By Manasi Deshpande & Michael G. Mueller-Smith

We estimate the effect of losing Supplemental Security Income (SSI) benefits at age 18 on criminal justice and employment outcomes over the next two decades. To estimate this effect, we use a regression discontinuity design in the likelihood of being reviewed for SSI eligibility at age 18 created by the 1996 welfare reform law. We evaluate this natural experiment with Social Security Administration data linked to records from the Criminal Justice Administrative Records System. We find that SSI removal increases the number of criminal charges by a statistically significant 20% over the next two decades. The increase in charges is concentrated in offenses for which income generation is a primary motivation (60% increase), especially theft, burglary, fraud/forgery, and prostitution. The effect of SSI removal on criminal justice involvement persists more than two decades later, even as the effect of removal on contemporaneous SSI receipt diminishes. In response to SSI removal, youth are twice as likely to be charged with an illicit income-generating offense than they are to maintain steady employment at $15,000/year in the labor market. As a result of these charges, the annual likelihood of incarceration increases by a statistically significant 60% in the two decades following SSI removal. The costs to taxpayers of enforcement and incarceration from SSI removal are so high that they nearly eliminate the savings to taxpayers from reduced SSI benefits

Cambridge, MA: National Bureau of Economic Research, 2022. 38p.