Prison and Race: The Impact of Incarceration on Human Capital Accumulation and Wages Across the Career

Kecia R. Johnson, The Ohio State University

There are many reasons to expect that incarceration will have long-term, negative consequences for labor market success, and that the consequences may be especially acute for minority ex-offenders. This paper extends Bruce Westerns (2002) work concerning the impact of incarceration on wage mobility by introducing a model that makes a distinction between human capital obtained primarily outside the labor market (e.g., education) and inside the labor market (e.g., experience, and job tenure). This theoretical and empirical distinction is important for estimating models of earnings inequality for ex-offenders, because incarceration disrupts the career, reduces opportunities for stable employment and is linked to slow wage growth. Using the National Longitudinal Survey of Youth 1979-2000, fixed effects models are estimated to examine how labor market characteristics shape the earnings trajectories of African American, Latino and white male ex-offenders. The introduction of cumulative unemployment, cumulative work experience and job tenure into subsequent models is used to capture endogenous human capital influences on earnings. The results suggest that ex-offender/non-offender and race/ethnic differences in earnings are linked to differential career returns to age and these effects are mediated by access to endogenous human capital. Consequently, the effect of incarceration on idndividual wages increases wage inequality.

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Updated 05/20/2006