Data Show Second-Chance Hiring Works

May 13, 2021

Data Show Second-Chance Hiring Works

From an economic standpoint, the question is not “are these good people?” We will never know what is in an employee’s heart. We can only ask whether, as employees, they can behave in ways that employers associate with good character: do they work honestly and diligently? Can people with criminal records be good employees? 

Ultimately, opinion does not matter, but data does. There is admittedly a limited amount of formal data. But there are a number of organizations that have deliberately focused on identifying people with criminal records for employment, developing systems that select and support success, and have tracked the result

Data Drives Inclusion

The issue of why data is so scarce is both interesting and frustrating. On a practical level, I have found that many larger employers simply don’t track the performance of hires with a criminal record—once someone is employee, it does not occur to them to monitor any group of employees based on any background criterion, whether criminal record, schooling or any other background characteristic. Sometimes, particularly among employers who are consciously driving second-chance hiring, this is for moral reasons; these employers don’t believe second-chance hires should every be perceived as different from any other employee. Finally, people in criminal justice reform have shared with me their belief that there are some companies tracking these statistics, but do not want to make this public because of the perceived reputational risk to their business. While I can respect such sentiments, it leads to a paucity of data that, were it more plentiful, would be helpful in driving other companies to adopt more inclusive hiring standards

Given these barriers to data collection, we are fortunate to have The Johns Hopkins Hospital System. Over 15 years ago, Johns Hopkins began selectively hiring people with criminal records. As the size of this cohort grew and progressed, Johns Hopkins was able to assess the performance of these hires. After completing a 5-year study with nearly 500 hundred hires with criminal records, the Hospital was able to draw favorable conclusions. In comparison with traditional hires, those with criminal records experienced lower turnover in the first 40 months. The Hospital paid special attention to those hires who had a record for a violent crime; of those 79 who were tracked for period of 3-6 years, 73 were still employed by Johns Hopkins and only one had been involuntarily terminated.

It is fair for an employer to wonder whether, of those hires with criminal records who did not remain employed, were there any exceptional problems. The Hospital made one other important observation to address this concern. Like any other employer has a number of terminations that they characterize as “problematic” —but none of there were ex-offenders.

The commitment to second-chance employment of Johns Hopkins offers one additional lesson. In the most recent U.S. News & World Report’s 2019-2020 list, Johns Hopkins is ranked the #3 adult hospital in the nation among the 4,600 that were included in the study. This was the 30th consecutive year that the institution was among the top hospitals in the United States. Second chance does not mean second rate. 

U.S. Military Sets an Example

Another large organization, the U.S. military, has offered a unique insight into the job performance of people with criminal records. The military is often considered the largest employer in country with more 2.1 million serving on active duty, reserve and in the National Guard in 2018. The military has traditionally barred applicants with felony convictions (including state-level misdemeanors that would qualify as felonies under the Uniform Code of Military Justice). However, under continuing challenge from the demands of the global war on terror, and with increasing competition from private sector employers, the Department of Defense has expanded the use of its felony waiver program. These waivers, which a granted selectively, offer.

Interestingly, the U.S. military itself has published no study of the results of the waiver program. However, using Freedom of Information Act requests, sociologists Jennifer Hickes Lundquist, Devah Pager and Eiko Strader were able to gather the relevant data. The scholars tracked the performance of 1.3 million enlistees (those with and without felony records) from 2002-2009. There is a likely skew to some of the results since those with felony records are more likely to be assigned to roles with higher risk and associated stress. This shows, for instance, that enlistees with serious criminal records have a higher rate of death. Perhaps also related to the specific nature of the military assignment, enlistees with a criminal record are slightly more likely to be discharged for a criminal offense than those with no history, 6.6% vs 5%. 

The critical findings, however, are very encouraging, not just for the military felony waiver program but also by implication for any employer considering second-chance employment. Short-term turnover in the military is already very limited, but enlistees with a record have no higher attrition than those without. 

In performance, though, as measured by promotion to the rank of sergeant or higher, enlistees with a felony conviction excelled. When examining promotions after six years of service, those with a felony conviction were more than 32% more likely to achieve the rank of sergeant or higher. Pay grade increases for those with felony records was also clearly faster than for other enlistees. 

Other Positive Examples

The American Civil Liberties Union (ACLU) has also collected a number of single-employer studies. The most notable characteristic in these studies are the low turnover rates associated with second-chance hiring. The experience of Total Wine & More, a 7,000+ employee liquor retail chain, is among the examples cited in the ACLU publication “Back to Business: How Hiring Formerly Incarcerated Job Seekers Benefits Your Company.” On average, first-year turnover rates for hires with criminal records was more than 12 full percentage points lower than traditional hires. Another example cited, Electronic Recyclers International, reduced better than half its turnover rates through a program recruiting people with criminal records. These publicly-cited examples also align with my own research and experience with second-chance employers. In one of the most notable examples, Dan Meyer, the CEO of Nehemiah Manufacturing, estimates that by largely staffing through second-chance hires, he has increased his business’ cash flow (EBITDA) by 5.2%. In his consumer products manufacturing business, 160 of his 180 employees are second-chance hires (a broad interpretation including people with records, battling addiction and homeless). His estimate of the financial benefit of low turnover takes into account the loss of hours worked, recruiting expenses and lost productivity. A team from Harvard Business School visited Nehemiah to write a case study, the first business school case specifically studying a second-chance employer. 

A Practical Bottom Line 

Ultimately, we don’t know what exact percentage of people with a criminal record can be viable employees, but we can say with certainty that this demographic pool is a large enough and underutilized enough to be an enormous business opportunity. Our model is not about creating a path to employment for everyone. Our model is employer-centric, finding the people who can fill a business’ need for labor. This does not mean that this model will not do social good. Even if our strategies ultimately mean that employers are hiring the “cream of the crop” among those with records, that will free more resources for those who are not yet ready (or may never be ready) for employment. Certainly, for those we can employ, the benefits of employment are meaningful: the potential for financial security and breaking cycles of multi-generational poverty, improved public safety, and the well-being of families and communities. 

The Authors: 

Jeff Korzenik is chief investment strategist of Fifth Third Bank and author of Untapped Talent: How Second Chance Hiring Works for Your Business and the Community (HarperCollins Leadership, April 2021).