Financial Implications of Correctional Facilities

Ben Williams
December 7, 2023

The United States spends over $80 billion on public prisons and jails annually. Unfortunately, that figure doesn’t paint the full picture of the financial implications of incarceration.

While it is absolutely necessary to spend money on correctional agencies and justice systems, there is evidence showing that education can reduce recidivism, lead to positive outcomes post-release, and make our communities safer. Such measures not only change individual lives but also have significant macroeconomic upsides.

Here are the financial implications of our current correctional systems, and what can be done to decrease government spending (so budgets can be reallocated to other necessary projects) and make our communities safer.

The Current State of Incarceration in the U.S. 

The US has less than 5% of the world's population, but at 2.2 million, it accounts for 20% of incarcerated people worldwide. That eats up almost $300 billion in state and federal funds annually.

Beyond the staggering amount directly spent operating penal and correctional systems, there are hidden costs that add up to more than double the federal spending. This has led some accounts to report that the system costs America an estimated $1 trillion annually. A few examples of the economic implications of incarceration include:

These costs aren’t immediately apparent, but are real and significant. There are costs bore by families and friends of incarcerated people, including the cost to communicate with someone in prison and decreased productivity when a loved one is no longer around.

Another cost is the loss of the loss of wages that the incarcerated person would have been making. Over a 10 year sentence, even a full time job at the federal minimum wage of $7.25 means a loss of at least $150,000 in income. This amount is significantly larger for those in states with higher minimum wages like California, Washington, and Colorado.

Compounding the effect of wage loss, juveniles who are incarcerated fall behind on education which can limit earnings potential over their lifetime. For example, the average American salary is around $59,000. By falling behind on education, a juvenile might only earn a minimum wage job, with a salary of $15,000 a year. In this scenario, over 10 years, they could miss out on around $440,000 of wages. It is a drastic example, but this type of loss is significant and common.

Even upon release, formerly incarcerated individuals face significant financial barriers. They are often barred from working in many places, and struggle to find permanent and meaningful employment. A resent study found that only around 35-38% of formerly incarcerated individuals are employed. Facing significant barriers to employment and needing to meet their basic necessities can often result in individuals returning to committing crimes to survive, leading to high rates of recidivism.

Given these numbers, it is clear to see that the impact of incarceration can cause siginficant a financial on families in a number of ways. At Nucleos, we ask the question: what can we do to change this?

Economic Impact of Reducing Recidivism

There is compelling evidence to show that educational initiatives help the formerly incarcerated obtain meaningful employment and higher wages after release. One study showed that former incarcerated individuals who participated in interventions, including education and employment programs, significantly improved their chances of finding a job, hours worked, and wages earned. Vocational training has a similar effect by imparting skills for high-demand jobs.  

When formerly incarcerated people are employed, there are ripple effects to their communities. They can provide for their families (thereby decreasing the reliance on government aid), invest economically in their neighborhoods, and serve as mentors for at-risk youth. The resulting strong workforce and lower crime rates will attract business investment. States stand to gain billions in additional GDP due to these cumulative effects.

While precise calculations are difficult, the evidence clearly shows that well-designed educational and vocational programs prepare formerly incarcerated to contribute positively to the economy after release.

Reinvesting in Education

Studies have demonstrated that prison education programs, from GEDs to college degrees, can reduce post-release reconviction rates by over 40%. With the right education, incarcerated people can cultivate the skills and efficiency necessary for securing legal work instead of crime.  

Several such educational programs have been highly successful. The Bard Prison Initiative (BPI) has offered college courses to incarcerated students since 1999. A comprehensive study found that participation in BPI reduced recidivism by 38%. On top of that, higher levels of participation correlated closely with even lower recidivism rates. According to the Center for American Progress, criminal recidivism reduces annual GDP by $65 billion annually. 

These results are just a glimpse into the economic potential of education among

Nucleos seeks to bring skills-based learning, job opportunities, and re-entry support to everyone correctional facility in the country. Our mission isn't just closing opportunity gaps—it's strengthening families, communities, and the economy through education. Together, we can reduce recidivism and build a better, safer future.

Finding a Way Forward That Makes a Difference

Administrations in Washington, DC, have continued to enact tough-on-crime policies to curb crime rates. Yet, research shows that incarceration offers diminishing public safety returns. At the same time, it costs billions in taxpayer dollars on what one study called “the nation's most expensive government program.”  

Can a system costing over $1 trillion annually and delivering only marginal outcomes be justified? Or should policies aim to redeem lives through targeted vocational training and education—approaches consistently shown to reduce recidivism more effectively?

Nucleos believes we can build stronger workforces and communities by unlocking human potential instead of limiting it. We provide modern education solutions to incarcerated individuals, giving them the tools they need to earn gainful employment upon release. Our aim is to target recidivism at the source.

At Nucleos we are driving the shift through education initiatives that prepare the incarcerated population for employment. We pair skills-based learning with strong post-release job placement services to uplift individuals and make communities safer and economically sustainable.

About the project

This blog was put together using research from Prison, the Vera Institute of Justice, and the American Action Forum.