Identifying the Effect of Unemployment on Crime
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
Centre for Economic Policy Research by two economists, Steven Raphael of
the University of California at San Diego and Rudolf Winter-Ebmer 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
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.
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Rudolph Winter-Ebmer is Professor of Economics at the University of Linz, Austria.
Stephen Raphael is Assistant Professor at the Goldman School of Public Policy, University of California, Berkeley, USA.