State and federal governments do not get as much tax revenue either because these people are not earning at their full potential. So basically, it hurts everyone involved as well as society as a whole.
Is that true? I don't know much about macroeconomics but it seems to me that even though these folks aren't earning at their full potential, the jobs are being done by someone. In other words, if these folks were earning more, someone else wouldn't be doing that job, so the overall earning that the set number of jobs would support wouldn't change one way or the other from the tax revenue point of view. (Not advocatin…
This generates economic activity across the entire chain, enriching everyone along the way. All of these people end up paying more taxes. Collectively the increase in activity can cause retailers, suppliers, and manufacturers to hire to keep up with demand further feeding the cycle.
IIRC the research shows ex-cons are far less likely to re-offend in the future if they land a good job. How many kids looking forward to $130k/yr jobs would choose to join a gang instead?
There's also the deadweight loss of criminal prosecution and jailing offenders. It generates a few legal and prison guard jobs but most of the taxes spent in the criminal justice system don't contribute constructively to society the same way building new bridges, subway systems, or funding science research does.