Entrepreneurship, Employment and Careers for Individuals with a Criminal Record

Kate Cooney (00:00):  

This is CitySCOPE. 

Eun Sun Cho (00:01):  

A podcast on cities and inclusive economic development from the Yale School of Management. 

Kate Cooney (00:07):

Are we ready? 

Manuel Morales (00:08):

Let’s go.

Kate Cooney (00:24):

Welcome to episode 8 of season 3 of the CitySCOPE podcast. I’m Kate Cooney, faculty at the Yale School of Management. Today, we speak with Kylie Jiwon Hwang. At the time we interviewed her, Kylie was finishing up her PhD dissertation and on her way to a postdoc.

Kylie Jiwon Hwang (00:41):

I’m Kylie Jiwon Hwang, and I’m currently a PhD candidate at Columbia Business School and joining Stanford GSB as a postdoctoral fellow during the summer.

Kate Cooney (00:50):

Since then, Kylie has secured a position at the Kellogg School of Management at Northwestern University, where she will join as an Assistant Professor in Management and Organization in July 2023. Let’s just start by talking about the focus of your dissertation, which is looking at recidivism, discrimination in the labor market, and entrepreneurship. Share with us some of the statistics related to incarceration in the United States.

Kylie Jiwon Hwang (01:13):

Yeah, absolutely. So I think that’s a great place to start our discussion. So to give you some of the statistics related to incarceration in the United States. We have around 2.3 million people behind bars, either in prisons or jails as of year 2018. So that’s a lot of people behind bars. The US has the world’s largest incarceration rate, and it’s much, much higher than comparable countries. So just for example, I think it’s around five times higher than that of the UK and also around seven times higher than that of France. And it’s much higher than most of the countries that we would normally compare United States. So it has the world’s largest incarceration population, and it’s even more important to think through what mass incarceration really means for our society. It cost around sixty five thousand dollars to keep one person behind bars for one year. So that’s not even thinking about the social costs for this person or their families and so forth. What really drives up this cost of incarceration or mass incarceration is, as you mentioned, the high recidivism rate. So recidivism, the rate of individuals re-contacting the criminal justice system or going back to prison or jails is extremely high in the United States. Among these, around six hundred fifty thousand people coming back yearly from prisons or jails back to our society. Around sixty eight percent of these individuals end up going back to prisons or jails or re-contacting with the criminal justice system within three years of release. So that’s a huge proportion of these individuals who are actually going back to the criminal justice system. This really dries up not only the economic costs for society, but also the social costs and that ends up increasing crime. And also, it ends up driving the social costs that are involved in what these individuals and their families as well. This huge recidivism rate is a really big problem in that the United States is really having problems in terms of successful reentry and reintegration of people coming back from prisons and jails. And it really ends up increasing the systemic racial inequality or racism going in our society because of the fact that incarceration itself is very racially disproportionate in the United States. So racial minorities, especially Black and Hispanic men, are really overrepresented and going into the criminal justice system. Just this big problem of unsuccessful reentry was one of the reasons why I started focusing on this project for my dissertation and trying to think through creative ways of how formerly incarcerated people or people who have been in contact with the criminal justice system can really successfully reenter and reintegrate into society.

Kate Cooney (03:59):

So that was going to be one of my next questions is how did you get interested in this topic when you came to business school? Was this the topic you were interested in looking at?

Kylie Jiwon Hwang (04:08):

I get that question a lot because this isn’t a topic that a lot of business PhDs end up researching. So I think my main interest in this topic really started when I was working at a criminal background check company before I started my PhD. So that’s when I first learned about the mass incarceration crisis in the United States. The criminal background check company I worked for was one of the largest criminal background check companies in the United States, and they were basically providing these background checks to potential employers who are looking at these backgrounds in terms of hiring other employees for their companies. That’s when I really learned about how having criminal backgrounds can have huge repercussions in terms of finding employment afterwards in the United States because of these widespread criminal background checks that were going on. That really led me to look at a lot of research. And I also found that there is huge racial inequality in terms of first getting in contact with the criminal justice system, but also in terms of how much discrimination or stigma you actually get from having a criminal background as well. That really led me to learn a lot about the system in general, the fact that it’s really hard for individuals with criminal backgrounds to end up getting employment because of these background checks, or sometimes even laws prohibit them from employment that really led me to think about then how can these formerly incarcerated people or individuals with criminal backgrounds find work and income without having to solely rely on employers to just change their mind? So I think that was the main question I really wanted to answer, and that kind of led me to think about this as my main dissertation topic during my PhD.

Kate Cooney (05:51):

Did you get a sense of how employers engage the criminal background technology when you were working at that firm?

Kylie Jiwon Hwang (05:59):

My role there was just providing the softwares for these employers to look at the criminal backgrounds. So I’m not exactly sure what the process is for them. This was also where I learned about the policy “ban the box,” and at that time, “ban the box” was really rolling out and starting. So I think at that time, the company, because it’s a criminal background check company, it was against “ban the box” policy because that would ban these employers from using these criminal background checks more widespread. So my role there was actually really looking at “ban the box” and trying to see whether or not that’s helpful or hurtful for individuals in this society, both with and without criminal background.

Kate Cooney (06:39):

My next question is related to one of your findings that maybe we should talk about the methods a little bit. There’s various ways you could try to answer some of the questions that you’re asking. Tell us a little bit about your methods for asking those questions and using data to answer them.

Kylie Jiwon Hwang (06:57):

Absolutely. So I use a mixed-method approach in my dissertation, so I both use quantitative data, which is the National Longitudinal Survey of Youth dataset. It’s a public dataset that’s available, and I use that as my data, quantitative data, and I also supplement it with a lot of interviews that I’ve been conducting for a while. To talk about the data first, I use the National Longitudinal Survey of Youth data because it’s one of the largest, law sample datasets in the United States, which has a lot of variables both on incarceration and on entrepreneurship and employment. So I use this dataset to try to get some more number-related findings in terms of whether or not formerly incarcerated people go into entrepreneurship, what are the impacts of entrepreneurship for these individuals? So that really helped me find actual statistics and numbers to provide for this topic. And then there are a lot of questions that are really hard to get just with the dataset. So that’s why I ended up conducting a bit more than 60 interviews now with formerly incarcerated individuals, both in entrepreneurship and those who have been employed. And also, I conducted some other interviews with employers that hire formerly incarcerated individuals just to get a better sense of both parties in terms of employment for these individuals. I’ve been trying to conduct a lot of interviews to get more of the context and also what is really going on in the process. For example, for entrepreneurship, I would ask these formerly incarcerated entrepreneurs about when they started their intention of entrepreneurship, what actually goes on in the process, the challenges and barriers that they face and also their future plans. These things that you would never be able to get this from the dataset. So I’ve been trying to supplement with a lot of interviews so that I can get a bit more of a better sense of what’s really going on underneath the data.

Kate Cooney (08:59):

What are some of the things that you’re finding out starting with, when does that idea first come to the entrepreneur? Is it always something that has been on their mind as a possibility? Do they see others doing it? And that opens up the kind of vector of possibilities? What kind of things are you learning?

Kylie Jiwon Hwang (09:19):

There was a large variance in terms of when they first started their entrepreneurial idea and actually when they actually started making that as a business. So I think most of the individuals that I talked to did start their entrepreneurial idea inside prisons or jails, and many of them talked about how they have so much time inside and they just start thinking about ideas that they could do and they would be bouncing off ideas with each other. And most of them do also know that it’s hard to find jobs after coming out of prison and jail. So they do think about it. But they all did also say that this was just a pasttime idea bouncing thing rather than like actual entrepreneurial planning or actually having like something written down or anything. So it’s more so that they just first started thinking about what they would like to do, inside. There were a few others who actually wanted to become entrepreneurs even before going into prison. Some would think about it after coming out, so there was some variance. I think the majority did think about it when they’re actually incarcerated. I think this is a bit different in terms of when they actually started initializing the process of starting their own businesses. Most of the individuals that I talked to would come out of prisons or jails and first start by looking for employment. So not many of these individuals would start out from day one, and they want to start their own company. So most of them were actually looking for employment after they came out of incarceration, and many of them faced a lot of difficulties. For example, one person told me that they were rejected from around 50 jobs after coming out. Just the fact that they see so many closed doors makes them end up pursuing entrepreneurship. They might have had the idea of entrepreneurship in the back of their minds, but the really push factor seems to be that they have so much difficulties in finding employment and just having that kind of rejection over and over again, or being unable to especially find jobs that they actually really want is one of the main push factors of why they end up having to do it on their own. So I think that was really what pushed many of these individuals to start their own businesses.

Kate Cooney (11:32):

What is the cohort that you’re looking at in that longitudinal study? Are you looking at a cohort of a certain age? How did you choose?

Kylie Jiwon Hwang (11:40):

I used a National Longitudinal Survey of Youth 1997 cohort, so they were basically around the age of 14 to 18 in 1997. And this survey basically follows them over the years, starting in 1997, and my data goes up to 2015. So it’s around 17 or 19 years and it just follows them yearly. And I chose this cohort because this was the one available. There is an NLSY 1997 and then also in 1979, and the more recent one has a bit more richness and data. So that’s why I chose this cohort. And so now they’re around 35 to 40 years old in the dataset.

Kate Cooney (12:25):

And in 1997, we’d already seen this big ramp up in mass incarceration. It’s really the nineties, isn’t it? When it just, yeah, when you look at the graph, it just swoops up into 700 per 100,000 when we used to be like everyone else, around 100 per 100000. Absolutely. Absolutely. Yep. So that’s interesting. So at 14 or 18, the criminal justice mass incarceration approach is fully operational and might be quite easy to get in contact as a teenager with the criminal justice system, depending on where people are living, there are certain neighborhoods that are so overpoliced.

Kylie Jiwon Hwang (13:08):

Absolutely. You’re exactly right and that if you look at the dataset, most of these individuals end up going into prison or getting in contact with the criminal justice system at a young age. So it’s mostly in their late teens or their early 20s, where they have their first contact with the criminal justice system. That absolutely has no overlap with the mass incarceration boom in the 1990s, where they would have had the full swing going on in 1997.

Kate Cooney (13:36):

One of the things that you find and this is in the quantitative work is that formerly incarcerated individuals are more likely to become entrepreneurs than non-incarcerated individuals. So it sounds like from our previous discussion, this wasn’t entirely unexpected. Or was it? Were you surprised by that finding? 

Kylie Jiwon Hwang (13:56):

This is a finding in one of my chapters of my dissertation, which is co-authored with my advisor, and I think we were both surprised and also kind of expecting this result. So I think the reason we were surprised was because normally we would think that entrepreneurship entails a lot of challenges and barriers. You have to have a lot of capital, both financial and social, and we would expect that it would be even more difficult for individuals with criminal backgrounds or people coming out of prisons or jails to start businesses. So at first, we thought that it would be very hard for them. But then in our initial fieldwork where we were talking to a lot of formerly incarcerated people, we did find that there were actually a lot of formerly incarcerated people who ended up starting their own businesses because of the difficulties of finding employment. So I guess there’s that barriers to entrepreneurship that we would think about and then there’s also these barriers to employment for formerly incarcerated people. And at the end of the day, maybe it seems that the barriers to employment is even greater or larger for this population. So I think at first we were kind of focusing on entrepreneurial barriers, though we were a bit surprised. I think after Damon and I were thinking about it and talking a bit more to formerly incarcerated people. We started understanding and thinking that this is actually the expected result that we would see.

Kate Cooney (15:19):

The thing that struck me as you were talking about how the idea sometimes gets developed while people are doing time. And what’s interesting about that is the world’s moving on rather quickly. And when you think about entrepreneurship, it’s about opportunity spotting. And maybe you’re somewhat disconnected from that opportunity spotting that you’re doing from behind bars might be from an older moment. And then we just recently had a story at Yale really successful story where the law clinic here helped get someone released. There was an anecdote about just the struggle of being told to get online and sign up for something when the individual really didn’t have an understanding of how to navigate that space. So much had changed since they had gone away, and I just wondered if you heard any anyone reflect on that, that their first idea was one, you know, pre-iPod or something.

Kylie Jiwon Hwang (16:16):

Exactly. I love that you bring that up because these were stories that I really heard a lot from my interviews. So I remember one person who I think served in prison for more than 20 years, and he told me how the ideas that he had were even before many people have cell phones, so it was just really hard to kind of come out and think about like ideas for apps where he didn’t even really understand what cell phones were and so forth. And another person joked about how the ideas that he had in prison were already had been become successful businesses around 10 years ago. You thought about food trucks for the first time, but then it had already been done. And so that’s absolutely what happens when they have, like a lot of time spending inside. They have a lot of time to think about ideas. But then also they kind of lose touch with like how things change and also especially with entrepreneurship, you really need to be on the cutting edge of things. So I think that was a lot of times what people mentioned, and that was definitely one of the difficulties that these formerly incarcerated people mentioned in terms of starting their own business. Not just financial capital or social capital, but really just the idea generating process and that, say many times relied on the ideas that they had before going into prison. And especially if their sentences are long, it just really pushes them into going to ideas that are probably really old by the time they come out. So many of them joked about it during the interviews.

Kate Cooney (17:51):

Just staying on those interviews for a few more minutes, did you hear about some of those other challenges? What were some of the stories you heard about pathways into entrepreneurship? Were there certain kinds of social capital connections, certain types of network connections that were really important for those pathways to move someone along? Did people talk about capital, financial capital as being a big barrier? Or were people able to in various ways figure that out?

Kylie Jiwon Hwang (18:23):

Most of my interviewees did talk about financial capital, and they were talking about starting their own businesses. So most of them did mention how it’s very difficult to find financial capital in terms of getting bank loans and so forth. One of the interviewees I talked to is very successful, and even now he has difficulties finding financial capital from VCs and so forth because of his criminal background. So even though he’s very successful right now. So many of these individuals did talk about that as one of the barriers. And this is also shown in some of the dataset that I have and that formally incarcerated people end up relying much more on capital from family and friends or their own personal savings compared to other similar non-formerly incarcerated people, because they have so much difficulty getting loans from financial institutions or getting backs from venture capital and so forth. So they did mention this, and I think mainly they end up having to rely on their social capital, which is their family and friends, and many times they end up having to rely on non-profit organizations. So there are some non-profit organizations that are very helpful to formally incarcerated people or individuals with criminal backgrounds trying to found their own businesses. So many of them mentioned these non-profit organizations that were really helpful in terms of not only providing them with the first seed money for their businesses, but also helping them in the process of thinking about that idea. For example, like the jokes about these old ideas, they talk about how these nonprofits would kind of bring them to reality, I guess on telling them, like, “Oh, that was already a business 15 years ago.” So they talk about how these organizations or their social capital help them in terms of starting their businesses. Financial capital is one of the main barriers for formally incarcerated people. The fact that they face a lot of barriers in collecting seed money or finding financial capital leads them to go into certain industries or into certain businesses more. So, they’re less likely to go into businesses or industries that require a lot of starting capital, so they’re more likely to go into service industries or construction businesses and so forth, and industries where you don’t need a lot of financial capital to start with. And many times they don’t even have like physical location to start with because they don’t have the money to rent their home business office. The fact that they have little financial capital may not really impact their likelihood to start a business, but it does really impact what type of business they end up starting. And I think that’s has a lot of implications on the success of business and also the potential that they can have from businesses. And I think this is some of the policy implications that we can talk about later on, too.

Kate Cooney (21:10):

Can you give us some stories about some of the types of businesses that you saw. You said services? Can you give us some insight into what ideas people were successful at, at developing, even if they were in these higher growth sectors of the economy?

Kylie Jiwon Hwang (21:24):

Yeah, yeah. So there is a large varying of what types of businesses formally incarcerated people go into and also the interviewees that I talked to. So there are actually a few formerly incarcerated individuals who have gone into very successful like building apps. They’re more of the entrepreneurship that a lot of us would think about or people at, for example, Yale or Columbia Business School would think about as entrepreneurship. And then they’re a lot more formally incarcerated people who go into small businesses, for example, tailor shops, barbershops, catering businesses, bakeries, personal fitness centers and supports the more service oriented businesses or the businesses that require smaller financial capital to start with. There are also paralegal businesses. So many of them don’t require a business office to start with, or it can be very small. You don’t have to have a lot of employees. So I think these are the industries or types of businesses where they were starting. 

Kate Cooney (22:23):

The Forbes article that featured your work talked about was the role of occupational licenses on the labor market side. So there can be holds on a waiting period between serving time and being eligible for certain occupational licenses with certain felonies, I guess. But on the banking side, are there similar kinds of restrictions or is it more that there’s a gap in your employment and that’s the way that the barrier is erected. There isn’t a similar kind of box that you check on credit applications or is there?

Kylie Jiwon Hwang (23:04):

I think on the financial side, sometimes they do actually ask if you have a criminal background and then sometimes it’s similar to like your credit check, but then they kind of infer that you have a criminal background and then that leads you to be unlikely to get bank loans. I think it might differ by state. So I don’t want to be super exact here, but I think that a lot of times they end up finding out and also in terms of like venture capitalists and so forth or like angel investors, they also end up getting to know that you have a criminal background. And I think that’s what some of my interviewees mentioned and that not only financial institutions, but also these like angel investors or venture capitalists also end up finding out. And then they just because they have a lot of options to choose from when they see this record, they’re less likely to be able to back your business. So I think it may be a bit less stringent than the occupational licensing where it’s written, actually written in the law, but it still ends up getting there as well in the financial side as well.

Kate Cooney (24:07):

So we talked about occupational licenses and the labor market side, and we talked generally already about some of the discrimination that can happen in the labor market. I just wonder if there’s anything else that we didn’t cover that you wanted to bring up related to the kind of barriers and discrimination that someone can face in the labor market, restrictions to employment that can be experienced that you’ve learned about through this work.

Kylie Jiwon Hwang (24:32):

I think there is huge barriers to employment for formerly incarcerated people for various reasons. For example, occupational licensing is something that’s actually in the law, and actually prohibits or bans certain individuals from finding employment in certain sectors. And this also differs by state, and I’ve done some research on this too, where sometimes some states would actually allow you to get occupational licensing for certain things that other states would absolutely ban you from. And what’s also interesting, or I guess sad about occupational licensing is that many times inside prisons or jails, they would provide employment training for occupations that these individuals are actually banned from in that state. So, for example, they might be trained to become a beautician inside prison, and then they come out and find out that they actually have occupational licensing bans for becoming a beautician. There are these like weird administrative loopholes where you just can’t get employment jobs where you were actually trained for that certain occupation. So that just adds on to the difficulties for formally incarcerated individuals when they come out. Above occupational licensing, I think for employers, it just ends up being that a lot of employers have stigma against people with criminal backgrounds or incarceration records, and it’s disconcerting to see that this is amplified when it’s intersected with racial minorities. There is a lot of research done, not my own research, but there’s been a lot of research done showing that if even if you have the same criminal background, if you are of a racial minority, you have, you face even more difficulties in finding employment. So it just shows that it’s not just your criminal background that’s really changing your likelihood of finding employment, but it has an intersection with race. And this really amplifies the problem in the United States. So that’s something that was very important and also disconcerting to me when I was looking at what types of difficulties people coming out of prison will face in terms of employment. And many times it’s just very hard to overcome because formerly incarcerated people just end up having to rely on employers to change their mind and hire them. In that sense, it’s very difficult to change or for policymakers to even try to change it, even with policy changes such as “ban the box” and so forth.

Kate Cooney (27:01):

There is a body of work that Bruce Western was working on where after being someone who had educated us all about, you know, statistically what was happening with mass incarceration. At a certain point in his work, he shifted to thinking about intervening narratively in people’s imaginations about can we imagine a place for people who have gone through this experience and are now coming back. They’ve paid their dues, and yet we continue to create all these barriers to integrate back into society. And so he was doing some film work and some narratives to really try to, you know, rather than continue to speak only through the statistics, which are powerful in their own right, but to also sort of just directly ask people the question and  confront them with a fuller picture of who some of these candidates might be and what their lives might have been like leading into that moment and really challenging employers and all of us to consider how much space are we willing to make?

Kylie Jiwon Hwang (28:08):

Exactly, exactly. I think that just brings up a thought on I think there has been a movement on trying to change how criminal records are shown. So I think it goes back to kind of thinking about if it’s just checking a box like past felony. It just brings out a different kind of thought for the potential employer compared to having like a longer paragraph or a written document and what the actual crime was, what really happened in going into the crime. In fact, there has been a movement in trying to change how, for example, how rap sheets look or how these criminal background checks can actually look in terms of the hiring process.

Kate Cooney (28:46):

So getting back to where we started in thinking about recidivism, you do find that recidivism is lower for entrepreneurs with criminal justice entanglements versus similarly situated folks without entrepreneurship. Is that the finding?

Kylie Jiwon Hwang (29:04):

Yeah, so basically, I find that recidivism is lower for formally incarcerated entrepreneurs compared to similar formally incarcerated employees, so people who don’t have entrepreneurial experience. So we do find that entrepreneurship does seem to help them reintegrate into society and basically successfully reenter the society and stay in it.

Kate Cooney (29:24):

And is that true, whether or not these are failed founders or successful founders? And do you think it’s connected to like if you think about Center for Employment Opportunities? The RCT that was done on that program, they found that came down to basically how quickly you got attached to employment reduction and recidivism, not the job itself, because there was actually absolutely no difference in the jobs that they were able to get people through this transitional job and training and those that went straight into the labor market. Everything was the same, the hours, the wages. But what they could do was attach them to employment faster. Do you think that might be the mechanism or what? What are your thoughts about how that’s reducing recidivism?

Kylie Jiwon Hwang (30:08):

So I think the initial thought that we also had was, is it because entrepreneurship provides a bit more income to them? So is it really just like economic stability or the amount of wages or income that you get in entrepreneurship compared to employment that’s driving it? So we actually find that this is regardless of how much they actually earn in entrepreneurship, that entrepreneurship seems to have a bit more positive impact on desistance to crime compared to employment. We find this above and beyond how much they actually earn. So this could be one of the mechanisms, but it’s not the main mechanism that’s driving it. So we tried to look into what’s really driving entrepreneurship to be a bit more helpful in terms of desisting crime and successful reentry. There’s been a lot of research on looking at what really impacts recidivism, what really impacts successful reentry, and there’s been a lot of work that shows that it’s economic stability, but also there is a lot of work that shows that it’s something beyond economic stability. And as you mentioned, it’s something about being attached to something like social integration or more psychologically having a connection with the society. And there’s been recent research that shows that doing good or making good in the society, doing something good for the public also helps them in terms of desisting from crime and also having a sense of responsibility and so forth really helps them as well. For example, I think there was a research that shows that if you come out of prison and have a child that helps you desist from crimes over so like having that sense of responsibility also helps you. So this is something that we’re not able to disentangle in terms of the data because we don’t really know their intention of going back to crime or not. But I think this is something that our interviews really helped us. We learned a lot in terms of what really seemed to help them in terms of successfully reentering, and many of them did mention something about a sense of responsibility, a sense of having power over their own lives, empowerment. And many of them mentioned that having their own employees also help them in terms of feeling this sense of being responsible not only for yourself, but also for people around you, and that if you are unsuccessful in reentry, you will be not only impacting your own life, but also your employees’ lives as well. So it seems to be that entrepreneurship has an added layer of empowerment and the sense of responsibility that you get and also giving back or doing good to society. Of course, you have your own business, but it also means that you’re doing good to your employees and so forth. We’re not able to disentangle it with the data, but I think that’s one of the mechanisms that’s going on. So it was really interesting to find that entrepreneurship not only seems to help successful reentry compared to formally incarcerated people who don’t have jobs at all so unemployed, formerly incarcerated people. But it seems to help them above and beyond employed formally incarcerated individuals. And I think this also kind of goes back to the fact that many of the times that the employment that formerly incarcerated people end up getting is not really the most stable employment that we would think about. So I think that’s also kind of driving the results in that when we think about employed people, we think that they have a lot of stability, they have a lot of responsibility and they’re actually attached to something. But many times the employment of formerly incarcerated people face is not really attachment to one job. It could be they’re going through stints of jobs that lasts for less than a month each. And that really drives them to not be really attached or integrated into the society. That’s also one of the reasons, whereas entrepreneurship, even if it’s unsuccessful, they do end up having at least a year attachment to their business or to employment.

Kate Cooney (33:45):

That’s so interesting. So let’s get to the “ban the box” findings. So you’re coming into grad school, you know about these “ban the box” policies, you’re curious about what can be done, recognizing that all these employers are utilizing the software and most likely using it to screen out candidates. So you were curious would entrepreneurship be reduced in states that had “ban the box”? So you were looking at that connection between entrepreneurship and discrimination in the labor market? Is that it?

Kylie Jiwon Hwang (34:21):

Yeah. So basically, I used the “ban the box” policy implementation as a way to parse out the mechanism of why formerly incarcerated people seem to be going into entrepreneurship. So there can be many reasons, and there probably are many reasons why formerly incarcerated people or people with criminal backgrounds are more likely to be going into entrepreneurship. And I used “ban the box” specifically to try to parse out whether or not one of the reasons why individuals with criminal records or with incarceration records are going into entrepreneurship is because they faced so much difficulties in employment. So is labor market discrimination one of the driving factors of why they’re being pushed into entrepreneurship. So in that sense, using “ban the box” as a policy shop was useful in that if in states or counties where a “ban the box” is implemented, formerly incarcerated people have more chances of finding employment. In that sense if labor market discrimination is one of the main driving factors, we would expect entrepreneurship to be lower in these states or counties, and that was exactly what I found. So we do seem to find that labor market discrimination is one of the main driving factors. We’re mostly trying to kind of parse it apart from other mechanisms that’s been shown. For example, there has been research by Robert Fairlie where he finds that individuals who have been in contact with the criminal justice system or drug dealing specifically, they’re more likely to be a bit more risk taking and also entrepreneurial in their personalities, and that leads them to become entrepreneurs. So his paper is really not talking about how discrimination per se is pushing them into entrepreneurship, but it’s just that their kind of personal preference is a bit more into entrepreneurship, and I think that’s definitely one of the mechanisms that’s still going on even in my research. I also talked to some of my interviewees who say things like that. So there were some people in my interviewees who used to do drug dealing, and they say, “I was actually an entrepreneur before, anyway, just illegal. But now I’m a legal entrepreneur.” So there are people who joke like that. So I think that’s definitely one of the mechanisms that’s going on. But we use “ban the box” specifically to try to see if there’s another layer of mechanism that’s going on where even for individuals who aren’t specifically entrepreneurial per se, they are choosing into entrepreneurship because they just can’t find jobs elsewhere. That was why we were trying to use “ban the box” policy as a way to identify what the causal mechanism of what’s going on.

Kate Cooney (36:57):

In thinking about the entrepreneurs that you’ve interviewed, the subset that were not doing some of those service-related businesses, you know, but were instead perhaps really making it in some innovative space. One of the things some of the literature that that we’ve looked at highlights how for innovation related entrepreneurship, you often have a need for a bigger team, a more diverse skillset of that team, the kind of capital you need is more patient and your growth is not linear, it’s you’re finding that product market fit and then you might take off. Did you get any insight from thinking about that subset that were doing really creative work? Were there certain interventions of assistance that were really helpful? Maybe they were uniquely situated in a social capital kind of way? Or that nonprofit that just worked really well at helping connect, playing that brokering role in a network of helping people build out management teams or there were accelerator programs? I was just curious what insight you might have about what it would take both on the entrepreneur side, which it sounds like there’s a lot of drive and growth, and all the things we think about when we think about successful entrepreneurs. But were there ecosystem or scaffolding that you observed being important or specific obstacles that were overcome in a way that really helped people get to that level of success?

Kylie Jiwon Hwang (38:34):

I don’t think I found any consistent kind of things that were happening to these specific formally incarcerated entrepreneurs who were not doing like small businesses but were actually more successful. I think they were more likely to have been connected with a non-profit pretty earlier on in their entrepreneurial venture. But I don’t think that was one of the main driving factors. I think it definitely helped them, but I think. This is all kind of just the thoughts that I had, but from my interviews, at least, I think they were, they really have the drive and they were, I think many of the times they were actually intending to have a growth oriented business from the start. So many times a lot of formerly incarcerated entrepreneurs don’t start with the intention of having a growth oriented business, so they’re really going into it as an alternative to employment. Not really in terms of saying that I’m going to have the biggest business in the long run. So many times. I think the intention or the thought, even that they have from the very start is very different. And I think those individuals who really ended up having these like big, very successful entrepreneurial ventures were the ones who really started with the intention to have a growth oriented business. And I do think that they were the ones who were more likely to seek social capital from the start. So they were the ones who are more likely to kind of actively go to non-profits and so forth. So I think that was a bit different. But other than that, I don’t think I’ve found any consistent differences in terms of like whether or not they were the ones who went into accelerator programs or the ones who got specific help from non-profits. Yeah, I think it’s in this sense. It’s a bit similar to non-formally incarcerated entrepreneurs as well. It’s very difficult to discern what’s really the driving factor of success in entrepreneurship, and many times it comes down to just entrepreneurs, perhaps compared to non-formal incarcerated people, having social connections and having financial capital might be a bit more important because there are greater barriers. But other than that, I think it was pretty similar in terms of it coming down to the entrepreneur, their intention and so forth.

Kate Cooney (40:55):

So we’ve talked a lot about how entrepreneurship appears to be a pathway for those who are facing discrimination in the labor market. And on the other hand, you might have a step back into the wage labor market after a stint of entrepreneurship. And there’s some interesting work coming out just thinking about entrepreneurship in that broader view of how it relates cyclically to other moves that you’re making on your career path. My colleague here, Tristan Botelho, finds that entrepreneurs in his audit study are less likely to receive a call back after their entrepreneurial stint relative to a non-founder, and that it’s even truer when the founder successful. So what do you make of that study, and do you see any evidence of this career penalty in the population that you’ve been focused on in your work?

Kylie Jiwon Hwang (41:50):

Right. So I’m glad you brought that up because that’s actually what my job market paper looks at. So. So just to give a brief overview of Tristan’s paper. So Tristan finds that, he’s not looking formally incarcerated people, he’s looking at the general population, and he finds that people with entrepreneurial experience have difficulties going back to employment after their entrepreneurial stint because especially if they’re successful because employers are now less likely to hire them. So I was also interested in this because if a lot of formerly incarcerated people are being pushed into entrepreneurship to start with, if they end up wanting to go back to employment, if they have these same penalties, it could mean that entrepreneurship is really not a viable alternative pathway if it’s going to cut them out from employment further on in the long term. So I was really interested in the long term outcomes or impact of entrepreneurship for formally incarcerated people, and I did expect that it would be different for the formerly incarcerated people in terms of how entrepreneurship impacts them in the long run in terms of going back to employment. And the main reason I thought it would be different was because, for example, in Tristan’s paper, he’s looking at more high skilled individuals. I think he was looking at maybe marketing, HR professionals or I.T. individuals. So they are individuals that have a lot of options. And the main reason why employers are less likely to hire ex-entrepreneurs is because they think that these individuals have chosen entrepreneurship despite having employment opportunities, so they think that they’re going to be better fits to entrepreneurship, and they prefer entrepreneurship to employment. And that’s really, that’s really the reason why they’re less likely to call back. But for formerly incarcerated people, it’s very different that they’re not going into entrepreneurship despite having a lot of employment opportunities. But they’re actually being pushed into entrepreneurship because that’s the only option they have in the labor market. So in terms of thinking about whether employers think that formerly incarcerated people are better fits to entrepreneurship and that’s why they became entrepreneurs, I thought that this would not hold because the reason why formerly incarcerated people go into entrepreneurship is very different, and I also thought that in terms of formerly incarcerated people becoming entrepreneurs, they face a lot of entrepreneurial barriers as well and perhaps going through all the hoops and barriers to become an entrepreneur could actually signal some positive factor about their ability in terms of having actually gone through the hoops and also having that kind of drive of wanting to work. I actually do find in my research that for formerly incarcerated people, if you have an entrepreneurial experience, it actually helps you in terms of your long term employment outcomes. So it helps you secure employment even more so than having the same amount of employment beforehand. And I think the main reason for this is also similar to what I talked about in terms of the recidivism result in that the employment record that a lot of formerly incarcerated people have is not really the best employment records. For example, when employers are looking for potential employees, they try to look at what you did before. And if you have, for example, you work two years at Facebook and so forth, it’s a really positive signal for employers. But a lot of the times that the employment record that these formerly incarcerated people have is very short stints of employment in several different companies. They look a bit more unstable in terms of the employment record and compared to that having a longer stint of entrepreneurship where they actually founded their own business, it can be a bit more helpful in signaling a positive sign to potential employer. So I find the opposite results in terms of the fact that for formerly incarcerated people, or perhaps more generally, for individuals who face a lot of discrimination in the labor market, having this entrepreneurial experience doesn’t hurt you as much in terms of trying to go back to employment compared to having employment records. 

Kate Cooney (45:52):

So we’ve been through a hard year. There were some really startling statistics at the beginning of the pandemic about, you know, how much of the businesses were lost. Do you have any sense of how the interview subjects that you’re connected to through your research have weathered this? 

Kylie Jiwon Hwang (46:07):

Yeah. So I continued to do interviews during the COVID crisis, so I do have a sense and I agree that it’s been very difficult for many of these formerly incarcerated entrepreneurs, as well as it has been for non formally incarcerated entrepreneurs too. But I think I know that some of the interviewees that I talked to ended up having to close down their businesses, especially if it’s more services, for example, like catering services and so forth. It’s just really hard to continue during the COVID crisis. So some of them had to close down their businesses or had to change their business area. I know that some bakeries that I talked to added an online feature where they could deliver, for example, their cupcakes instead of catering cupcakes, so that I think that there were there obviously were a lot of difficulties for these individuals. I did also interview formerly incarcerated individuals who are not in entrepreneurship, but just in employment, and I did hear that even for them, it was also difficult because employment has been going down, and especially with so much unemployment, it’s even less likely that formerly incarcerated people are going to find jobs because now having that criminal background is even worse when the economy is down and there’s a lot of unemployment going on. So yeah, I think the COVID crisis has been huge in terms of the formerly incarcerated population, both in employment and entrepreneurship. This might be a bit of a different story, but there has also been a lot of releases because of COVID. There has been an impact of that where a lot of formerly incarcerated people were released just because of COVID and they weren’t ready in terms of finding employment or starting their own business. And it was very difficult time. So I think it’s been a very hard time. Maybe this is a call for more research on how COVID has impacted this population as well.

Kate Cooney (48:07):

So I’m just going to ask one more question. You had mentioned some policy implications, and I’d love to hear how you think about the policy implications of your work. Oh, I also want to know about the employer’s perspective, so maybe you can weave that in. I’m going to make it like a three part-er, so it’s my last question, but it’s got three parts. You said you were talking to employers who are focused on hiring people with a criminal record, and I just wonder what kind of stories do you hear from them? What would they like people to know about their experiences, the implications of your work and where you’re going next, where you’d like to go?

Kylie Jiwon Hwang (48:42):

All right. So for the first question about the employer’s perspective, so I’ve been talking to some employers who actively hire formerly incarcerated people and also are very interested in integrating formerly incarcerated population in their workforce. I think there are two points, though. The first point is that a lot of these employers talk about how committed formerly incarcerated or individuals with criminal records are as employees, they talk about how they’re much more loyal, they’re much more likely to be committed and active in the job, and they really are thankful for their job and are more likely to have better work performance. So there’s been a lot of kind of employers trying to talk about that, and I tried to do a bit more research on this by working with an employer who hires both within prisons and also after people come out of prison. And I also do find in the data that they do seem to be a lot more loyal in terms of how long they stay in the company. And many times, for example, that company was a call center and many times the amount of time that these individuals stay is really important for the company, the retention rate, because it’s just a lot of training that these employers put in and the fact that they leave after a while is a big loss for them. A lot of employers talk first about how this workforce of formerly incarcerated individuals with criminal records is a workforce that’s really efficient and also very loyal and committed to the company if they’re actually hired. I think a lot of employers are trying to call on other employers to also hire formerly incarcerated people and individuals with criminal backgrounds as well. That’s one point that a lot of employers that hire formerly incarcerated people have been telling me. And the second point is that they do also talk about how these criminal background checks should be a bit more standardized because there is a lot of criminal background check companies out there. Many times it’s the rap sheet that they send out, or the background checks that they send out is not very clean in terms of, for example, you can have criminal backgrounds that should have been erased. It can have criminal backgrounds that aren’t really felonies, but it could be mark as felonies. And as human resources teams, they talk about the difficulties of actually interpreting what criminal backgrounds really mean, and they think that it should be something that perhaps policymakers can work on a bit more in terms of cleaning that out and at least help well-intentioned companies or employers to really sort out that. Those are the two main points. There is a lot of movement of trying to increase hiring for individuals with criminal backgrounds and incarceration records. And your second question was the policy implications they make. Based on our research, it does seem that entrepreneurship is a viable alternative strategy or alternative labor market choice for formerly incarcerated people. But it still remains that there still are a lot of barriers and challenges for formerly incarcerated people to become entrepreneurs, especially in terms of becoming a growth oriented or successful entrepreneurs. There’s still a lot of bans in terms of formerly incarcerated people getting bank loans. Recently, there was a movement against the small business associations in the United States, where they had a blanket ban on bank loans for small businesses that were founded by formerly incarcerated people. So these kind of policies, at least should maybe not actively help, or at least not ban people with criminal records or formerly incarcerated records to try to start their own businesses. That could be something that could be changed and also that there’s a lot of training in terms of employment for formerly incarcerated people inside prisons and jails. But there’s been really no, almost no training in terms of entrepreneurship for formerly incarcerated people in prisons and jails. So most of the training and policy has been really focused on employment. But if entrepreneurship is a labor market choice that these that so many formerly incarcerated people actually end up taking, then perhaps some sort of entrepreneurial training should be going on inside prisons and jails in terms of providing a bit more education or training in terms of entrepreneurship so that they can actually make a more educated choice when they’re coming out to society in terms of going to employment for entrepreneurship. The whole research shows how much difficulties there remains in employment for formerly incarcerated people. Just the fact that formerly incarcerated people have to choose to start their own businesses because they have so much difficulties in finding employment really just highlights the fact that there still is a lot of difficulties in terms of employment for formerly incarcerated people. So I think it never goes without saying that it still remains that there should be a bit more effort in providing more employment for formerly incarcerated people. So many times when I talk about my research, people ask me, “Do you mean that we should take out money from providing employment for formerly incarcerated people and move it to entrepreneurship?” So I don’t think that’s what I’m trying to say, but I do think that employment still should be highlighted as one of the main or the main choice for formerly incarcerated people.

Kate Cooney (53:58):

I just want to thank you so much for spending some time with us this afternoon as we’re thinking about these issues. 

Kylie Jiwon Hwang (54:05):

Thank you so much, Kate. Thanks for having me.

Kate Cooney (54:08):

We’ll continue our exploration of entrepreneurship and entrepreneurial ecosystems next week on episode nine when we focus on the challenge of access to financial capital. Stay tuned.

Manuel Morales (54:24):

This podcast was created by Kate Cooney in collaboration with James Johnson-Piett and the students of the Spring 2021 Lab.

Eun Sun Cho (54:32):

All engineering and production by Ryan McAvoy and Kate Cooney.

Kate Cooney (54:37):

Special thanks to Rhona Ceppos for administrative support and to Ryan Carpenter for assistance with Zoom.

Eun Sun Cho (54:43):

Music from the album City Trees, composed and performed by the artist K-Dub.

Manuel Morales (54:48):

For more information and show notes, visit our website at IEDL.yale.edu.

Eun Sun Cho (54:55):

Thank you for listening.

[Music]