The sharp rise in U.S. incarceration rates has heightened long-standing concerns among scholars and policymakers that lengthy incarceration permanently harms the future labor market outcomes of prisoners. If true, then lengthy prison sentences will not only punish criminals for crimes committed, but will also make it far more difficult for ex-prisoners to reenter society as productive citizens. To investigate this claim I examine how increase in duration of incarceration affects subsequent earnings and employment. Comparing long-serving prisoners with short-serving ones in the Illinois state prison system, I find that the length of incarceration is positively associated with earnings and employment, even though these effects attenuate over time. The positive effects are stronger for individuals convicted of economically motivated and less violent crimes (such as property- and drug-related offenses) than for those convicted of violent crimes (such as person-related offenses). The effect is also stronger for prison entrants with self-reported drug addiction problems. The deterrent effect of lengthy incarceration and rehabilitation during incarceration are possible reasons for this positive effect. However, because this paper analyzes men who served less than four years in Illinois prison and excludes the population of men who served their terms exclusively in jail, readers should be cautious about generalizing findings of this paper. © 2011 by the Association for Public Policy Analysis and Management.