Incarceration and Labor Market Conditions of the Underclass in the United States: An Empirical Investigation


In this paper using both annual time-series data at the federal level as well as annual state-level (balanced) panel data from 1980 to 2017 we investigate the relationship between several labor market variables and the federal and state level incarceration rates in the United States. We find a significant empirical association between the incarceration rate, 10th-percentile real-wage rate, and the unemployment rate, as well as the level of inequality. Specifically, the time-series analysis reveals a significant negative correlation between the incarceration rate and the 10th-percentile wage rate. Moreover, in all time-series regressions, the unemployment rate and the 40%-to-10% wage ratios are both positively correlated with the incarceration rate. In the state-level analysis, panel data regressions indicate that the unemployment rate, income inequality, and unemployment duration are positively associated with incarceration whereas the 10th-percentile wage is negatively correlated with the latter.

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  1. 1.

    The prison boom in the US started much earlier than 1980; however, our choice of the time-series dimension in this study was determined entirely by the availability of the relevant variables we use in our empirical analysis.

  2. 2.

    We also ran several panel regressions controlling for the police-to-civilian ratio (for a subset of the whole data set for which we could find data). However, as this exercise did not alter our results, we have not included it in the paper. Instead, we refer the interested reader to the corresponding author for information on these additional results.

  3. 3.

    We also considered an alternative measure of education, i.e. % of population with or without college education; however we obtained qualitatively very similar results.

  4. 4.

    The use of the political party of a state’s governor might be seen as a rather crude variable, as much of the historical research on state politics and incarceration has shown that a government's approach to crime may be independent of its political affiliation and the fact that different parties might dominate the state congresses. In addition to the state governor dummy, in additional panel regressions we also used other political dummies such as who won the Electoral College in the previous presidential election in the state or the state congressional majority dummies (Republican vs. Democratic) to control for the conservativeness of the state; however, none of these dummies yielded significant estimates. Because of space constraints, these results are not reported but are available upon request from the corresponding author.


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Correspondence to Ceyhun Elgin.

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Cantekin, K., Elgin, C. Incarceration and Labor Market Conditions of the Underclass in the United States: An Empirical Investigation. Eur J Crim Policy Res 26, 529–546 (2020).

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  • Incarceration
  • Labor market
  • Real wage
  • Unemployment
  • Inequality
  • US economy