Welcome to America, where 2.3 million people are locked up, and each year 600,000 of those individuals will be coming home, often to communities near you. For the most part, they will leave prison uneducated, unskilled, unprepared, and angry at having spent years locked away in a warehouse. This is the legacy of the law-and-order movement and the prison boom of the 1990s: America is in the midst of an incarceration and post incarceration crisis.
Link to Part I
Link to Part II
PART III: Unimpressive Results: Incentivizing or Penalizing Employer Behavior
Federal efforts to improve employment prospects for individuals leaving prisons have largely focused on creating employer-side incentives. The rationale is, essentially, that employers face a number of financial risks in hiring ex-offenders, and that reducing these risks or compensating for them financially, could improve the employment prospects of those with criminal records.
Theoretically, the greatest benefit to individuals, many of whom have been disconnected from the labor market, actually accrues over the long-term: jobs made possible through wage subsidies restore the unemployed to the universe of employable people and, over the long term, allow them to build human capital in terms of work experience and job skills. Unfortunately, this rarely happens in practice because, even with incentives, few employers hire ex-offenders, and few ex-offenders remain employed long enough to realize those gains in human capital.
Two of the most well-known incentives created by the federal government are the Work Opportunity Tax Credit (WOTC) and the Fidelity Bonding Program. Currently, under the WOTC program, employers who hire low-income individuals with criminal backgrounds can receive a tax credit of up to $2,400 per qualified worker.
The full amount of the credit is available if the new hire works at least 180 days or 400 hours, and a partial credit of 25 percent is available for employees working between 120 and 400 hours. Unfortunately, most research to date suggests that that WOTC has virtually no measureable, positive effects on long-term employment or job tenure, and generates only limited wage improvements.
Although the WOTC at-first glance appears promising, it is widely viewed as under-publicized and under-utilized by both job applicants and employers. Some experts suggest that the credit remains largely unknown outside of state employment service offices and non-profit organizations that focus on helping low-income individuals find jobs. Others suggest that the WOTC would be a more effective tool if the tax credit available for hiring low-income ex-offenders matched the tax credit available for individuals who qualify as Long-term Family Assistance recipients: up to $9,000.
Although views on the matter vary widely, the general consensus is that the WOTC will not create a sufficient incentive for employers to hire high-risk applicants unless the dollar amount available increases significantly. Even then, the effectiveness of such a proposal will likely depend on a range of other reforms, including enhancement of support services for employers, training for workers, and financial incentives that make legitimate jobs more attractive than illegal ones.
Another program created by the federal government attempts to address employer concerns regarding potential monetary or property loss that they may incur as a result of hiring ex-offenders. The Fidelity Bonding Program provides bonds ranging from $5,000 to $25,000, at no cost to employers, to insure against employee dishonesty. Because most commercial insurance policies will not cover "at risk" individuals, such as ex-offenders, the program gives employers insurance coverage that might otherwise be unavailable.
In spite of early praise for the program, it remains underutilized. Many employers do not take advantage of the bonding program either because they are simply unaware of its existence, or because they remain convinced that the potential liability they could incur from hiring ex-offenders far surpasses the amounts provided by the bonds.
Alternatively, there have been a number of proposals for the creation of a wage subsidy for low wage workers. Some researchers suggest that wage subsidies provide a more powerful incentive to employers than tax credits, likening the former to a discount taken at the register and the later to a mail-in rebate. Nonetheless, research on the long-term effectiveness of wage subsidies remains scant, and there is virtually no data on how such subsidies would specifically impact the job prospects of individuals with criminal records. As stand-alone policy initiatives, tax credits and wage subsidies provide only a minimal benefit to ex-offenders seeking work.
From Incentives to Penalties: Discrimination, Equal Protection, and Licensing
Although many economists prefer incentives as a means of encouraging employers to hire ex-offenders, many scholars and social justice groups have called for reforms specifically addressing discrimination against individuals who have criminal records. The substance of proposed anti-discrimination reforms varies widely.
Some experts have suggested that Congress create a federal standard based on the Equal Employment Opportunity Commission (EEOC) policy guidance on the use of criminal background checks in the hiring process. Such a suggestion has a number of shortcomings. Essentially, the guidance currently asks employers to consider the relationship between the offense and the job, how long ago the offense occurred, the severity of the offense, and any evidence of rehabilitation.
Such guidance is not new. The EEOC first offered this recommendation in 1990, and over the past two decades, Congress has never seriously considered giving it the force of law. Such a proposal would likely face significant opposition, particularly from members of the business community who would fear being subject to both greater pressure to hire ex-offenders and greater risks of incurring liability for negligent hiring.
If the EEOC guidance did become law, it would likely spawn a wealth of litigation, but it is unclear whether or not it would yield increases in the employment prospects of ex-offenders. As a threshold matter, only individuals who were racial or ethnic minorities alleging a disparate impact would have access to such a legal remedy. And even then, employers would still be able to raise a defense of business necessity Also, such a policy change would likely be of little help for inmates who were are transitioning back into society. It seems likely that employers would be well within their rights to reject applicants who had checkered work histories, lacked adequate educational credentials, and had only recently been released from prison.
Other proposals specifically on this point involve providing ex-offenders status as a suspect class under the Equal Protection Clause. Such proposals have gained little traction. Even if there were more significant movement on this front, it would likely come from the courts, and would then probably take the form of ex-offender status being elevated to a quasi-suspect classification. Such classifications are subject to the vague intermediate scrutiny standard, which has been characterized by some as "an unworkable half measure" that has led to inconsistent and unfavorable results. Thus, the Equal Protection Clause offers little hope for relief.
Other proposals attempt to reduce state-sponsored employment discrimination and expand the universe of employment opportunities available to ex-offenders by bringing federal efforts to bear on state occupational licensing regimes.
Many states prohibit ex-offenders from obtaining work in certain industries by requiring licenses that contain broadly applicable character requirements that bear no direct relation to the licensed occupation. For many individuals leaving prison, the denial of a license can bar them from reemployment in prior occupations, or jobs where they already possess the appropriate skills. In many states, the occupational licensing regimes are pervasive, covering a range of professions including barbering, cosmetology, real estate, physical therapy, personal training, and even car sales.
The biggest obstacle to federal efforts on this point is the basic nature and sheer scope of the problem: occupational licensing schemes vary dramatically by state, with some states maintaining dozens of laws that contain such provisions. Although this represents a realm in which reform is sorely needed to provide more job opportunities to ex-offenders, it is likely that local-actors working on a state-level would be more successful in lobbying for such changes.
Incentives, Penalties, and a Chronological Mistake
I theorize that one of the fundamental reasons why employer-side financial incentives have failed to improve the employment prospects of ex-offenders is the chronological position of such incentives along the prisoner reentry timeline. Incentives like the WOTC and the Federal Fidelity Bonding program only come into play – if ever – once an employer has received a job-seeker’s resume, interviewed the applicant, and is weighing the pros and cons of hiring that individual.
The problem with this fantastical timeline is that many individuals with criminal records never get far enough in the hiring process to realize the intended benefit – i.e. employment – of such programs. Some segments of the ex-offender population, particularly racial minorities living in urban areas, are almost uniformly cut off from the primary labor market: they do not receive callbacks, job interviews, or serious consideration as prospective employees, even with the added bonus of a tax credit. Barring a dramatic increase in the credit provided by the WOTC and the amount of insurance provided by the fidelity bonding program, it is unlikely that employers will changes their attitudes about hiring workers who have limited skills, erratic work histories, limited education, and criminal records. Additionally, it is worth noting that there are millions economically disadvantaged individuals who do not have criminal records.
With an increase in the WOTC, employers would still be far more likely to hire these individuals before turning to ex-offenders. Penalties, or the more credible threat of penalties, for employment discrimination would likely be similarly ineffective. The guidance provided by the EEOC makes time since conviction and evidence of rehabilitation key factors that employers should evaluate in making hiring decisions that involve ex-offenders.
Most individuals leaving prison can offer no evidence of rehabilitation, and are seldom that many years removed from the commission of the crime. Proposals to codify the EEOC guidance may be symbolically value, but they are of little benefit to individuals who are leaving America’s prisons today, and looking for work tomorrow.
To date, the federal government’s efforts in this realm have consisted largely of incentives. Congress and the Obama administration should not seek to address the post-incarceration unemployment crisis that is plaguing America – and particularly America’s cities – through relying primarily on employer-side incentives that are completely ineffective until the last stages of the hiring process.
All of the policies addressed above are concerned primarily with employer behavior, and come into play only after the individual has left prison. None of them are activated while the individual is incarcerated, to make use of prison time, build human capital, foster employability, and increase the likelihood of successful reentry.