~UTTERWORT H

mE I N E M A N N

The Effects of Criminality and Conviction

on the Labor Market Status of Young
British Offenders

DANIEL NAGIN

Carnegie Mellon University

and
JOEL WALDFOGEL
Yale University and NBER

We examine the effects of criminal activity and criminal conviction on the income
and job stability of young British offenders. Using longitudinal data on job market
performance, as well as self-reported data on criminality and official records on
conviction, we estimate the separate effects of criminality and conviction. We find
that criminality alone has no effect on job performance, whereas conviction increases
both job instability and pay. These results confirm results we have obtained else-
where showing that conviction increases the income of young offenders. We explain
the positive effect of conviction on pay by appeal to a human capital explanation of
workers' pay.

I. Introduction
The effect of criminal conviction on individuals' labor market opportunities has been
a question of long-standing interest to criminologists (cf. Becker, 1963; Lemert,
1972) and more recently to economists (Freeman, 1991; Lott, 1992a,b; Waldfogel,
1994a,b). Criminal conviction is believed to stigmatize offenders and thereby limit
legal economic opportunities. Conviction signals that offenders are untrustworthy
and may violate the terms of their employment, for example, by shirking or pilfer-
ing.
Evidence of an adverse impact of criminal conviction on labor market perfor-
mance is surprisingly limited. Until recently, all existing economic evidence on the
effect of conviction on labor market status was based on studies of ex-prisoners (see,
for example, Cook, 1975; Beck, 1981; Witte and Reid, 1980; Hardin, 1975; and

Thanks to Jacqueline Cohen, Donald Fullerton, Lowell Taylor, and Joseph Tracy for helpful comments and to
Bee Lim for research assistance. This work was supported by National Science Foundation under Grant SES-
9023109. Part of the work on this paper was done while Waldfogel was an Olin Visidng Fellow at Yale Law School.

International Review of Law and Economics 15:109-126, 1995

© 1995 by Elsevier Science Inc. 0144-8188/95/$10.00
655 Avenue of the Americas, New York, NY 10010 SSD1 0144-8188(94)00004-E
110 Effects of criminality on young British o~end~,'s

Evans, 1968). These studies indicated, not surprisingly, that ex-prisoners faced poor
economic opportunities; but data limitations prevented these studies from determin-
ing whether their poor labor market performance was attributable to conviction or,
alternatively, to their continued substitution of illegal for legal income-generating
activities. Furthermore, because these studies were based on cross-sectional data they
also could not rule out the possibility that both their criminal activity and poor labor
market performance were attributable to pre-existing heterogeneity. Cook (1975),
for example, documents that incarcerated offenders possess attributes, such as very
low educational attainment and IQ, that will greatly limit legal job opportunities. An
extensive criminological literature also documents that the same attributes are asso-
ciated with greatly elevated levels of criminal activity.
Economists have recently begun exploiting panel data to study the effect of con-
viction on labor market opportunities. With one exception, recent studies using
panel data have found that conviction reduces income and increases job instability.
Freeman (1991) examines the effect of incarceration on employment (but not in-
come) for a sample of young U.S. men in the 1980s.2 He finds that incarceration
depresses the probability of work by 15 to 30 percentage points and the number of
weeks worked per year by 8 to 16. Lott (1992) examines the effect of conviction on
income, and Waldfogel (1994a) examines the effect of conviction on income and
employment of U.S. federal fraud and larceny offenders. Both studies find large (as
much as - 40 percent) negative effects of conviction on income. Waldfogel also finds
significant depressing effects of conviction on employment. Grogger (1992) finds
persistent effects of arrest on youth unemployment.
The exception to the group of studies documenting a negative effect of conviction
on income is a companion to the present study, Nagin and Waldfogel (1993). There,
we examine the effect of first-time conviction on the legal income of federal offend-
ers, by age of conviction. We find that conviction increases the income of offenders
under age 25, whereas it has an increasingly negative effect on income after age 30.
This apparently positive effect of conviction on the income of young offenders begs
replication with different data, which this study provides. Our study offers three
other major innovations. First, our data cover a cohort of young men, some of whom
become involved in crime and some of whom do not. Thus, we can compare the
change in labor market status of young men who become criminals with those who
do not. Second, our data are unique in including not only measures of criminal
conviction but also self-reported measures of criminal activity. This allows us to
separately isolate the effect of conviction, over and above the effect of being involved
in crime, on legitimate labor market outcomes. Third, because the data contain
measures of both pay and job stability, we can analyze the impact of conviction and
criminal activity on both dimensions of labor market performance.
Our data have shortcomings as well as major advantages. First, the sample is small.
The data cover 411 young men born in 1954 in London. After eliminating unusable
observations, we include under 300 individuals in the analysis. Second, the circum-
stances surrounding crime among young British men in the early 1970s may be quite
different from the circumstances currently confronting young offenders in the
United States. Still, we believe that a conviction's signal of untrustworthiness is sim-
ilar in both historical circumstances. Third, and less important, the job market per-
formance measures are categorical rather than continuous. We circumvent this prob-
lem by estimating a bivariate ordered probit model.
Like Freeman, we find that conviction increases job instability. In contrast to most
existing studies on the effect of conviction on income (but consistent with Nagin and
 D. NAGIN ANDJ. WALDFOGEL 111

Waldfogel, 1993), we find that conviction has a positive effect on the legitimate
income of young offenders. Both job stability and income effects are statistically and
economically significant. We rationalize the finding that conviction is associated with
greater job instability but higher income by appeal to a human-capital theory expla-
nation of rising wage profiles. We argue that conviction bars access to stable but
initially low-paying career jobs with rising wage profiles and thus may relegate con-
victed young workers to unstable but relatively high-paying spot market jobs. Fur-
thermore, we find that criminality unaccompanied by conviction has no effect on pay
or job stability.
These results have a number of interesting implications. First, income may be a
poor measure of economic integration into the labor market for young and on
average criminally active populations, for example, young black men in the United
States. s High income for young men with criminal records might reflect participation
in short-term spot jobs, rather than improved access to career jobs. A second--and
sobering--implication of these results concerns deterrence of crime. If deterrence
operates through the threat of lost income (as, for example, Lott (1992s) has sug-
gested), then unless young persons place high value on deferred compensation, the
threat of lost income facing young potential offenders is empty and may provide little
deterrence. Indeed, one can view our results as part of an explanation of why the
young are much more likely than the old to commit crime.

II. Data
The analysis uses a panel data set assembled by David Farrington and Donald West
as part of the Cambridge Study in Delinquent Development (CSDD). The panel is a
prospective longitudinal survey of 411 males from a working class area of London.
Data collection began in 1961-62, when most of the individuals were about age 8. All
subjects were interviewed at about 2-year intervals through age 19. A wide range of
psychological (e.g., IQ), socialization (e.g., parental supervision), family background
(e.g., parental criminality) and labor market performance variables were collected;
for a complete discussion of the data set see West and Farrington (1973, 1977).
The CSDD data set uses criminal conviction as the primary indicator of criminal
involvement. 4 A complete history of criminal convictions for all individuals is avail-
able until age 32. Self-reports of criminal involvement were also periodically elic-
ited. ~ Beginning at age 21 only a subset of the sample was interviewed. Thus, this
study focuses on estimating the effects of criminal involvement and conviction on
changes in labor market performances prior to age 21.

III. T h e Measurement Framework

Four measures of labor market activity are available at ages 17 and 19: income
(weekly take-home pay), time spent unemployed in the past year, longest time on any
job (months), and number of jobs ever held. The measure of weeks spent unem-
ployed is available only for the boys who are not students. 6 By age 16 most of the boys
in the underlying sample had left school. Those remaining at school are excluded
from the analysis. At ages 17 and 19 data are also available on convictions incurred
and self-reported criminality.
Our principal objective is m measure the effect of an adult conviction on labor
market prospects, over and above the effect of criminal involvement. The following
classification framework was devised to accomplish this objective. At age 17 two
112 Effects of criminality on young British offenders

groups are defined: delinquents, defined as individuals in the u p p e r half o f a self-

reported criminality scale or who have a juvenile (by age 16) conviction, 7 and non-
delinquents (all others). T h e criminality scale at age 17 is based on self-reports o f
activities ranging from truancy and smoking to vandalism and theft at age 17. At age
19 three groups are defined: adult convicts (convicted as adults at age 17 or 18),
non-convicted criminals (individuals in the u p p e r half o f a self-reported criminality
scale at age 19 but not convicted at age 17 or 18), and non-criminals (all others). A
young man is classified as delinquent at age 19 if he reports high "delinquency"
(based on self-reports of damaging property, joy-riding, receiving, shoplifting, steal-
ing from slot machines, breaking and entering, and stealing from cars) or high
"violence" (based on the individual's involvement in fights and carrying and use o f
weapons) at his age 19 interview.
Because we are trying to ascertain the effects of criminality and conviction on
measures o f job performance, it would be ideal for our criminal and conviction status
measures to always precede our job performance measures. Unfortunately, our data
do not allow us to know this with certainty. This raises the concern that our effects
o f conviction actually stem from a mixture o f criminality and conviction. However,
because we control for criminality (in the same potentially noisy way), our conviction
effects, measured as the difference between conviction and criminality effects, should
still reflect the effect of conviction over and above the effect o f criminality.
Criminal status measures at ages 17 and 19 are combined to create six groups:
CC---individuals who are non-criminals ("clean") at ages 17 and 19,
CB---individuals who are clean at age 17 but who are non-convicted criminals ("bad")
at age 19,
CD---individuals who are clean at age 17 but convicted ("dirty") between ages 17 and
19,
BCwindividuals who were delinquent (bad) at age 17 and clean at age 19,
BB--individuals who were bad at age 17 and bad at age 19, and
BD--individuals who were bad at age 17 and dirty at age 19.
By grouping individuals based on their criminal status at both age 17 and age 19, we
can compare changes in job performance o f individuals who had the same status at
age 17 but different status at age 19 to obtain estimates o f the effects o f interest. T h e
assumption implicit in this "differences in differences" framework is that in the
absence o f changing status, a group's job market measures would have followed the
pattern for its control group not changing status. Such comparisons form the basis
for the measurement framework, s
Lety~ denote a specified measure of job market performance at age t (17 or 19) for
an individual o f criminal status i (CC, CB, CD, BC, BB, or BD). With this measure-
ment framework four effects of interest are estimated in the following way.

The Effect of Criminality on Cleans

Assume that in the absence of becoming criminals at age 19,job market performance
of cleans at age 17 would have changed by the same amount as the individuals who
were also cleans at age 17 but remained clean at age 19. Under this assumption, the
effect o f criminality on cleans is estimated by
 D. NAG1N ANDJ. WALDFOGEL 113

Similarly, the other three effects of interest are estimated by contrasting the change
in job performance of two groups with the same status at age 17 but different status
at age 19.

The Effect of Conviction on Cleans

Our objective is to estimate the effect of an adult conviction over and above the effect
of criminality for individuals who were non-delinquents at age 17. To estimate this
effect we contrast the change in job performance between age 17 and 19 of CDs with
that of CBs as follows:
- y??] - -

The Effect of Continued Criminality on Bads

To estimate this effect we contrast the change in job performance of the BBs with
that of the BCs:

The Effect of Adult Conviction on Criminals

To estimate this effect we contrast the change in job performance of the BDs with
that of the BBs:
- - _

This straightforward measurement framework cannot, however, be implemented

directly because the data on job market performance are reported in a categorical
rather than continuous format (e.g., pay at 17 is reported in three categories <7
pounds (pds.), 7 to 11 pds., and over 11 pds.).
To obtain point estimates of y~ to perform the above calculations, we estimate the
following model:

ln(yi,17) = otoCCi + OtlCBi + ot2CDi + ct~BCi + oqBBi + otgBDi + Ei,17 (1)

ln0i,19) = [$0CCi + [$1CBi + [$2CDi + ~3BCi + [~4BBi + ~sBDi + £i,19 (2)

where the vectors 0t and [3 are parameters to be estimated and ¢~ is a disturbance. For
increased efficiency, eqs. (1) and (2) are jointly estimated under the assumption that
eu is distributed iid bivariate normal across persons. With this assumption, the pa-
rameters of the model, eti, G0 o17, oh9, and p (the covariance of el7 and ~19), can be
estimated as a bivariate ordered probit. 9 Each of the measures y~ is positive, so we
specify the ordered probit thresholds as logarithms, l°
The age 17 and age 19 indices of job performance are reported in varying num-
bers of categorical groupings.~l For each index at each age, the data were recorded
into three categorical intervals. For each index the sample space is thus partitioned
into 9 discrete possibilities (i.e., 3 at age 17 times 3 at age 19). The likelihood function
is derived in the Appendix.
The model does not include individual or labor market condition variables that
 114 Effects of criminality on young British offenders

might affect job performance. Because the individuals comprising the sample all
generally lived and worked in the same relatively small geographic area from age 17
to age 19 and have a similar (working class) background, it is reasonable to assume
they confronted similar labor market conditions. There is, however, the usual vari-
ability within the sample in individual characteristics (e.g., IQ, school leaving age)
that may affect human capital and thereby job performance. To the extent that the
influence of such characteristics is stable over time, their enduring impact on job
performance will affect job market measures at both ages and will thus be removed
by the differencing employed in the measurement approach. Their omission from
the model, however, will bias our estimates of 13i and ai if relevant unobserved
heterogeneity is correlated with both criminal status and the change in job market
performance between ages 17 and 19. ~

IV. Results
From the model we obtain estimates of the means of the four job market measures
at ages 17 and 19. ~3 Figures 1 through 4 display these measures, by criminal status,
along with the sizes of the criminal status cells. These figures indicate that the job
market measures are nearly constant across criminal stata at age 17 but vastly dif-
ferent at age 19.14 Recall that our measurement approach identifies the effect of
conviction, for example, as the change experienced by individuals who become con-
victed, less the change experienced by a relevant control group. Thus, for example,
the effect of conviction on the income of bads is the change in income for BDs less
the change for BBs. Figure 1 shows weekly take-home pay. At age 17, the young men
in all groups earn about the same pay (9 to 10 pounds per week); at age 19 they earn

'1t-.o

no

CC (95) CB (11) CD (10) BC (64) BB (46) BD (31)

[~ age 17 ~ age 19 ]
FIG. 1. Weeklytake-home pay.
 D. NAGIN ANDJ. WALDFOGEL 115

6-

5-

4-

3-

2-

1-

O- 1/

CC (100) CB (11) CD (10) BC (69) BB (54) BD (47)

I/ a g e 17 I age 19
FIG. 2. Weeks unemployed last year.

14 to 19 pounds per week. While the BDs and BBs have equal pay at 17, the BDs
have higher pay at 19. Thus, our measurement approach identifies a positive effect
of conviction on the income of bad young men. (Table 1 reports the size and sig-
nificance of this and other effects, discussed below.)
Figures 2 through 4 show the young men's measures of job market stability at ages
17 and 19. These figures clearly demonstrate that, across criminal statuses, the in-
dividuals in the sample are similar at age 17 but quite different at 19. In particular,
the young men who become convicted between 17 and 19 (CDs and BDs) tend to
have "worse"job stability outcomes at age 19. As Figure 2 indicates, while members
of all groups spent under three weeks unemployed in the year prior to age 17, in the
year preceding age 19 the unconvicted boys spent an average of 1.8 weeks unem-
ployed, while the convicted young men spent over 6 weeks unemployed. Figures 3
and 4 show similar patterns: similar job market outcomes at 17, different outcomes
(worse for the convicted offenders at 19). Larger changes for the convicted offenders
than for their control groups are identified in our measurement framework as effects
of conviction.
Table 1 presents measures of the effects of criminality and conviction identified by
differences in differences. The first and second rows of the top panel of Table 1,
respectively, report estimates of the effect of criminality on cleans and continued
criminality on bads. None of the estimates of criminality effects are statistically sig-
nificant. Furthermore, there is no consistent pattern in the signs of the point esti-
mates of job stability effects. There is some indication, however, that criminality is
associated with lower take-home pay, but none of the estimates of this effect are
statistically significant.
Turn now to the estimates of the effect of conviction. The estimated effects of
 116 Effects of criminality on young British offenders

..E
{,-
,,i,.i

O
:Z

CC (90) CB (11) CD (10) BC (69) BB (53) BD (45)

I RIm age 17 n age 19

FIG. 3. Longest time on a job.

conviction on "bads" are all statistically significant. Compared to the BBs, the BDs
experienced larger changes in job instability between the ages of 17 and 19 and
received larger increases in weekly take-home pay. While none of the companion
estimates of the effect of conviction at age 19 on cleans at age 17 are significant, the
pattern is similar. Two of the three measures of job stability indicate that the CDs
experienced larger changes in job instability than the CBs and, like the BDs, received
larger increases in take-home pay. x5
The bottom panel of Table 1 reports estimates of the effects of criminality and
conviction that constrain the effects of criminality and conviction to be equal, re-
gardless of status at age 17. Thus, the effect of continued criminality (estimate 2 in
the top panel of Table 1, measured by BB versus BC) is assumed to be equal to the
effect of criminality on cleans (estimate 1: based on CC versus CB). Analogously,
constrained conviction effect estimates are obtained by forcing equality of the effects
of conviction on clean and bad offenders (estimates 3 and 4, measured by CB versus
CD and BB versus BD, respectively). The reason for estimating constrained effects is
simply to check whether the insignificance of the criminality effects is driven by small
samples. The constrained estimates mirror the results of the unconstrained esti-
mates. Criminality effects are uniformly small and insignificant, and conviction ef-
fects are large and significant. The results thus suggest that criminality by itself has
no statistically significant impact on either pay or job stability measures but that
conviction (over and above criminality) significantly increases all three measures of
job instability and pay. 16
While these results indicate that conviction increases weekly take-home pay, they
also show that conviction increases the time spent unemployed. While the rate of pay
for boys who work may have risen, because their work following conviction may be
 D. NAGINANDJ. WALDFOGEL 117

E
Z

CC (109) CB (16) CO (22) BC (63) BB (51) BD (35)

] Lqm age171age19 ]
FIG.4. Number of jobs held.

more sporadic, their actual incomes may have declined. Because their total income
may be the quantity relevant to deterrence, we explore the impact of conviction on
a derived measure of annual income.
Because our data on pay and unemployment are categoric rather than continuous,
we cannot directly construct measures of, say, annual income (by multiplying weekly
pay by weeks worked). Instead, we estimate bivariate ordered probits on pay and
weeks unemployed at ages 17 and 19, respectively. Based on these estimates, we are
able to impute estimates of pay and time spent unemployed for each individual at
age 17 and 19 as follows. We used bivariate ordered probit models to estimate
the means and standard deviations of the logarithms of pay and weeks unemployed
at ages 17 and 19. We simulate age 17 and 19 pay and weeks unemployed by draw-
ing 10,000 times from distributions with the means and standard deviations
estimated for pay and weeks unemployed, respectively, at 17 and 19. We exponen-
tiate these simulated values of log pay, then compute the within-cell means. Using
these imputed values, we compute annual income as (52 - imputed weeks
unemployed) * (imputed weekly pay). We then estimate criminality and conviction
effects from an OLS regression of the change in annual income on a constant and
dummies for whether boys are bad or criminal at age 19. This regression allows us
to estimate criminality and conviction effects on annual income that are analogous to
the constrained effects reported in Table 1. We report these results in Table 2. To
verify that this imputation technique does not drive the results, we also re-estimate
criminality and conviction effects for pay and weeks spent unemployed, also re-
ported in Table 2. These results should mirror the constrained results in Table 1;
they do. Our finding for annual income is that criminality has an insignificant neg-
ative effect (-59.9 pds., about 12 percent), whereas conviction has a positive but
118 Effects of criminality on young British offenders

TABLE 1. Effect o f criminality a n d conviction on j o b p e r f o r m a n c e

Measure (t-statistics in parentheses)

Effect o/ P~y~ Unemp. n Longest jobc Jobs ever heldd

Criminality o n "cleans" - 2.32 1.77 - 5.08 1.13

( - 1.57) (1.17) (-0.77) (0.70)
C o n t i n u e d criminality on "bads" - 1.53 0.26 2.38 -0.21
( - 1.40) (0.28) (0.76) (-0.17)
Conviction o n "cleans" 2.11 3.30 0.42 2.63
(1.08) (1.58) (0.05) (1.09)
Conviction o n "bads" 2.53** 2.14"* - 9.71" 7.72*
(1.92) (2.83) ( - 3.05) (2.09)
Constrained measures*

Criminality effect - 1.07 0.24 0.02 0.38

( - 1.31) (0.33) (0.01) (0.44)
Conviction effect 2.27"* 3.51 ** - 8.18** 5.53"
(2.08) (4.20) (-2.71) (2.43)

* Significance at the 95 percent level.

** Significance at the 90 percent level.
Weekly take-home pay (pounds).
b Weeks unemployed last year.
c Longest time spent on a job (months).
a Number of jobs ever held.
"Effect of continued criminality on bads is constrained equal m the effect of criminality on cleans. Effect of
conviction is constrained equal for those clean and bad at age 17.

insignificant effect (37.6 pds., about 7 percent). Hence, conviction does not appear to
reduce income, although the income estimate is imprecise.
The estimates of the effect of conviction on job instability are consistent with the
argument that conviction stigmatizes a worker. Based on the constrained estimates,
conviction increases time spent unemployed last year by more than 3 weeks. This is
large compared with the average amount of time spent unemployed in the preceding
year, which the model implies is less than 2 weeks for most criminal status types. 17 It
is also very similar to Freeman's result that youth who have been convicted work 2

TABLE 2. Criminality and conviction effects for pay, u n e m p l o y m e n t , and annual income based o n
imputation technique

Effect of Pays Unerap.b Annual income*

Criminality effect - 1.29 0.24 -59.9

( - 1.16) (0.33) ( - 1.05)
Conviction effect 2.26* 3.51" 37.6
(1.79) (4.20) (0.58)

* Weekly take-home pay (pounds).

b Weeks unemployed last year.
' Computed as (52 - imputed weeks spent unemployed) * (imputed weekly take-home pay).
 D. NAGIN ANDJ. WALDFOGEL 119

fewer weeks per year than the average of 41 weeks, but his estimate is not significant.
Conviction also decreases the longest time spent at a job by 8.2 months, which is large
compared with the age 19 average of under 25 months. Similarly, conviction in-
creases the number of jobs held by 19-year-olds by over 5. Considering that non-
convicted 19-year-olds, on average, held only three jobs, this estimate is economi-
cally, as well as statistically, significant.
The effect of conviction on pay would appear to be inconsistent with the stigma
hypothesis; it is positive, large, and significant, over 2 pounds per week or more than
10 percent of average pay for these individuals at age 19. These results provide an
interesting contrast with earlier results on the effect of conviction on income. Previ-
ous studies find significant depressing effects of conviction on income for U.S. fed-
eral offenders when they are not distinguished by age. is Federal fraud and larceny
offenders are, however, older (over 30, on average) and farther along in their careers
than the individuals in this sample. The results obtained here for young British
offenders are consistent with results in Nagin and Waldfogel (1993) on young U.S.
offenders.
Waldfogel (1994a) finds that effects of conviction on income are largest for of-
fenders apparently in positions of trust prior to conviction (fraud offenders, well-
educated offenders, and offenders whose crimes breach professional trust). The
pre-conviction incomes of older individuals presumably reflect trust rents that are by
nature absent from the incomes of recent labor market entrants. We use this obser-
vation as a basis for rationalizing the contrast between the large negative effects of
conviction on income for older federal offenders and the significant positive effects
of conviction on income of the young workers in this analysis.

V. Interpretation of the Results

Our finding of increased job instability of convicted offenders is consistent with the
supposition that criminal conviction damages job prospects. The finding that con-
victs have higher take-home pay, however, is not. In this section we offer a charac-
terization of the labor market in which these young men operate that rationalizes the
findings. We than present supporting evidence that the characterization is reason-
able and not simply convenient. Finally, we discuss implications of our results for
deterrence.

The Labor Market for Young Workers

The description in West and Farrington (1977) of the work activities of the young
labor market entrants in this sample suggests that two types of jobs are available to
them--spot market jobs and career jobs. The spot market jobs involve the provision
of unskilled labor. Such jobs offer little or no training and no promise of long-term
employment. In contrast, career jobs, for example, in the civil service or as an
apprentice for a skilled occupation, offer the prospect of long-term employment and
require on-the-job training.
Human capital theory predicts rising wage profiles in what we call career jobs.
Wages will be low early in a career when workers receive part of their compensation
as training and rise thereafter as the individuals accumulate human capital and
experience a declining implicit reduction in take-home pay to cover training costs. By
contrast, the sorts of spot market jobs available to the young men in our sample,
120 Effects of criminality on young British offenders

generally as laborers, require no training and will tend to have flat wage profiles.
Furthermore, human capital theory suggests that job stability will be greater in
career jobs than in spot market jobs; job dismissal for poor performance will result
in the employee forfeiting accumulated firm-specific human capital, to the detriment
of both employee and employer, whereas in spot market jobs there is little firm-
specific human capital to forfeit.
The process by which young workers choose occupations will tend to equalize the
present value---or, more precisely, the discounted utility streams of spot and career
jobs. If discounted income itself were equalized across occupations, the spot income
profile would clearly start above and end below the career profile. Indeed, we believe
this is quite possible and indeed likely. The young men in our sample have similar
social backgrounds and are all just beginning their working career with little formal
job training. Thus, there is no compelling reason to expect that the value of their
marginal product in spot market jobs that require no training should be less than
that in the early stages of career jobs. Furthermore, take-home pay in career jobs will
be net of training costs.
Having argued that spot market jobs will be more unstable and likely have higher
starting wages than career jobs, we next argue that a criminal conviction will ad-
versely affect prospects in the career job market. Conviction provides a signal that an
individual is untrustworthy. A signal of untrustworthiness would be of no conse-
quences if the individual were always paid his marginal product. Employers, how-
ever, do not have unlimited flexibility in determining wages. Legal or contractual
obligation may very well require the employer to pay the employee more than the
value of his marginal product early in his career. If this is the case, the employer will
forfeit his training investment if the employee is dismissed. This creates a disincen-
tive to hire an individual thought to be untrustworthy if employer-provided training
is required.
To summarize, if access to career jobs depends on trust, we expect workers who
are shown to be untrustworthy to be relegated to the spot labor market, where wages
might very well be higher than the wage received in the early stages of career jobs.
At the same time, because conviction is expected to relegate workers to jobs where
they do not develop much firm-specific human capital, convicts experience greater
job instability than workers in career jobs. These, of course, are precisely the results
that we find for the young workers in the study: conviction is associated with higher
pay and higher job instability. 19

Evidence That Our Characterization Is Reasonable

Two sorts of additional evidence support the above explanation for the greater job
instability but also higher wages of convicts, statistical evidence on human capital
acquisition by the individuals in the sample at ages 17 and 19, and the observations
of Farrington and West, who not only collected the data but have extensively ana-
lyzed it.
Our human-capital explanation for the findings predicts that differences in human
capital investment at age 19 of convicts compared to non-convicts should be larger
than at age 17. Two measures of human capital accumulation are reported at age 17:
whether the individual has taken, or plans to take, college or university classes, and
whether he has served an apprenticeship by age 17. At age 19 three measures are
reported: whether the young man's present job requires at least a year of training,
 D. NAG1N AND J. WALDFOGEL 121

whether he has served an apprenticeship since age 17, and whether he has taken a
college entrance exam by age 19.
For simplicity, we aggregate the six criminal status groups into three groups ac-
cording to status at age 19. Thus CC and BC combine for form C, CB and BB
become B, and CD and BD become D. Table 3 reports the five human capital
acquisition measures for these three aggregated categories.
Our main interest is explaining the conviction effect documented in the previous
section. The dearest indication that conviction bars access to jobs offering human
capital accumulation comes from the contrast in the apprenticeship measures be-
tween ages 17 and 19. At age 17 essentially the same fractions of young men in all
groups (between 26 and 33 percent) have served apprenticeships, whereas at age 19
only 9.8 percent of the Ds have served apprenticeships since age 17, compared with
about 30 percent of the others. Similarly, under 30 percent of the young men
convicted at age 19 work at jobs requiring a year or more of training, compared with
45 percent for the others. These differences, which are statistically significant, indi-
cate that at age 19 the individuals convicted since age 17 (the Ds) are at jobs where
they are investing less in skills than the other boys. While it should be noted that the
members of different groups differed in college intentions at age 17, it is important
to bear in mind that all types of boys are equally likely to serve apprenticeships at 17.
Something clearly has happened to the Ds since age 17.
We attribute this change to criminal conviction because both the conviction effect
and the lower investment in human capital occur among the convicted, but not
among the merely delinquent, at age 19. Of course, it is possible that something
other than conviction causes the effects observed among the Ds, but it must be a
phenomenon that affects individuals who are convicted and not merely delinquent.
The second type of evidence supporting our interpretation of the results comes
from the observations of Farrington and West. Farrington (1990: 67) observes:
"[g]enerally, offenders took unskilled, dead-end jobs that were relatively well paid at
age 18 but relatively lowly-paid at age 32." Just as we report above, Farrington finds
that offenders take jobs initially paying more than non-offenders. Using only data for

TABLE 3. Human capital investment at ages 17 and 19, by criminal status at age 19

Percentage

Measure Clean (C) Delinquent(B) Convicted(D)

Age 17
Has taken, or plans to take college classes 37.1 29.8 19.5"

Has served apprenticeship 32.7 26.3 29.3

Age 19

Present job requires at least one year of training 46.5 45.6 29.3*

Has served apprenticeship since age 17 27.7 29.8 9.8*

Has taken college entrance exams 44.7 31.6 12.2"

* Measure for D is significantly below measure for B at the 95 percent level in a one-sided test.
122 Effects of criminality on young British offenders

ages 17 and 19, we can only speculate about subsequent labor market performance,
but Farrington confirms our prediction that offenders will subsequendy earn less
than non-offenders.
Similarly, West and Farrington (1977: 62) note a "tendency for delinquents and
especially recidivists to take up laboring or unskilled occupations offering relatively
high rates of pay for beginners, but with relatively few prospects of long-term ad-
vancement. Non-delinquents were more likely to defer immediate material rewards
for the sake of obtaining apprenticeships or training for skilled work. ''~° Unlike
Farrington and West, we view the age 19 convicts to be constrained to take high-
paying, low-skilled jobs, rather than choosing these jobs because of high discount
rates or impatience. If the individuals who experience what we term conviction
effects prefer high-wage, low-skill work at 19, we should observe them in similar jobs
at age 17, but we do not. Thus, again, we attribute the changes we observe for
convicted individuals (but not for criminal but non-convicted individuals) to convic-
tion, not to impatience.

Deterrence of Young Career Workers

Our results may help explain youth participation in crime. Results in this paper
suggest that the career income trajectory starts below and, given West and Far-
rington's observations, ends above the spot market income trajectory. Equalization of
net advantages of spot versus career occupations will tend to equalize the present
value of income net of training costs---or, more precisely, the discounted utility---of
the various occupations. This equalizing tendency, however, holds only at the start of
the career. 21 Once a career worker has spent time earning low starting pay, the
present value of his future income, as of that time until retirement, will exceed the
present value of spot market income over that same period. As discussed in Nagin
and Waldfogel (1993), this implies that discounted income losses from relegation to
the spot market start small but grow over early stages of the work career until
reaching a maximum at mid-career, after which they decline steadily to retirement.
This predicted pattern of initially small but growing income losses from conviction
during the early stages of the work career provides one explanation for the high
involvement of adolescents in crime and the steady decline in their illegal activity
following late adolescence.

VI. Conclusion
Conviction increases the job instability of the young British men in this sample by
economically and statistically significant amounts. These results provide support for
existing research, indicating that conviction increases the legal income of young
offenders but damages their employment prospects. Drawing upon human capital
theory and arguments about the role of trust in hiring decisions, we offer an expla-
nation for the surprising finding that convicts receive higher pay. The explanation
also accounts for the higher job stability of non-convicts. Furthermore, while con-
viction has significant positive effects on young offenders' income and job instability,
criminal activity alone (in the absence of conviction) has no significant effect on labor
market performance. This suggests that stigma, rather than withdrawal of effort
from legal work, explains the effects of conviction.
Our results may also be viewed as part of an explanation of youth crime. If
 D. NAGIN ANDJ. WALDFOGEL 123

conviction increases young workers' income, at least temporarily, then the deterrent
threat o f lost income facing young potential offenders may be weak, especially if they
heavily discount the future. This may e n c o u r a g e - o r fail to discourage---youth
crime. I f market penalties are inadequate to deter young criminals, then a stiffer
sentencing policy may be needed for young offenders to adequately deter them.
Even though we have now found a positive effect of conviction on income in two
distinct data sets, more research is needed--especially on typical U.S. offenders--
before any firm policy conclusions are justified.

Appendix
Variable Definitions
We define a young man as "bad" at age 17 if he has been convicted as a juvenile (by
age 16) or if he reports engaging in criminal activity (variable 580 > 2). Variable 580
divides the young men into self-reported delinquency quartiles; when it is greater
than two, the young man is in the u p p e r half of self-reported delinquency at age 17.
A young man is bad at 19 if he reports criminal activity in the years leading up to
age 19 (v799 = 3 or v800 = 3) and he has not been convicted since age 17. Variable
799 is a measure of self-reported delinquency for the last 3 years, as of age 19; if it
equals 3, it is "high." Variable 800 is a measure of self-reported violence. Again, 3 is
"high."
T h e self-reported property crime index for age 19 is based on a "combination of
7 items: Damaging property, joy-riding, receiving, shoplifting, stealing from slot
machines, breaking and entering, and stealing from cars, in the last 3 years (each
scored 1--4)" (Farrington, 1987: 335). T h e self-reported violence score is a "combi-
nation o f 4 items: no. of fights involved in, no. of fights started, no. of days carried
a weapon, no. o f times used a weapon, in the last 3 years (each scored 1--4)." A
classification of above average indicates a score o f 10 or more of a possible 16. A
young man is dirty at age 19 if he has been convicted of a crime as an adult (over age
16) by 19.

Deriving the Likelihood

Variable x (a measure o f job market performance at age 17) and variable y (age 19
measure) can each fall into one of three regions. Variable x can be below A~, between
A 1 and A 2, or above A2. Variable y can be below B l, between Bl and B 2. This gives rise
to a sample space with nine possibilities. Define

T h e nine likelihood branches are:

1. Pr(x < A,,y < B I ) = f a~ o~fy~-= f(x,y,p)dydx = F ( A , , B I O ) ~ ~ l

2. Pr(x < Ai,B1 < y < B2) = |~A , ~ja2 f(x,y,p)dydy = F(AbB~,p) - F(AbBbo) = $2
Jx=-o~ Jy=sl
124 Effects of criminality on young British offenders

3. Pr(x < A,,y > B~) = fa~ f® f(x,y,p)dydx = V(At) - F(A,,B2,O) - ~

.Ix --oo jy=B2

4. P r ( A l < x < A2,y < B1) = F(A2~BI,p) - F(A1,BI,p) --- ~ 4

5. P r ( A , < x < A2,B, < , < B 2 ) = jxfa'=a, £ B 2 , f(x,y,p)dydx =

[F(A2,B20) - F(A2,Bt,o)] - [F(A1,B2,p) - e(al,/h,p)] - ~5

6. Pr(A, < x < A2,, > B 2 ) = f a='

a -',=f® f(x,y,p)dydx =
l B2
IF(A2) - V(a~,B2,p)] - [F(a~) - F(a~,B2,p)] - ,1,6

7. Pr(x > A2,y < B1) = F ( B t ) - F(A2,Bt,p) E ~7

8. Pr(x > A2,BI < y < B2) = [F(B2) - F(BI)] - [F(Az,B2,p) - F(A2,BI,p)] - ~ s

9. Pr(x > a2,y > B2) = [1 - F(B2)] - [F(A2) - F(A2,B2,o)] ~- ~9

T h e l i k e l i h o o d f u n c t i o n is

~---- 1--I (I)l 1--[ (I~2... I-I (I)9

iENl iEN2 iEN9

Notes
1. For an excellent review of this literature see Wilson and Herrnstein (1985).
2. Freeman (1991) presents other estimates but no others based on longitudinal measures of both
criminal activity and labor market performance.
3. See Mauer (1990) and Freeman (1991) for discussions of the economic conditions for young
black men.
4. In England the minimum age of criminal responsibility is age 10. The conviction counts do not
include convictions for traffic offenses or for offenses deemed to be of minor seriousness (e.g.,
drunkenness or simple assault).
5. Some readers may be skeptical of the candor of reports of own criminal involvement. This issue
has been studied in detail by Hindelang et al. (1979, 1981), who conclude that with the possible
exception of black males, self-reports of criminal/delinquent behavior are generally reflective of
actual behavior.
6. The unemployment measure at age 17 is the number of weeks spent unemployed since leaving
school, as long as at least 3 months have elapsed since leaving school, while the unemployment
measure at age 19 refers to the past year. While it would be desirable to adjust the age 17
measure to be on a per-year basis, the data do not indicate how long the boys have been out of
school. At age 17 fewer than a quarter of the boys analyzed had been available for work for less
than a year.
7. In England adult but not juvenile convictions are public record. Protection of the confidentiality
of juvenile convictions, however, may not be absolute, and a juvenile conviction may become
public knowledge through informal social networks. This suggests that our measure of juvenile
delinquency may confound criminal involvement and conviction effects. However, as will be
discussed below, delinquent status at age 17 has no association with labor market performance
at age 17, so the issue of confounded effects is moot.
8. See the Appendix for a further description of the construction of clean, bad, and dirty variables.
9. The ordered probit has the following intuitive interpretation. We assume that, for example, the
 D. NAGIN AND J. WALDFOGEL 125

log of income is distributed normally among our offenders, but we only observe which of three
categories income falls in. The univariate normal distribution has two parameters, mean and
variance. The estimation process finds a mean for each criminal status and imposes a common
variance on all statuses. Estimating the model as a bivariate ordered probit increases efficiency
and introduces an additional parameter to be estimated (p), the correlation of the age 17 and 19
errors.
10. An alternative to our basic specification with dichotomous right-hand-side variables measuring
criminal and conviction status employs the continuous variation in the underlying measures of
criminality and conviction to enhance estimation efficiency. We experimented with a specifica-
tion that added eight variables (and therefore 16 coefficients) to the basic model. These variables
include continuous measures of juvenile convictions,juvenile criminality, convictions between 17
and 19, criminality between 17 and 19, and the four interactions of these variables across ages.
This model nests our basic model as the special case in which all 16 new coefficients are jointly
zero. We were able to estimate this model for three job market measures (all but longest time on
any job), and for a = 0.05, we reject the zero restriction for only one measure, weeks spent
unemployed. Thus, the introduction of continuous variation does not materially improve esti-
mation efficiency.
11. At age 17 the measure of weeks unemployed is reported continuously for individuals with a
week or more of unemployment. Because the age 19 measure is available only categorically, our
estimation approach requires use of only categorical unemployment information at age 17. See
note 17 below, however.
12. As indicated above, the data set includes a large variety of measurements of individual and
home-life characteristics. We experimented with inclusion of a variety of such characteristics in
the model (e.g., IQ, parental criminality, school leaving age). None had a consistently significant
relationship with job market performance controlling for criminal status. Furthermore, the
inclusion of such variables had no material impact on the results reported below concerning the
impact of criminality and conviction on job market performance.
13. For example, estimated average income at age 17 is calculated as
Yl7 = exp(a~". . . . + 0.5 0"2).
14. Strictly, we reject the hypothesis that job market outcome is independent of criminal status for
two of four job market outcomes at age 17 (weeks unemployed last year and number of jobs ever
held), while we reject for all four measures at age 19. As the figures indicate, the statistically
significant differences at age 17 are not substantively large, while the differences at age 19 are
both large and significant.
15. The statistical insignificance of the estimates of conviction on cleans may be attributable to small
sample sizes. The sample includes only 11 CBs and 10 CDs.
16. Reinforcing the interpretation that conviction, not criminality, affects job instability and pay is
the fact that, at age 19, there is no significant difference between the degree of criminal activity
reported by bad and dirty boys.
17. The model's implied number of weeks spent unemployed in the year prior to age 17 is low and
reflects the inability of our normal distribution-based ordered probit model to adequately cap-
ture the skewed nature of the data on weeks unemployed. For individuals reporting a week or
more of unemployment in the year prior to age 17, the data indicate the actual number of weeks
spent unemployed. The average number of weeks unemployed for the 27.1 percent of the
sample reporting a week or more of unemployment is 8.23 weeks. Even if the remaining boys
experienced no unemployment, the overall average would be 2.28 weeks, about 1 week above the
model's implied value. The conviction effect remains large relative to this baseline, however.
18. See Lott (1990, 1992a,b) and Waldfogel (1994a).
19. Our argument that conviction relegates individuals to what we call spot market jobs may seem
similar to secondary labor market (SLM) theories (cf. Gordon, 1975; Harrison, 1972). Our
explanation is different. SLM theories argue that individuals are relegated to working in poorly
paying, insecure SLMs based on characteristics (such as race, gender, or ethnicity) that have no
bearing on their productivity. By contrast, we are arguing that conviction signals untrustwor-
thiness, a characteristic that does affect productivity.
126 Effects of criminality on young British offenders

20. West and Farrington use conviction, not self-reported criminality, as their primary indicator of
delinquency and recidivism.
21. See Polachek and Siebert (1993: 13-14) on equalizing net advantage.

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