw incarcerations going up as SSI benefits go down, well, naturally she decided to do a cost benefit analysis.

Manasi Deshpande: Incarceration in the United States is very, very expensive. And so the calculations that we do in the paper suggests that the amount that we’re spending on incarceration and to a lesser extent enforcement, are basically eliminating the cost savings to the government of spending less on SSI benefits and Medicaid for this population.

Paul Rand: How dramatic though is the shift?

Manasi Deshpande: If we look at total savings to the government from not providing SSI benefits and not providing Medicaid benefits, we’re talking about $50,000 per removal over the next 20 years. If we compare that to the enforcement and incarceration costs over that same time period, over that next 20 years, we see that about $40-45,000 state and local governments are spending on enforcement and incarceration. So over the same time period, the government is essentially breaking even.

Paul Rand: And with one of the highest incarceration rates in the world, it’s worth really considering the trade offs here.

Manasi Deshpande: The government is saving on SSI and Medicaid, but then as a result of removing these young people from SSI, it has to spend approximately as much on enforcement and incarceration.

Paul Rand: And in terms of, I guess, if we think through the overall benefits, I’m assuming benefits go beyond just simply saving the cost of incarcerating somebody. What other benefits does an SSI program provide to people that go beyond a simpler apple to apple comparison in terms of costs?

Manasi Deshpande: I have other work showing that disability benefits lead to substantial reductions in bankruptcy filings and in foreclosure. This study on crime is notable because it’s one of the first studies that is looked at not just the effects on recipients, but the effects on society at large, that the victim costs that we calculate are enormous.

Paul Rand: Victim costs factor in the losses involved in crimes beyond just the enforcement and the incarceration. The medical bills victims may have to pay a possible reduction in their productivity at work, or the fear increased crime creates in society leading to less consumptions.

Manasi Deshpande: The victim cost dwarf even the cost of the government of incarceration and enforcement.

Paul Rand: So do you look at this and say that increasing, maintaining or increasing SSI benefits is actually a very effective way to reduce crime? And we ought to think about it that way.

Manasi Deshpande: So it’s certainly the case from this study that removing young people from SSI increases crime substantially. That suggests that doing the opposite, expanding SSI eligibility, either to those young people who would’ve been removed or to other disadvantaged populations or increasing the generosity of these benefits is likely to lead to substantial reductions in crime. I think that would be a safe implication.

Paul Rand: The debate over the effectiveness of welfare is one we’ve been having in this country for a long time. This one paper won’t end that argument, but Deshpande hopes that it will reframe the debate entirely.

Manasi Deshpande: So my hope is that with these results, people will reconsider the way that welfare programs are discussed. The debate over welfare programs is generally framed in terms of work disincentives. That we understand that these programs have benefits to individuals, but that they really discourage work. And what we find in this paper is that, although there are some work disincentives, there are much larger crime disincentives. And so my hope is that this paper reframes the way that we think about these programs.

Paul Rand: And are you having any indication that message is getting received?

Manasi Deshpande: I think so. I think progress is always slow, but the way that I think about the rule of research and public policy is not that I’m going to write a study and then tomorrow something is going to happen as a result of that study. And before I went to graduate school, I worked at the National Economic Council at the White House and have some other policy experience. And that was my experience, is that it was never the case that an academic study overnight changed public policy. But instead that the political system at some point decided to reform welfare or reform education or reform labor market policies. And when the political system decides that the research needs to be there, that is the opportunity for academics and researchers to then inform how those policies get shaped. So I do think it’s important for researchers to make sure that their research gets out there and is accessible to policy makers and to the broader public. Doing things like publishing op-eds, appearing on podcasts.

Paul Rand: That’s really good idea. We should get you on a podcast.

Manasi Deshpande: Right.

About the Authors

Matthew Hodapp: Big Brains is a production of the University of Chicago podcast network. If you like, what you heard, please leave us a rating and a review. The show is hosted by Paul M. Rand and produced by me Matthew Hodapp and Lea Ceasrine. Thanks for listening.

Source: University of Chicago

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