Theory and research on the employment lives of the ex-incarcerated suggests that imprisonment can decrease earnings in the conventional labor market for young adults (e.g., Sampson and Laub, 1993; Sampson and Laub, 2003; Western, 2002; Western, 2006). However, little is known about the influence of imprisonment on criminal earnings. To fill this gap, the research reported below addresses the following question: How does incarceration influence criminal earnings for adolescents and young adults? Drawing on theories regarding stigma, social and human capital, and opportunity structure, I develop an argument to explain how incarceration can yield returns in the form of greater illegal earnings. Briefly, the case is made that due to failures in the conventional labor market, the ex-incarcerated are forced to rely on criminal earnings from illegal opportunity structures during the life course. Thus, illegal earnings will be greater for this group than for their counterparts who have not been incarcerated.
To assess the role of prior incarceration on illegal earnings, this study estimates random-effects models for adolescents and young adult male ex-offenders and non-offenders using the National Longitudinal Survey of Youth (NLSY97) for 1997-2005. Consistent with the theoretical arguments, the findings reveal that individuals with an incarceration history earn significantly higher annual illegal earnings than those who do not have such a history. This is true net of a variety of predictors of illegal income, including factors related to ‘persistent heterogeneity’. The analyses also reveal an interaction effect of prior incarceration and African-American racial status on illegal earnings, whereby formerly incarcerated African-American males earn much higher predicted illegal income than former incarcerees from other race/ethnic backgrounds.
To assess the role of different sources of illegal earnings, I also investigated the influence of prior incarceration on illegal earnings from drug trafficking. These analyses demonstrated a strong positive relationship between incarceration history and annual illegal income from this source. Further, interaction models revealed that ex-incarcerated African-American males earn significantly higher predicted logged income from drug trafficking than Hispanic and White ex-offenders and those never incarcerated. There is also an interaction between prior incarceration and hardcore drug use for this outcome. Formerly incarcerated individuals who use hardcore drugs earn much higher predicted logged annual illegal income from drug sales than ex-incarcerated non-drug users, non-incarcerated drug users and non-incarcerated individuals that do not use drugs.