The Economic Burden of
Incarceration in the United States
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# IJRD-072016
Michael McLaughlin, MACC, MBA | Washington University in St. Louis
Carrie Pettus-Davis, MSW, PhD | Florida State University
Derek Brown, MA, PhD | Washington University in St. Louis
Chris Veeh, MSW, PhD | The University of Iowa
Tanya Renn, MSW, MPH, PhD | Florida State University
FLORIDA STATE UNIVERSITY • COLLEGE OF SOCIAL WORK • IJRD.CSW.FSU.EDU
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ABSTRACT
The Economic Burden of
Incarceration in the United States
This study estimates the annual economic
burden of incarceration in the United States.
While prior research has estimated the
cost of crime, no study has calculated the
cost of incarceration. The $80 billion spent
annually on corrections is frequently cited
as the cost of incarceration, but this gure
considerably underestimates the true cost
of incarceration by ignoring important social
costs. These include costs to incarcerated
persons, families, children, and communities.
This study draws on a burgeoning area of
scholarship to assign monetary values to
twenty-three different costs, which yield an
aggregate burden of one trillion dollars. This
approaches 6% of gross domestic product
and dwarfs the amount spent on corrections.
For every dollar in corrections costs,
incarceration generates an additional ten
dollars in social costs. More than half of the
costs are borne by families, children, and
community members who have committed no
crime. Even if one were to exclude the cost
of jail, the aggregate burden of incarceration
would still exceed $500 billion annually.
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The scale of incarceration over the past forty
years in the United States is unprecedented.
The prison population grew sevenfold
as the U.S. became the world leader in
incarceration (Epperson & Pettus-Davis,
2015; Pew Center on the States, 2008).
This phenomenon of hyperincarceration
has been criticized for being unnecessary,
counterproductive, and prohibitively
expensive (Alexander, 2010). The 2008
nancial crisis underscored these concerns
by highlighting the scal unsustainability
of hyperincarceration (Henrichson &
Delaney, 2012). For many state and local
governments, corrections spending has
become an unaffordable burden.
The $80 billion spent annually on corrections
has been cited as the cost of incarceration
(DeVuono-Powell, Schweidler, Walters,
& Zohrabi, 2015). However, a growing
body of research suggests the true cost
of incarceration far exceeds the amount
spent on corrections (Pager, 2007; The
Pew Charitable Trusts, 2010; Wakeeld &
Wildeman, 2014; Western, 2006). This is
because corrections spending ignores costs
borne by incarcerated persons, families,
children, and communities. Examples of
these social costs are the foregone wages
of incarcerated persons, increased infant
mortality, and increased criminality of
children with incarcerated parents. While
these costs do not appear on government
budgets, they reduce the aggregate welfare
of society and should be considered when
creating public policy.
The aims of this study are twofold. First,
this study draws on prior literature to
estimate the annual, aggregate burden of
incarceration. This is important because
it enables legislators and advocates to
understand the scale of hyperincarceration’s
effects relative to other social problems.
This is particularly relevant for incarceration
because there is reason to believe the cost
of incarceration has been substantially
underestimated (Clear, 2007).
Second, this study identies the specic
groups upon whom the costs of incarceration
fall. If incarceration solely affected criminal
offenders and government budgets, there
would be no need for such an analysis.
However, it has become clear that the
costs of incarceration are also shouldered
by families, children, and communities.
Incarceration does not take place in a
vacuum; incarcerated persons are members
of families, organizations, and communities.
When a person is removed from these
social structures, it comes at a signicant
cost- not just to the person being removed
but to the people and neighborhoods that
are left behind. Until now these costs have
BACKGROUND
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not been measured. This a tremendous
injustice, for a social policy has been carried
out without even identifying who bears the
costs or the amount of costs to which they
have been subjected. This study addresses
this knowledge gap by identifying the extent
to which various groups bear the cost of
incarceration.
There is a substantial literature measuring
the cost of crime (Anderson, 1999;
Cohen, 2005; Ludwig, 2006). To date,
however, no study has estimated the
cost of incarceration. Knowing the cost of
incarceration is critical to legislators who
weigh the costs and benets of incarceration
in forming criminal justice policy. The $80
billion in corrections spending is misleading
because it underestimates the total cost
of incarceration, which includes not just
corrections spending but all costs that
reduce social welfare. This study nds the
aggregate burden of incarceration to be
one trillion dollars, which approaches 6%
of GDP and is eleven times larger than
corrections spending.
Each cost estimated in this study represents
either the opportunity cost of resources
deployed or people’s willingness-to-pay
to avoid an undesirable outcome, which
is consistent with the denition of social
costs in the cost-benet analysis literature
(Boardman, Greenberg, Vining, & Weimer,
2010). The willingness-to-pay concept
acknowledges that social policies have
winners and losers; the amount losers would
pay to avoid an undesirable outcome is a
social cost (Stiglitz & Rosengard, 2015).
Opportunity costs, which refers to the fact
that dollars spent on incarceration cannot
be spent elsewhere, represent a foregone
benet to society and are thus social costs
as well.
This study relies on ndings from prior
research regarding the value of a person’s
life and time. These ndings are used to
calculate opportunity costs and people’s
willingness-to-pay to avoid incarceration-
related harms. Assumptions are explicitly
stated when made, and every effort has
been taken to use conservative gures.
In deriving the cost of incarceration
this study relies on an incidence-based
approach. This approach identies the
lifetime cost associated with all incidences
of incarceration occurring within a single
year. When these costs occur in the
future (second-generation costs) they are
discounted to the present value using a
discount rate of 3% (Fang, Brown, Florence,
& Mercy, 2012). The Bureau of Labor
Statistics ination calculator was used to
adjust gures to 2014 dollars. Consistent
with the incidence-based approach, costs
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are estimated using the number of new
admissions to state and federal prisons in
2014 plus the average jail population for
2014 (Carson, 2015).
Estimating social costs of incarceration
is problematic because it is difcult to
disentangle the effects of incarceration
from the effects of poverty (Wakeeld &
Wildeman, 2014; Western, 2006). If a formerly
incarcerated person earns low wages after
being released from prison, this could be
due to the stigma of being incarcerated, the
erosion of his or her skills during the period of
incarceration, or the lack of a social network
after having been cut off from the outside
world. Alternatively, it could be that the person
earns low wages because he or she grew
up poor and obtained an inferior education,
which led to him or her becoming incarcerated
in the rst place. To the extent possible this
study attempts to identify the unique effect of
incarceration, but double-counting of costs is
an inevitable drawback to such analyses.
PRIOR LITERATURE
A substantial literature examines the costs of
crime (Anderson, 1999; Cohen, 2005; Ludwig,
2006). These costs include crime-induced
production, the opportunity cost of people’s
time, and the value of people’s lives. Crime-
induced production refers to activities that
would not be necessary in the absence of
crime (e.g., paying a police force). Time costs
assign a value to the minutes people spend
locking and unlocking doors or engaging in
other aspects of crime prevention. The value
of a human life is drawn from the cost-benet
analysis literature, and the value of non-
fatal injuries is estimated using jury awards
(Boardman et al., 2010; Cohen, 2005).
Crime is by no means the only social problem
for which researchers have attempted
to measure the cost. Researchers have
estimated the cost of childhood poverty,
child maltreatment, and disease (Fang et
al., 2012; Holzer, Schanzenbach, Duncan, &
Ludwig, 2008). While these studies focus on
different phenomena, they share a common
framework. In each case, the goal is to
measure the aggregate reduction in social
welfare. This informs policy makers regarding
the magnitude of the problem and facilitates
comparisons across social issues. While it
may seem callous to say that one social issue
is more costly than another, governments
have nite resources and must make tradeoffs
based on relative importance.
Incarceration-related costs have been
discussed in a number of studies, but no study
has of yet quantied and aggregated the costs
(DeVuono-Powell et al., 2015; Pager, 2007;
The Pew Charitable Trusts, 2010; Wakeeld &
Wildeman, 2014; Western, 2006). This study
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lls the knowledge gap by estimating the
annual burden of incarceration to be one
trillion dollars. For ease of exposition, the
twenty-three costs estimated in this study
are grouped into the following categories:
(1) costs of corrections, (2) costs borne by
incarcerated persons, and (3) costs borne
by families, children, and communities.
COSTS OF CORRECTIONS
Corrections spending ($91.1 billion)
Federal and state governments spend
$80 billion annually to operate prisons
and jails (DeVuono-Powell et al., 2015;
U.S. Department of Justice, 2013).
Corrections costs fund the connement of
convicted prisoners and people awaiting
trial (Kearney, Harris, Jácome, & Parker,
2014). The ideal way to measure the
cost of corrections is to track the costs
attributable to all persons incarcerated in a
single year throughout their entire spell of
incarceration. Unfortunately such data are
not available. To approximate the lifetime
cost, this study relies on the steady-state
methodology used by researchers to
estimate the lifetime cost of disease when
longitudinal data are not available (Barnett,
Birnbaum, Cremieux, Fendrick, & Slavin,
2000; Birnbaum, Leong, & Kabra, 2003).
The steady-state methodology allows for the
cost of corrections incurred during a single
year to serve as a proxy for the lifetime
cost for persons who became incarcerated
during that year (Fang et al., 2012). An
assumption of the steady-state methodology
is that the cost of corrections does not
uctuate considerably from one year to
the next. The size of the prison population
has stabilized over the past few years, so
this assumption is likely to hold (Epperson
& Pettus-Davis, 2015). Using the cost of
corrections for a single year thus yields a
total corrections cost of $80 billion. However,
13.9% of corrections costs do not appear in
government budgets (Henrichson, Rinaldi,
Delaney, 2015). These costs include certain
pension obligations, health care benets for
correctional staff, and health care provided
to inmates. The total cost of corrections is
thus $91.1 billion.
Lost wages of incarcerated persons
while incarcerated ($70.5 billion)
The wages incarcerated persons could have
earned had they been working reduces
GDP and constitutes lost productivity. After
subtracting the value of prison production
(nancial savings from work performed by
inmates), the average incarcerated person
incurs $23,286 ($33,066 in 2014 dollars in
lost productivity per year (Anderson,1999).
Multiplying this productivity loss by the
average jail population (744,600) yields
$24.6 billion in lost wages. For prisons,
the number of new admissions (626,644)
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is multiplied by lost productivity for 2.25
years (the average time served in prison).
Using the average prison term accounts for
differences in the length of incarceration
spells among inmates. The total cost
of foregone wages produced by these
calculations, discounted to the present
value, is $70.5 billion.
Reduced lifetime earnings of formerly
incarcerated persons ($230.0 billion)
Incarceration reduces a person’s lifetime
earnings between ten and forty percent
(The Pew Charitable Trusts, 2010; Western,
2006). Formerly incarcerated persons earn
lower wages because they face occupational
restrictions, encounter discrimination in
the hiring process, and have weaker social
networks and less human capital due to
their incarceration. The reduced wages of
formerly incarcerated persons constitutes
lost productivity and is thus a social cost.
Incarceration will have no effect on the
earnings of the 5% of new admissions
who will never be released (Pager, 2007).
To estimate the productivity loss for the
remaining 95% of new admissions, lifetime
earnings (based on full-time work from age
25 to 64) are estimated based on persons’
level of education. The educational status
of new admissions is as follows: 41.3% of
are high school dropouts, 46.0% have a
high school diploma/GED, and 12.7% have
some form of postsecondary education
(Harlow, 2003). The median earnings for
high school dropouts, high school graduates,
and individuals with an associate’s degree
are $973,000, $1,304,000, and $1,727,000,
respectively (Carnevale, Rose, & Cheah,
2011). Reducing earnings by 25%—the
midpoint of the estimates—generates
rounded, per-year costs of $3.3 billion,
$4.9 billion, and $1.8 billion respectively
([1,302,682* 41.3%* 973,000* 25%] / 40
+ [1,302,682* 46.0%* 1,304,000* 25%] /
40 + [1,302,682* 12.7%* 1,727,000* 25%]
/ 40). Treating each of the per-year costs
as a forty-year annuity discounted at 3%
produces a total cost of $230.0 billion.
Cost of nonfatal injuries sustained while
incarcerated ($28.0 billion)
The Bureau of Justice Statistics 3rd National
COST $ (BILLIONS)
Reduction in lifetime earnings of
incarcerated persons
230.0
Lost wages while incarcerated 70.5
Higher mortality rate of formerly
incarcerated persons
62.6
Nonfatal injuries to incarcerated
persons
28.0
Fatal injuries to incarcerated persons 1.7
TOTAL 392.6
TABLE 1 - COSTS BORNE BY
INCARCERATED PERSONS
NOTE: e sum of the individual costs does not match the
total because of rounding.
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Inmate Survey revealed that 3.2% of jail
inmates and 4% of state and federal prison
inmates reported being sexually abused
during the year (Kaiser & Stannow, 2013).
This implies that 86,288 rapes and/or sexual
assaults occurred in 2014. The cost of a
rape has been estimated to be $324,690 in
2014 dollars (Cohen, 2005). Thus, the total
cost using the steady-state methodology
is $28.0 billion. This is an underestimate
because it does not include the cost of
physical assaults.
Cost of fatal injuries sustained while
incarcerated ($1.7 billion)
Five hundred and thirty-six people
committed suicide in state and local jails in
2013 (U.S. Department of Justice, 2015).
The suicide rate for incarcerated persons
is 16.5 per 100,000 people, which is 1.587
times greater than the risk for persons not
incarcerated (Cohen, 2005). Dividing the
number of deaths by the increased risk
suggests the incremental number of suicides
attributable to the effects of incarceration is
198. Prior research has measured the cost
of a person’s life to be $8.66 million (in 2014
dollars) so the steady-state methodology
generates a total cost of $1.7 billion
(Anderson, 1999).
Higher mortality rates of formerly
incarcerated persons ($62.6 billion)
The mortality rate of formerly incarcerated
persons is 3.5 times higher than that of
people who have not been incarcerated
(Binswanger, Stern, Deyo, Heagerty,
Cheadle, Elmore, & Koepsell, 2007). For
every 100,000 person-years there are
777 deaths among formerly incarcerated
persons compared to 222 for the rest of
the population (Binswanger et al., 2007).
Multiplying the incremental mortality by the
number of new admissions (only the 95%
of whom will be released at some point)
yields a gure of 7,230 premature deaths
(Binswanger et al., 2007; Kaeble, Glaze,
Tsoutis, & Minton, 2015; National Resource
Council, 2014). Multiplying this by the value
of a person’s life produces a total cost of
$62.6 billion (7,230* 8,662,000).
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Visitation costs ($0.8 billion)
To visit incarcerated persons, family
members must spend time traveling, incur
transportation costs, and suffer emotional
harm from being strip-searched (DeVuono-
Powell et al., 2015). There are 700,000
families with an incarcerated family member
and the opportunity cost of a person’s time
is $18.66 in 2014 dollars (Anderson, 1999;
Clear, 2007). Assuming one person from
each family spends ve hours traveling to
and from visits each month, the cost of this
wasted time is $0.8 billion (700,000* 5* 12*
18.66) using the steady-state methodology.
Moving costs ($0.5 billion)
The incarceration of a family member
increases the likelihood that other family
members will change their residence
(Clear 2007). A family might move closer
to the prison or jail, or a signicant other
might move to begin cohabiting with a new
COST $ (BILLIONS))
Criminogenic nature of prison 285.8
Increased criminality of children of incarcerated parents 130.6
Children's education level and subsequent wages as an adult 30.0
Marginal excess burden 17.8
Divorce 17.7
Decreased property values 11.0
Adverse health effects 10.2
Reduced marriage 9.0
Child welfare 5.3
Interest on criminal justice debt 5.0
Reentry programs, nonprots, movement to end mass incarceration 2.9
Homelessness of formerly incarcerated persons 2.2
Infant mortality 1.2
Children rendered homeless by parental incarceration 0.9
Visitation costs 0.8
Moving costs 0.5
Eviction costs 0.2
TOTAL 531.0
TABLE 2 - Costs Borne by Families, Children, and Communities
NOTE: e sum of the individual costs does not match the total because of rounding.
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person. The release of the incarcerated
person from prison or jail could trigger yet
another move. According to the American
Moving & Storage Association, the average
cost of an intrastate move is $1,170 and the
average cost of an interstate move is $5,630
(Williams, 2014). One out of nine families
changed residences between 2013 and
2014 (U.S. Census Bureau, 2015). If one out
of nine new admissions to prison or jail have
a family member who moves because of
incarceration, the number of incarceration-
related moves is 152,867 and the total
cost (based on the weighted-average
cost of a move) is $0.5 billion (152,867*
(1,170+5,630) / 2).
Eviction costs ($0.2 billion)
Incarceration eliminates an incarcerated
individual as a source of income for his or
her family, thereby increasing the chance
of eviction. Release from incarceration
also increases the chance of eviction
because people with felony convictions
face barriers with private landlords and
in some cases are banned from public
housing (DeVuono-Powell et al., 2015) Ten
percent of formerly incarcerated persons
report family members being evicted from
their home post-incarceration (DeVuono-
Powell et al., 2015). The average cost of
an eviction is $1,635 (TransUnion, 2014).
Thus, the total incarceration-related cost is
$0.2 billion (1,371,244* 0.10* 1,635). This
underestimates the true cost because it only
includes costs to landlords and ignores the
emotional harm suffered by families.
Interest on criminal justice debt
($5.0 billion)
Incarceration may cause the family of
an incarcerated person to go into debt.
Transportation and telephone costs alone
put 34% of families in debt (DeVuono-
Powell et al., 2015). The total amount of
criminal justice debt owed is $50 billion; at
an interest rate of 10% this yields an annual
cost of $5 billion based on the steady-state
methodology (DeVuono-Powell et al., 2015).
Adverse health effects ($10.2 billion)
Sixty-six percent of incarcerated persons
and family members report experiencing
detrimental mental health effects such as
depression, anxiety, and post-traumatic
stress disorder (DeVuono-Powell et al.,
2015). The cost of PTSD, major depression,
and PTSD with major depression are
$5,900 to $10,300, $15,460 to $25,760, and
$12,430 to $16,890, respectively (Tanelian,
Jaycox, & Invisible Wounds Study Team,
2008). The high estimates include the
loss of life due to suicide (Tanelian et al.,
2008). This study uses the low estimates
to avoid double-counting suicides that
were accounted for by nonfatal injuries to
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incarcerated persons. The average of the
low estimates is multiplied by the incidence
rate and the number of new admissions
annually yields a total cost of $10.2 billion
(1,263* 0.66* 1,371,244).
Infant mortality ($1.2 billion)
After controlling for other risk factors
parental incarceration increases infant
mortality by 40% (Wakeeld & Wildeman,
2014). The infant mortality rate in the U.S.
is 5.96 deaths per 1,000 live births, so
incarceration results in an additional 2.384
deaths per 1,000 live births for infants with
an incarcerated parent (Center for Disease
Control and Prevention, 2015). The number
of live births for incarcerated parents
was 56,119 in 2014 ([210,567/(210,567
+1,350,958 +744,600)* 0.7% + (1,350,958
+744,600) / (210,567 +1,350,958 +744,600)
* 2.4%)]* 2,500,000). This was calculated
using a weighted average for federal and
state prison populations, with the percentage
of jail inmates with infant children assumed
to be the same as that of the state (Glaze &
Maruschak, 2010). The incremental mortality
implies an additional 134 children die
(56,119* 2.384/1,000). Based on the value
of a human life the total cost is $1.2 billion,
using the steady-state methodology.
Children’s education level and subsequent
wages as an adult ($30.0 billion)
Ten percent of incarcerated persons’
children are unable to nish high school
or attend college because of their parents’
incarceration (DeVuono-Powell et al.,
2015). Since half of incarcerated individuals
contributed at least 50% of their families’
income, their teenage children may forego
education and prematurely enter the labor
force to compensate for the lost family
income (DeVuono-Powell et al., 2015)
This is a social cost because it leads to
underinvestment in the human capital and
productivity of young people.
Assuming that new admissions (only the
42.2% of whom have zero criminal history,
to avoid double-counting) are responsible
for a proportionate share of the 2.5 million
children with an incarcerated parent, there
were 627,313 children ((1,371,244* 0.422) /
2,306,125* 2,500,000) affected by parental
incarceration for the rst time in 2014 (U.S.
Sentencing Commission, 2004). If 10%
of these children did not complete their
education due to parental incarceration,
then 62,731 children did not complete their
educational goals. The difference in lifetime
earnings for a high school dropout versus a
high school graduate is $331,000 and the
difference for a high school dropout versus
a college graduate is $1,295,000 (Carnevale
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et al., 2011). The weighted-average of
these reductions in lifetime earnings is
$813,000. Multiplying the weighted-average
reduction by the number of children who
do not complete their education goals
produces a discounted cost of $30.0 billion
((62,731*813,000) / 1.03
18
).
Increased criminality of the children of
incarcerated parents ($130.6 billion)
Children of incarcerated parents are ve
times more likely to go to prison (Simmons,
2000). If parental incarceration increases
the criminality of children, then it creates
second generation costs that are manifested
in a higher rate of future crime (Cohen,
2005; Glueck & Glueck, 1950; Hagan &
Palloni, 1990; Murray & Farrington, 2005;
Sampson & Laub, 1993; West & Farrington,
1977; Wildeman, 2009). Assuming that new
admissions (only the 42.2% who have zero
criminal history, to avoid double-counting)
are responsible for a proportionate share of
the 2.5 million children with an incarcerated
parent, there were 627,313 children
(1,371,244*0.422) / 2,306,125* 2,500,000)
affected by parental incarceration for the
rst time in 2014. The likelihood that the
average person will commit a crime is 5.1%
so the incremental likelihood that children
with incarcerated parents will commit a
crime is 20.4% (25.5% – 5.1%). Parental
incarceration thus creates 127,972 future
offenders annually (627,313 * 0.204). The
number of offenders created is 9.33% of
new admissions (127,972 / 1,371,244).
Assuming the amount of crime increases
proportionate to the increase in new
admissions, the 9.33% increase in crime
generates discounted costs of $130.6 billion
in 2014 dollars (9.33% * 2,382,120,000,000)
/ 1.03
18
).
Child welfare costs ($5.3 billion)
Changes in the incarceration rate of females
alone accounted for 30% of the increase in
foster care caseloads between 1985 and
2000 (Swann and Sylvester, 2006). The
cost to the child welfare system per victim
is $7,728 (Fang et al., 2012). Assuming
30% of the 2.1 million screened-in referrals
(those resulting in an investigation by Child
Protective Services) were related to parental
incarceration, the total cost is $5.3 billion in
2014 dollars (2,100,000* 7,728* 0.30* 1.09)
using the steady-state methodology (U.S.
Department of Health and Human Services,
2015).
Children rendered homeless by parental
incarceration ($0.9 billion)
At least 60,000 children (between 2.4%
and 2.7% of the 2.5 million children with an
incarcerated parent) become homeless as a
result of parental incarceration (Wakeeld &
Wildeman, 2014).
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The average cost of homelessness is
$14,480 per homeless person, so the total
cost of child homelessness is $0.9 billion
(60,000* 14,480) using the steady-state
methodology (National Alliance to End
Homelessness, 2015). This gure is an
underestimate because it does not include
the psychological harm becoming homeless
does to children.
Homelessness of formerly incarcerated
persons ($2.2 billion)
Between 25% and 50% of the homeless
population is formerly incarcerated (Knopf-
Amelung, 2013). The most recent estimate
of the homeless population is 610,042.
Using the lower of the two estimates
listed above produces an estimated
total of 152,511 formerly incarcerated
persons among the homeless (Henry,
Cortes, & Morris, 2013). The average
cost of homelessness to taxpayers is
$14,480 annually per homeless person,
so incarceration leads to $2.2 billion in
homelessness costs using the steady-state
methodology (National Alliance to End
Homelessness, 2015). This underestimates
the true cost because it does not include
the emotional harm to the people who are
homeless.
Reentry programs ($2.9 billion)
The 2015 Second Chance Act (SCA) and
Justice and Mental Health Collaboration
Program (JMHCP) conference was attended
by 1,400 federally-funded reentry programs
(National Reentry Resource Center, 2015).
The average budget for a public charity is
$2,093,772 so the steady-state methodology
places the cost of these reentry programs at
$2.9 billion (National Center for Charitable
Statistics, 2015). This is an underestimate
because it does not account for the time
spent by volunteers, academics, and
government ofcials on the movement to
end mass incarceration.
Decreased property values ($11.0 billion)
Incarcerated persons are released into
concentrated areas after completing their
sentences, which could reduce property
values in those neighborhoods (Clear, 2007).
If people prefer not to live near formerly
incarcerated persons, this could increase the
number of homes for sale in a neighborhood
and decrease housing prices. Incarceration
might also reduce property values because
it removes individuals from the community
and thus makes it difcult for their families to
maintain their lawn, contribute to community
efforts, and avoid eviction.
Research suggests people willingly incur
costs to avoid living near a formerly
incarcerated person. Housing values decline
between 2.3% and 4% when a sex offender
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moves into an area, with actual declines of
$5,500 and $3,500, respectively (Linden
& Rockoff, 2008; Pope, 2008). While the
authors of these studies argued the property
value decreases were a cost of crime, this
study assumes the stigma of incarceration
is responsible for the property value decline.
Applying the weighted average of these
price declines to the 95% of new admissions
who will one day be released, and assuming
that the arrival of each formerly incarcerated
person affects the value of two homes
(Pope, 2008 suggests homes within a
0.1-mile radius are affected). Thus, the
discounted cost is 11.0 billion ((1,371,244*
0.95* 4,500*2) / 1.03
2.25
).
Criminogenic nature of prison
($285.8 billion)
High levels of incarceration may actually
increase crime by reinforcing behavior and
survival strategies that are maladaptive
outside the prison environment (Aizer
& Doyle, 2015; Kellogg, 2015; Hoge,
Buchanan, Kovasznay, & Roskes, 2009;
Reiman & Leighton, 2013). Removing
large numbers of people from communities
may also weaken the social controls that
bind neighborhoods together (Reiman
& Leighton, 2013). Estimates of the
criminogenic effect of prison range from
4% to 23% (Aizer & Doyle, 2015; Bhati &
Piquero, 2008; Smith, Goggin, & Gendreau,
2002). Applying the midpoint of this range
(13.5%) to the annual cost of crime and
adjusting for the fact that 5% of incarcerated
persons will never be released generates
a discounted cost of $285.8 billion ((0.95*
0.135* 2,382,100,000,000) / 1.03
2.25
).
Divorce ($17.7 billion)
Incarcerated persons have triple the divorce
rate of people who are convicted but not
incarcerated (DeVuono-Powell et al.,
2015). Divorce retards economic growth by
eliminating economies of scale and eroding
human capital (Potrykus & Fagan, 2012).
The ramications are substantial; Nobel
Prize-winning economist Robert Lucas
described human capital as the primary
driver of economic growth (Lucas, 1993).
The amount of growth attributable to human
capital has been variously estimated to be
61%, 49%, and 22% (Hall & Jones, 1999;
Jorgenson & Fraumeni, 1992; Mankiw,
Romer, & Weil, 1992; Umut, 2015). Divorce
reduces human capital by one-fourth
(Potrykus & Fagan, 2012). Because real
GDP has grown 3.22% annually since 1948,
divorce has reduced economic growth by
at least 0.1771% (0.22* 0.25* 0.0322).
Thus, the 2014 GDP gure of $17.42
trillion would be $30,850,820,000 higher
if not for divorce (The World Bank, 2015).
The amount attributable to incarceration
can be ascertained by noting that 47%
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of incarcerated persons’ family members
obtained a divorce or separated from a partner
as a result of incarceration (DeVuono-Powell
et al., 2015). This study assumes a separation
has the same economic effect as a divorce.
Multiplying this proportion by the number of
new admissions generates an estimate of
644,485 incarceration-related divorces and
separations. The total number of divorces
in the U.S. in 2013 was 1,121,294 (Center
for Disease Control and Prevention, 2015).
Thus, the incarceration-related component of
the cost of divorce is $17.7 billion (644,485 /
1,121,294* 30,850,000).
Cost of reduced marriage ($9.0 billion)
Incarceration also reduces the likelihood of
marriage for formerly incarcerated persons
(Clear, 2007). Foregone marriage generates
costs for the same reasons as divorce
(Potrykus & Fagan, 2012). The reduced
likelihood of marriage is highest for black
males, who are 50% less likely to become
married following a period of incarceration
(Clear, 2007). This study conservatively
assumes formerly incarcerated persons are
25% less likely to become married. Applying
this percentage to new admissions who will
be released at some point yields an estimate
of 325,670 for the number of people who will
forego a marriage opportunity. Assuming the
cost of a foregone marriage is equivalent to
the average cost of a divorce (30,850,820,000
/ 1,121,294), the total cost of foregone
marriage opportunities is $9.0 billion.
Marginal excess burden ($17.8 billion)
Corrections costs are funded by government
taxes. Taxes are distortionary (other than
a head tax, which is not used to fund
corrections) in that taxpayers change their
behavior in response to the tax. Taxpayers
may choose to work less, for example,
because the price of leisure has been lowered
by the presence of a tax.
The deadweight loss that occurs due to this
distortionary effect on behavior is referred
to as marginal excess burden (Feldstein,
1999). Saez, Slemrod, and Giertz measure
the marginal excess burden to be $0.195 per
dollar of taxes (2012). Multiplying this amount
by the cost of corrections ($91,120,000,000)
generates a total excess burden of $17.8
billion.
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Discussion
The aggregate burden of incarceration in
the U.S. for a single year is $1.014 trillion
which is nearly 6% of GDP and eleven times
the size of corrections spending (DeVuono-
Powell et al., 2015; Pager, 2007; Western,
2006). There are $923 billion in costs that do
not appear on state or federal budgets. The
failure to take these costs into consideration
could cause legislators to overestimate the
net benet of incarceration when they are
determining criminal justice policy. This is
because social welfare is maximized when
incarceration is supplied at the level where
the marginal social benet equals the
marginal social cost. Underestimating the
cost of incarceration by ignoring hundreds
of billions of dollars in costs could cause
incarceration to be oversupplied, resulting in
a level of incarceration beyond that which is
socially optimal.
As a sensitivity check, the cost with jails
excluded is presented alongside the cost
of incarceration inclusive of jails (See Table
3). This is done to address the potential
objection that being sent to jail doesn’t have
the same negative effects as being sent
to prison (e.g., reduced lifetime earnings).
Even after excluding the costs attributable
to the jail population, the aggregate burden
still exceeds $500 billion, nearly half of
which is borne by families, children, and
communities. The costs of jail are important,
however, and should not be neglected.
More than eleven million people cycle in and
out of jails each year, and a case could be
made that conditions in jails are worse than
conditions in prison (Clear, Reisig, & Cole,
2016). Ignoring the costs of jail would lead to
the cost of incarceration being signicantly
underestimated.
(BILLIONS)
COST $
EXCLUDING
JAIL
To correctional institutions 91.1 65.9
To incarcerated persons 392.6 200.4
To families, children, and
communities
531.0 247.7
TOTAL 1,014.7 514.0
TABLE 3 - AGGREGATE BURDEN
OF INCARCERATION
NOTE: e sum of the individual costs does not match the
total because of rounding.
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Even if it could be argued that society is
currently producing an efcient level of
incarceration, there are substantial equity
considerations raised by this study’s
ndings. Figure 1 shows that the majority of
costs are borne not by government agencies
or the persons being incarcerated but by
families, children, and communities. These
individuals and groups have committed
no crime, yet they incur the majority of the
costs. These are real economic costs that
should be considered when weighing the
costs and benets of whether to incarcerate
an individual. Yet, until now these costs
have not even been measured. Legislators,
advocates, and members of the criminal
justice community must ask whether the
current system is equitable if children,
families, and neighborhoods bear most of
the costs. If the goals of incarceration are
deterrence and incapacitation, why do so
many innocents bear the brunt of the cost?
Whatever marginal benet is obtained by
incarcerating a nonviolent drug offender,
it seems unlikely that this benet would
outweigh the costs generated if his or her
family becomes evicted, goes into debt,
and has a child drop out of high school
as a result. Such tradeoffs have not been
discussed because more than 90% of the
costs of incarceration do not appear on
government budgets and are absent from
policy discussions.
Worse yet, the aggregate burden of
incarceration estimated in this study
may actually be an underestimate. First,
it does not account for the damage
incarceration causes to social networks or
the emotional harm inicted on children
and families (National Resource Council,
2014). Second, it does not include the cost
of juvenile incarceration, which may be
substantial (Aizer & Doyle, 2015). Third,
it does not account for a number of costs
that are difcult to measure, such as the
psychological pain children suffer when they
become homeless or the deterioration in
FIGURE 1
INCARCERATION COST BY GROUP
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# IJRD-072016
physical health experienced by incarcerated
persons and their families. Finally, it does not
account for the human potential and innovation
lost by incarcerating millions of people. In
the long run, this could jeopardize the United
States’ status as the world’s economic leader.
Future research could estimate the cost of
incarceration more accurately by incorporating
these additional costs.
Another limitation is that this study does not
consider the benets of incarceration. To set
the optimal rate of incarceration, a policy
maker would need to know not only the
costs of incarceration but also the benets.
Prisons serve a valuable purpose by providing
deterrence and incapacitation effects (Levitt,
2004; Yezer, 2014). Yet, there is a point where
the marginal cost of incarcerating an additional
individual exceeds the marginal benet. Cost-
benet analysis is the standard framework for
evaluating policy in this manner (Boardman et
al., 2010). The rst step is understanding the
cost of incarceration, which this study aims
to establish. Future research could provide a
richer understanding by identifying the benets
of incarceration and weighing them against the
costs at the margin.
Like all studies that estimate the economic
burden of a social problem, this study is
grounded on the research, techniques, and
estimates derived by other researchers. To
the extent that previous estimates (e.g., the
value of a human life) were measured with
error, the costs computed in this study will
be less precise. Future researchers can
improve upon these methods so that more
precise calculations can be made. But even
having done so, there is the omnipresent
danger of double-counting. Many of the
costs of incarceration may actually be costs
of poverty or other social problems. To the
extent that double-counting occurs, the cost
of incarceration will be imprecisely estimated.
Future researchers can provide a more
accurate measure of the cost by identifying
better counterfactuals and isolating the
costs specically traceable to the effects of
incarceration.
Conclusion
Researchers have devoted considerable effort
to estimating the cost of crime, but no study
has yet estimated the aggregate burden of
incarceration. Recent reports highlighting
the costs to incarcerated persons, families,
and communities have made it possible
to estimate the true cost of incarceration,
which is found to be one trillion dollars.
This approaches 6% of GDP and is eleven
times larger than corrections spending. This
is important because it suggests that the
true cost of incarceration has been grossly
underestimated, perhaps resulting in a level
of incarceration beyond that which is socially
optimal.
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