Sunday, August 16, 2009

Tax Credits and Convicts

There was an interesting line in an otherwise embarrassing bit about the Philadelphia Eagles' signing of Michael Vick:

"If [the Eagles will] pay $1 mil+ to give Michael Vick a 2nd chance, how about leading the charge to help ex-offenders citywide? Philly is home to 200,000 people with criminal records. Those with drug convictions are legally barred from ... jobs at airports, nursing homes or in security, but they can do most other tasks. And yet, few if any companies took the city up on $10,000 tax credits to hire ex-cons."

(Emphasis is mine, and the quote above is from a Facebook entry by Philadelphia Inquirer columnist Monica Yant, not the author of the above link.)

But...Philadelphia offers tax credits for hiring ex-cons? Really?

Sure enough, Michael Nutter, mayor of Philadelphia headed up the program:

"So on his 100th day in office last month, Mayor Michael Nutter announced a program, being headed by an ex-offender, that gives $10,000 a year in municipal tax credits to companies that hire former prisoners and provide them tuition support or vocational training."

Not sure how I feel about this. On the one hand, the uneven tax code creates a clear distortion into the labor market. On the other, considering the recent policy proposals at the national level, at least Philadelphia isn't further taxing companies that aren't hiring ex-cons.

People often complain that convicts have a difficult time incorporating themselves back into society (whatever that phrase is supposed to mean, I view it as having a hard time finding a job). Well, convicts put forth the signal that they are riskier employees, and insofar that those going to prison are riskier employees (probably true as a whole, though I'm sure there are plenty of exceptions), the signaling process here likely isn't too far off.

The idea that this program could prevent future recidivism is an interesting one; that's something the data will have to bear. From the initial quote above, it doesn't sound like many companies are taking the mayor's offer.

What else could possibly help deter crime? I've always thought that dropping the minimum wage would allow the labor market to price riskier employees accordingly, allow them entry into employment, then build up a reputation as a reliable employee and move down the path of higher wages. It's non-distortionary and liberty enhancing. Seems like it's worth a shot to me.

2 comments:

Will Luther said...

"And yet, few if any companies took the city up on $10,000 tax credits to hire ex-cons"

Wow. I knew they were riskier employees, but I would have never guessed THAT much riskier.

Assuming the ex-con makes $10 an hour, 40 hours a week, for 50 weeks, the government is covering HALF his annual salary in tax cuts. ($10 an hour is roughly minimum wage+FICA.)

Matt E. Ryan said...

"a program...that gives $10,000 a year in municipal tax credits to companies that hire former prisoners and provide them tuition support or vocational training."

Not sure what the price tag for the schooling or training is, but that amount has to come out of the $10,000.