Fed study quantifies financial exclusion of justice-involved
A Federal Reserve study reveals significant financial exclusion and worse outcomes for justice-involved individuals, including lower credit scores and reduced credit access. The research uses 2023-2024 Survey of Household Economics and Decisionmaking (SHED) data.
Severity deepens financial disadvantage
Individuals with justice system contact experience substantially worse financial outcomes than those without criminal records, with disparities widening by severity of involvement.
Compared to individuals with no prior records, those arrested but not convicted are 4 percentage points less likely to report doing at least okay financially.
Formerly convicted as well as incarcerated adults are 15 percentage points less likely to report financial well-being.
Formerly incarcerated individuals are also 21 percentage points less likely to have credit scores above 660 and 13 percentage points less likely to have credit cards.
These findings document substantial barriers to financial stability among justice-involved populations, even after controlling for relevant economic and demographic characteristics including educational attainment.
SHED data illuminates hidden barriers
The study utilizes data from the 2023-2024 Survey of Household Economics and Decisionmaking (SHED), an annual online survey conducted by the Federal Reserve Board.
SHED questions on justice system involvement, introduced in 2023, allow for classification into four categories: no history, arrested but not convicted, convicted without prison, and incarcerated.
The analysis is based on a sample of 19,680 individuals, with credit information from Experian linked to approximately 65 percent of respondents.
Justice-involved individuals, especially those with prison sentences, disproportionately tend to be male, prime-age, Black, and Hispanic, and less likely to have a bachelor's degree or own their home.
Beyond employment: a broader view
This paper significantly extends existing literature by moving beyond employment outcomes to examine broader financial health and inclusion.
The findings highlight systemic barriers that hinder economic reintegration and financial stability for a vulnerable population.
This evidence is crucial for informing targeted policies aimed at promoting financial inclusion and improving economic outcomes for justice-involved individuals.