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The Economics of Bail

What would you do if you had to come up with bail money for yourself or a loved one? You may never have thought about this question before, but it’s an important one. According to a Federal Reserve report, 47 percent of respondents said they either wouldn’t be able to cover an unexpected $400 expense through savings or their credit card, or they would have to cover it by selling something or borrowing money. Americans’ lack of cash on hand is part of what makes the economics of bail so complicated. 

Bail Basics

Why do we have bail at all? The practice of posting bail has Anglo-Saxon roots dating to medieval England. In the old days, an accused person’s family member or friend might serve as a kind of guarantor, using his personal honor and economic status as a guarantee that the accused wouldn’t flee the village. The guarantor (or, surety) would be responsible for putting up money in bail as a pledge that the accused would reappear in court. This early form of bail also included what was called the “bot,” a payment to the victim or the victim’s relatives.

Like many elements of English law, the practice of setting bail made its way to the colonial U.S. If you think back to your U.S. history classes you may remember that the Bill of Rights includes a prohibition of “excessive bail.” It’s right in there with the prohibition on “cruel and unusual punishment.”

In successive Bail Reform Acts, Congress has expressed a preference for defendants to be released on their own recognizance, meaning without bail. In fact, however, our jails are crowded with people who have been set bail amounts that they and their families can’t afford. According a 2015 Vera Institute of Justice report, the U.S. has over 3,000 jails, holding a total of 731,000 people on any given day.

The Economics of Bail

Because the jail population is transient and people cycle in and out, jails have almost 19 times the annual admission of prisons. The number of people held in jail includes both those who were denied bail and those who are unable to pay the bail they would need to secure their release, those who were convicted of minor crimes and serving short sentences and those who were convicted of serious crimes and are awaiting transfer to state or federal prison.

According to a Bureau of Justice Statistics (BJS) report from June, 2015, 95% of the growth in the jail population (up 123,500 inmates) since 2000 was because of an increase in the unconvicted population (up 117,700 inmates). In mid-2014, the BJS reports that about 6 in 10 adult jail inmates were not convicted, but were in jail awaiting court action on a current charge. That 60% rate of unconvicted individuals behind bars is the same as it was in 2005.

How Bail Works

If you’ve ever seen an episode of Law & Order you have a rough idea of how bail works these days. An individual who has been charged with a crime is brought before a judge whose job it is to set bail. In essence, bail provides a financial incentive for the accused to return to court because it’s money that the court eventually returns. That’s right – if you return for your court date(s), the money you paid in bail is returned to you, minus a court fee.

During a bail hearing, a prosecutor will generally argue for high bail (or for the defendant to be held without bail) and a defense attorney will try to get his or her client released without having to pay bail, or released for a low bail amount. However, many jurisdictions use pre-set bond schedules that suggest a bail amount for each crime, limiting judges’ discretion in how much bail to set.

If a defendant has access to the full amount of the bail, he or she can pay the court and get out of jail pending a trial date. If someone doesn’t have the full amount of the set bail, he or she can fork over 10% of the bail amount and get a bail bond. The bail company pays the court the full amount and pockets the 10%, and the defendant gets out of jail pending a trial date. But if someone doesn’t have enough money to pay even 10% of the set bail, he or she stays in jail until that trial date.

The bail system sounds relatively simple, right? If a person was charged with a particularly violent crime he or she might have a bail application denied and be put in pre-trial detention without bail.

In theory, the more serious a crime, the greater the flight risk and the greater the means of the accused, the higher the bail amount. In practice, however, many of the people who are charged with crimes can’t afford to make bail (or even pay 10% for a bail bond). Even defendants accused of non-serious, non-violent crimes can sit in jail for months or years waiting for their day in court.

Related Article: The Economics of the American Prison System

When People Can’t Afford to Pay Bail

The Economics of Bail

As we mentioned above, many Americans would struggle to come up with $400, an amount that might seem small to someone with a well-stocked emergency fund, complete with three to six months’ worth of living expenses. But according to a 2015 report from the Pew Charitable Trusts, 55 percent of American households are savings-limited. That means these households can replace less than a month of their income through liquid savings.

It’s not surprising, then, that unaffordable bail is such a problem. In New York City, only 15 percent of defendants in non-felony cases whose bail was $500 or less were able to come up with the bail money. According to the Pretrial Justice Initiative, 47 percent of felony defendants who have been set bail (meaning the ones who aren’t considered too dangerous to release on bail) cannot afford their bail. They stay in jail until their case makes it to court.

In theory, someone in pretrial detention would have as good a chance of acquittal as someone who was released on bail. In practice, however, pretrial detention has a significant impact on trial outcomes. The PJI estimates that, relative to those who could afford to make bail, defendants held in pretrial detention are three times as likely to be sentenced to prison. They also receive sentences that are twice as long.

What are some of the consequences of a system that sets unaffordably high bail for even minor offenses? Let’s take a look at two possible outcome for someone faced with unaffordable bail. One option is for that person  to take a plea bargain and plead guilty, whether or not he or she actually committed the crime.

Unaffordable bail makes plea deals more appealing. If you know that you and your family can’t afford to pay bail to get you out of jail, you’re more likely to plead guilty rather than taking your chances on a trial. Why? Because if you refuse to plead guilty you’ll spend the days, weeks, months or years before your case is resolved in jail. If you’ve already spent time in jail after your arrest you may be desperate to get out, even if it means pleading guilty to something you didn’t do.

People pleading guilty to crimes they didn’t commit isn’t just troubling on moral grounds. It also has economic costs, because people with criminal records often struggle to find employment. According to the Pew Charitable Trusts, “serving time reduces hourly wages for men by approximately 11 percent, annual employment by 9 weeks and annual earnings by 40 percent.”

Option one is pleading guilty to get out of jail and move on with your life. Option two is remaining in jail and waiting for your day in court. We say “jail” and not “prison” because it’s the city and county jails, not the state or federal prisons, that house people who haven’t been convicted. As we’ve seen, staying in jail can lead to an increased likelihood of conviction and to a longer sentence if convicted.

The rising jail population raises the costs to the taxpayer. The U.S. Department of Justice estimated that local communities spent $22.2 billion on jails in 2011, up from $5.3 billion in 1983. And it’s not just costly in monetary terms.

Unless you’ve been living under a rock you’re probably aware of the physical and psychological toll that life behind bars can take. The case of Kalief Browder, who spent three years in New York City’s notorious Rikers Island Jail without being convicted of a crime, is one example.

According to the New York City comptroller’s office, it cost $1.1 billion to run Rikers Island jail in 2014. Spending per inmate in that period was around $100,000, yet reports of abuse in the city jail is rampant. Browder, who was only 16 at the time of his arrest, was reportedly so traumatized by his time in jail that he committed suicide.

Also in 2015, Sandra Bland’s death in jail was ruled a suicide. She spent the night behind bars because she could not immediately pay the $500 she needed for the 10% bond premium on the $5,000 bail she was set.

Related Article: Which States Put the Most People in Prison?

A Growing Problem

Currently, around 1 in 100 U.S. adults is in prison or jail. Spending on a combination of prisons, jail, probation and parole is the second-fastest growing budget item for states, after Medicaid. Especially in states with a high percentage of the population behind bars, this can really add up.

In general, holding an individual in jail is less expensive than holding an individual in prison. Because the jail population is more transient, less is spent on programming for those behind bars in jail than in prison.

In states where counties and cities operate the jails, states often reimburse local government for some or all of the cost of running the jails. Still, according to the Vera Institute, between 1982 to 2011 local government spending on corrections — most of it the building and running of jails — increased by nearly 235 percent.

Bail Bonds: Private Enterprise and the Bail System

The Economics of Bail

According to the Bureau of Justice Statistics, beginning in 1998 financial pretrial releases (those that require bail to be posted) became more prevalent than non-financial releases (release on recognizance). Judges became less likely to order release on recognizance, in part out of fear that they would face blow-back if a released defendant were to re-offend. The growth in the use of commercial surety bonds (a.k.a. bail bonds) also accounts for the growth of financial pretrial release.

If a person accused of a crime doesn’t want to plead guilty or stay in jail, he or she can instruct loved ones to seek a bail bond. The private, for-profit bail industry exists to loan money to people who need it to pay bail for a loved one. When you pay for a bail bond, you don’t pay the full amount of the bond (if you had the full amount you’d just pay the court, right?).

Under a commercial bond, a defendant or his or her loved ones must pay a nonrefundable fee to a licensed bond agent. This is also known as a jail premium. According to the Justice Policy Institute, the standard amount for a jail premium (the amount a customer pays to have a bail bondsman post bail on behalf of a defendant) is 10% of the set bail.

Once he or she has the fee, the bond agent certifies to the court he or she will be liable for the full bail amount if the defendant fails to appear. Whether the defendant shows up in court or not, that 10% fee is forfeit. The bail bondsman keeps it. By contrast, defendants who are able to pay their bail in full get it all back, minus minor administrative court fees.

The presence of the private bail bond industry may lead to higher bail amounts, which in turn feeds the need for bail bonds. Judges may impose higher bail amounts, knowing that the defendant or his or her family will effectively only pay a fraction of the stated bail amount.

If a defendant doesn’t show up for court, the bail bond agent is on the hook for the full amount of the bail. That’s why some bail bond companies require that bond purchasers put up collateral that the company can go after. In some jurisdictions, you can hire a bail recovery agent to go after someone who skipped out on bail you paid for. Bail companies may themselves decide to send a “bounty hunter” after a defendant who has failed to appear in court.

Bail Agents

So how did bail go from a court transaction to a private industry? The U.S. is one of only two countries with a private bail industry (the other is the Philippines). The practice of private economic actors mediating between defendants and the courts for the purposes of posting bail seems to date from nineteenth-century San Francisco. The practice was formalized – and capitalized on – by a pair of entrepreneurs who started charging a fee for the privilege of posting bail for local residents. These days, the bail bonds business is booming.

So who are the people who run these bail bond shopfronts or work as bail recovery agents? We may have an image of them as tough guys, but in fact there’s a pretty low barrier to entry. In most states, a brief training period and a small licensing fee are all it takes to set up shop as a bail recovery agency.

Bail as Entertainment

Ever heard of Dog the Bounty Hunter? That’s the A&E reality show that followed a bounty hunter, also known as a bail recovery agent. The show attracted millions of viewers. Even in its final season, Dog the Bounty Hunter had a season premiere audience of 2.9 million. The show reportedly grossed $400 million for the network.

It spawned a spin-off show called Dog and Beth: On the Hunt. The show followed Dog and his wife Beth as they consulted with bail bond businesses and bail bondsmen around the country.

A lesser-known bail-related show was Bounty Girls: Miami, a short-lived reality show that followed female bail bond agents. Then there was Family Bonds, an HBO show about the Evangelista family. They are bail bond agents living on Long Island.

In short, the entertainment industry has found a way to capitalize on the public’s interest in the bail bond industry.

Bail Reform

Some community groups are taking bail reform into their own hands.

Take, for example, community bail funds. These are funds that anyone can contribute to, in any amount. The money is used to make bail for non-violent offenders who pose a low flight risk and whose bail is set at relatively low – but still unaffordable to the accused – levels. When the individuals show up to court, the fund takes back the money and uses it to help someone else. It’s a bit like a lending circle. People access the money when they need it but the fund itself keeps growing.

Another reform effort is known as supervised release. With supervised release, defendants are assigned to a supervisory program in their community as an alternative to bail and pretrial detention. They can live at home and continue working in their jobs while awaiting trial.

Washington, D.C. has implemented a large-scale supervised release program run by the Pretrial Services Agency. Under the D.C. program about 85 percent of all those arrested are released prior to their court date, 88% return to make all their court appearances and 97% finish the pretrial period without being arrested on a new felony charge. 91% finish the program without being arrested on a new misdemeanor charge.

The Takeaway

A bipartisan conversation around criminal justice reform is taking shape. Much of the talk around reform centers on reducing the country’s prison population.

Still, tackling the problem of pre-trial detention due to high bail may be low-hanging fruit, especially considering the fact that 75% of those in pretrial detention are accused of non-violent crimes. Changing the country’s bail system could be an easy starting place that would save taxpayer money, help keep people in their jobs and housing and help families stay together.

Update: Have financial questions beyond the economics of bail? SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to up to three registered investment advisors who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

Photo credits: © iStock/AVNphotolab, © iStock/-Oxford-, © iStock/Courtney Keating, © iStock/Joe_Potato

Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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