EurekAlert! posts a peer-reviewed study published in the Quarterly Journal of Economics that shows a “quite dramatic” correlation between the removal of welfare and an increase in crime rates – which winds up being more expensive for all of us:
Using data from the Social Security Administration and the Criminal Justice Administrative Records System researchers estimated the effect of losing Supplemental Security Income benefits at age 18 on criminal justice and employment outcomes over the next two decades. By comparing records of children with an 18th birthday after the date of welfare reform enactment on August 22, 1996, and those born earlier (who were allowed onto the adult program without review) the researchers were able to estimate the effect of losing benefits on the lives of the affected youth.
They found that terminating the cash welfare benefits of these young adults increased the number of criminal charges by 20% over the next two decades. The increase was concentrated in what the authors call “income-generating crimes,” like theft, burglary, fraud/forgery, and prostitution.
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.
“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.”
You can read the working paper here, at the National Bureau of Economic Research.