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Thursday, January 28, 2016

Identifying the Effect of Unemployment on Crime

Policies designed to increase jobs in inner city areas can have a direct, positive effect on crime rates. A new study of crime across the United States shows that crime rates rise and fall with unemployment. But this truth is obscured by other factors. A Discussion Paper published for the Center for Economic Policy Research by two economists, Steven Raphael of the University of California at San Diego and Rudolf Winter-Ember of the University of Linz, finds support for the view held by most people that when men are out of a job they are more likely to steal because the risks seem more worthwhile. The writers find a significant positive, but also quantitatively large, impact of unemployment on several crime categories.

Much research up to now has concluded that violent crime, as opposed to burglary and theft, is pro-cyclical,
or higher in good times. This aggregate picture can arise if other crime-driving influences are disregarded. One prime candidate is alcohol consumption, which is higher in good times, but on the other hand is a hefty determinant of
all sorts of crime rates. And there are other ‘omitted variables’ that have to be taken into account when analyzing
overall crime figures. One is the interaction between crime and joblessness, for the former can also cause the latter.

This is a result of what the authors call the ‘scarring effects effect of incarceration or a greater reluctance among the criminally initiated to accept legitimate employment…’   When the authors properly take care of these statistical problems, they find a positive impact of unemployment on property crime as well as violent crime.

The statistics used for the study are taken from the FBI’s Uniform Crime Reports across the US from 1970 to 1993. They are then broken down according to types of crime and adjusted for poverty and demographic components. The authors note that in a later period, 1992 to 1996, a period when unemployment was falling, there was a dramatic fall in all types of crime. So the two economists argue that a drop of two percentage points in unemployment would mean a 9% decline in burglary, 14% in rape and robbery and 30% in assault.

Had unemployment been one percentage point in higher in 1992, there would have been nearly 500,000 more crimes in the United States. The authors conclude that if there were improved job prospects for jobless workers, particularly in inner cities, further declines in crime rates would be achieved.