A Prison of Debt? Incarceration and Consumer Debt in Young Adulthood

• In Event: Causes and Consequences of Inequality Among Formerly Incarcerated

Abstract

The American criminal justice system has expanded considerably since the 1970s, and research finds that formerly incarcerated individuals are disadvantaged in the labor market, experiencing unemployment and reduced wages. Recent research further demonstrates that incarceration is damaging to wealth accumulation, including homeownership. We extend this research to consider if incarceration is associated with unsecured debt owed to credit card companies or other business. While some research examines the growth and proliferation of legal debt associated with a criminal conviction, no studies have explicitly examined if or how incarceration impacts access to credit or overall debt burdens. Drawing on data from the National Longitudinal Survey of Youth 1997 Cohort (NLYS97), we have two key findings. First, young adults with a history of incarceration are nearly 40% less likely to report unsecured debt than their never-incarcerated counterparts. That said, and second, among those with debt, formerly incarcerated young adults report over $11,000 more unsecured debt, or average, than their peers. Thus, incarceration appears to limit access to credit, but increases debt burdens among those who borrow. Our findings provide further evidence on the diverse and deleterious economic outcomes associated with incarceration, and contribute to growing knowledge of the indebtedness of American families.

Authors

• Cody Warner, Montana State University

• Jason Houle, Dartmouth College