The article draws on findings from the Edinburgh Study of Youth Transitions and Crime in order to show how labeling processes within the cultures of juvenile justice agencies have the effect of recycling certain categories of youth into the youth justice system; whereas, other serious offenders escape formal processing. The findings indicate that the deeper a youth is carried into the formal processing system, the less likely he/she is to stop offending. The article concludes that the most significant factor in reducing offending is minimal formal intervention and maximum diversion to programming that does not have the trappings of criminal processing. The current Scottish practice of targeted early intervention is likely to widen the net of youth who are brought into contact with formal youth justice processing. Greater numbers of children are likely to be identified as at risk for delinquency, and any early hearing involvement will result in constant recycling into the system. The more intensive the forms of contact with youth justice agencies, the more damaging they become in the long term in reducing the risk of chronic delinquency. Forms of diversion that caution youth without recourse to formal intervention, such as the police decision to warn youth rather than refer them to formal contact with the youth justice system, are likely to reduce more serious future offending. The current Scottish practice of bringing youth to a hearing and placing them on social work supervision is not associated with a significant decline in serious offending. 9 tables and 50 references