Sentencing Reform Update: The Economic Case for the “First Step Act”

By ·December 18, 2018
University of California, Los Angeles

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The Issue:

When it comes to putting people behind bars, the United States is an outlier: The share of the population that is incarcerated is higher by far in the U.S. than in most other countries. Maintaining this high rate of incarceration comes at a high cost to taxpayers, as well as to those who go through the system and their families. While there have been bipartisan shows of support for prison reform over the past several years, the issue has been stalled. The "First Step Act" represents a new opportunity to address criminal justice reform. Academic research supports the notion that the legislation could reduce the government and societal costs related to over-incarceration and is unlikely to increase crime rates.

The bill affects the federal prison population, which represents about 8 percent of the individuals incarcerated in the United States.

The Facts:


  • The “First Step Act” aims to reform the federal prison system and sentencing rules. The reform package includes several measures that would reduce over-incarceration in the U.S. and develop sensible and proportional punishments for offenders. For instance, it would reduce the “three strikes” penalty for drug felonies and retroactively limit the disparity in sentencing guidelines between crack and powder cocaine offenses. Importantly, the bill also introduces new incentives for rehabilitation of incarcerated individuals, with the goal of reducing recidivism rates after release. While the measure will only affect the federal prison population, which represents 8 percent of the individuals incarcerated in the U.S., this legislation may serve as a catalyst for future federal, state and local incarceration reforms.
  • The United States has the largest incarcerated population in the world. With more than 2.1 million individuals serving sentences in jails and prisons, the U.S. incarcerates nearly 20 percent of the world’s prisoners. The U.S. also has a higher incarceration rate than any other country with a rate that is 3.75 times the world average (see chart). While the U.S. incarceration rate has declined slightly over the past few years, it remains significantly higher than in past decades.
  • The prison population has surged in the United States over recent decades, with U.S. incarceration rates increasing by more than 200 percent between 1980 and 2016. In 2016, individuals convicted of non-violent drug offenses comprised over 45 percent of the Federal prison population and 15 percent of state prison populations (see here). Demographically, the U.S. incarcerated population is disproportionately concentrated among minority and low-income individuals; Blacks and Hispanics represent over 50 percent of the incarcerated population and historically, a large share have low levels of education: nearly two-thirds of the prison population had not completed high school, according to a 2003 report.
  • The total costs of incarceration exceed the direct costs to the government. In 2013, U.S. spending on incarceration was over $82 billion, or more than $260 per capita, according to the most recent data on expenditures in the criminal justice system. Survey data suggests that the average yearly cost of confining an adult prisoner ranges from $14,000 to $60,000 (see here page 9). In addition to direct government spending on corrections, the penal system has large indirect costs for incarcerated individuals. Research shows that job applicants with criminal records are 50 percent less likely to receive an interview request or job offer compared to identical applicants without criminal records (see here). Labor market restrictions for individuals with criminal records decrease the potential earnings of individuals that have been incarcerated; research has found that the formerly incarcerated earn 10 to 40 percent less than similar workers without a history of incarceration. In terms of sentence length, recent research finds that a one-year increase in incarceration decreases employment by 4 percentage points and reduces earnings by approximately 30 percent after release (see here). While a father is incarcerated, the probability that a family is below the poverty level increases by nearly 40 percent (see chapter 6). In addition, having a criminal record can decrease access to housing and government assistance, and serving time in prison can have negative consequences for health.
  • In the U.S., the crime-reducing benefits of incarceration are small and these benefits decline as the incarcerated population grows. Intuitively, the average level of criminal risk among prisoners decreases when the prison population expands, and the value of incapacitating a low-risk offender may be less than the cost of detention.Because the U.S. already has the highest incarcerated population in the world, the costs of further increasing the size of this population will likely exceed any additional benefits (see chapter 9). While estimates vary, reviews of economic research on incarceration in the U.S. find that a 10 percent increase in the incarcerated population decreases crime by 2 percent or less.
  • Nearly all prisoners are ultimately released – so policies that reduce recidivism are vital to an effective prison system. Each year, over 600,000 individuals are released from state and federal prison. Unfortunately, recidivism is common after release; over 70 percent of former state prisoners are convicted or arrested within 5 years, and over 50 percent of federal prisoners are convicted or arrested within 8 years. These high rates of recidivism have created a “revolving door” in the prison system. Our current approach to recidivism is to simply increase sentence lengths and prison populations, further increasing fiscal and social costs of incarceration and preventing formerly incarcerated individuals from fully integrating into communities after release. Instead, the “First Step Act” includes several measures that incentivize rehabilitation and aim to reduce reoffending. For example, individuals incarcerated in federal prison can earn credits toward accelerated release for participating in evidence-based recidivism reduction programming or other productive activities. Research has shown that incarcerated individuals respond to these types of behavioral incentives, and that reoffending rates decline as a result.
  • Decreasing sentences for low-risk offenders is unlikely to increase crime. The “First Step Act” includes provisions that reduce sentences for incarcerated individuals who are deemed low-risk, either because these individuals have been convicted of nonviolent offenses or because they have earned credits for good behavior or participation in rehabilitative programming. Shortening sentences for these individuals is unlikely to have adverse effects on crime; instead, these policy changes will aid in reducing costly over-incarceration in the federal prison system. Some studies have found evidence that longer sentences modestly reduce re-offending rates after release, though this research often finds that the reduction in offending does not always outweigh the cost of detention (examples include work on three-strikes laws,  sentence enhancementsparole release, and reforms to reduce prison over-crowding). At the same time, because criminal risk declines with age, incapacitating older individuals using long sentences likely yields small benefits. New research finds evidence that longer sentences can actually cause an increase in re-offending; this research finds that each additional sentence year leads to a 4 to 7 percentage point increase in recidivism after release. This increase in recidivism could result from social or emotional harm from incarceration, allowing offenders to build criminal expertise, or by causing labor market skills to atrophy while an individual is incarcerated.

What this Means:

The case is mounting for fair-minded and common-sense reforms to the overly punitive and expensive system of incarceration in the United States. A growing body of economic research supports the bipartisan case for prison reform, through developing sensible and proportional sanctions and investing in rehabilitation for offenders. The “First Step Act” represents a positive move in this direction. The legislation includes several measures that reduce sentences for incarcerated individuals who are deemed low-risk, and aim to reduce reoffending through incentivizing rehabilitation. These measures are unlikely to have adverse effects on crime; instead, these policy changes will aid in reducing costly over-incarceration in the federal prison system.

  • Editor's note: This post updates "The Economic Case for Sentencing Reform", originally published on May 19, 2017.

  • Topics:

    Crime and Criminal Justice
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