Economic and neighborhood development in low-income areas can transform macroeconomic issues caused by mass incarceration. Government-funded development programs that encourage access to secure housing, food, and education would intervene in the reincarceration cycle, simultaneously improving the economic prospects of previously incarcerated individuals and the nation as a whole.

Mass incarceration is a pressing issue unique to America. Despite our overall strong economy and role as the world’s reserve currency, we are stunted by a growing income gap due to generational wealth and systemic oppression along with an increase in the cost of living. America has the highest incarceration rate and largest prison population in the world. Currently, about 2.4 million people are incarcerated, including 1.6 million in state prisons, 720,000 in local jails, and 210,000 federal prisons. The bulk of the economic strain occurs at the state level, varying by state. For example, California pays an average of $81,000 per year to incarcerate an inmate. 50% of each inmate’s budget goes toward security costs, whereas only $2,478 is spent on rehabilitation programs. There are opportunity costs as well: inmates often leave ill-prepared to become functioning members of the labor force upon release. 

Increasing our labor force participation rate is key to sustaining economic growth and maintaining our current economic position, because having more workers results in higher output. Yet most incarcerated individuals are between the ages of 19 and 39, and 93% of those within this age group are unemployed after their release. By incarcerating our youngest generations, we diminish their future participation in the labor force; having a criminal record makes an individual less hirable and less able to attain human capital. Many employers will request a criminal background check before offering a candidate a job which, when disclosed, lowers an employer’s callback rate by 50%. 

If encouraged, employers may be more likely to hire previously incarcerated individuals. Government-sponsored tax incentives or cash reimbursement for the first few months of work to employers willing to hire previously incarcerated individuals would help former prisoners more seamlessly re-enter the labor force. By relieving hiring costs for the employer, previously incarcerated individuals become a more attractive hire.

Compare this to the current model, which decreases the future contributions of millions of people and requires further government spending past individuals’ time in prison through social service programs such as unemployment benefits. Formerly incarcerated individuals are more likely to use these benefits because they are less likely to be hired.

Many people also face recidivism, otherwise known as reincarceration, due to probation issues within our criminal court system. In America, roughly 76.6% of those who have been arrested will return to the prison system at some point. These high reincarceration rates reduce America’s annual GDP by $65 billion a year. Fortunately, increasing ex-inmates’ job prospects is a virtuous cycle. Recidivism is driven by the lower opportunity costs of committing subsequent crimes because after your first crime is committed, your economic prospects greatly diminish; there is a lot less to lose by going to prison again.

There are many restorative justice practices, such as mediation, therapy, conferencing and community service, that contribute to improving the overall economic development of America. They emphasize development of neighborhoods that face higher crime rates or have a history of being more heavily incarcerated and policed, such as in major urban areas like Compton in Los Angeles, California or Sunnyside in Houston, Texas. A large step would be to focus on therapeutic and preventative justice methods for nonviolent offenders. One example would be to treat addiction, which affects 1.5 million of the 2.3 million U.S. inmates currently incarcerated, as a public health issue instead of a criminal issue to avoid further reincarceration. Extending the cost of an individual inmate in the state of California to a broader scale, changing the way we view addiction would eat into a chunk of the grand total of $126,650,000,000 otherwise spent on 1.5 million incarcerated individuals.

In America, the overuse of probation goes hand in hand with the issue of mass incarceration. Instead of instating a criminal punishment for breaking probation as we currently do, the probation process should focus on education and lucrative job training. We should grow the human capital of individuals that may have lost opportunities to do so, making their time in and after prison more applicable to the future labor force. Personal education is an investment and education of America’s disadvantaged citizens is an investment in our country. Each year of schooling raises an individual’s earnings by 10% a year, more than most other investments will make within the same timeline. Human capital also contributes to 62% of an individual’s total wealth, and by incarcerating millions of young people, we incarcerate the millions of dollars that they could have earned through increased education. This increased earning potential bolsters the American economy and saves Uncle Sam money that would have been spent on recidivism.

Previously, many politicians sought economic growth through 1) tax cuts and rebates to return money to consumers actively contributing to the economy, 2) deregulation of the financial markets to again incentivize those actively contributing to the economy, and 3) infrastructure investments to create more job opportunities within the government or private companies. Where does this leave the millions of people who are deemed unhirable due to previous criminal sentences? By opening up the economy to these people, we grow it in a more sustainable way than before. While the previously mentioned strategies espoused by politicians are dependent on consumer behavior (the demand side), focusing on growing the labor force participation rate allows for both consumption and production to grow hand in hand. As these two sides come to an equilibrium, the overall equilibrium of our GDP will shift up.

Mass incarceration in the United States is a huge problem, but it is also a huge opportunity. By investing in the development of our neighborhoods and focusing our efforts on an education-based probation and incarceration system, we can increase our labor force participation rate and sustainably advance our economy.