<html><head /> <style type="text/css"> <!-- .style1 {font-family: Verdana} --> </style><body> <META http-equiv="Content-Type" content="text/html; charset=UTF-16"><title>Does Crime Pay Better?</title><meta name="keywords" content="crime,pay,benefits,burglary,business,causes,costas,criminal,cycle,economics,employment,England,geographical,kingdom,low-skilled,machin,media,meghir,models,police,property,Society,stephen,theory,trends,uk,unemployment,united,victims,wages,wales,website,"><table style="font-family:Verdana; font-size:larger; " align="center" border="0" width="50%"><tbody><tr> <td style="background-color:silver; border-color:white; border-left-style:none; border-style:none; " width="730"><span style="font-family:Verdana; font-size:larger; ">Does Crime Pay Better?</span></td> </tr> </tr> </tbody></table><br><table style="font-family:Verdana; font-size:medium; " align="center" bgcolor="white" border="0" width="50%"><tbody><tr> <td height="131" width="669"><span style="font-family:Verdana; font-size:x-small;"><strong>Editors Introduction</strong></span><span class="style1"> </span><span style="font-family:Verdana; font-size:x-small; ">Crime is rising steadily worldwide. The media, politicians and commentators have all taken potshots at the sources and causes of crime, but little concrete evidence has been proffered. In this article, Costas Meghir and Stephen Machin examine data provided by police forces and cast light on the link between crime and low wage rates. They found that in those areas where wage-growth prospects were next to hopeless, crime rates were on the rise. With little to look forward to, it appears as if crime does pay better.</span><br> <br><span style="font-size:x-small;"><strong>Crime and the business cycle</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">It's difficult to read a newspaper or turn on the TV these days without being reminded that the crime rate is rising. Of course, journalists love crime stories--they help sell newspapers--and they are prone to exaggerate. But even the Home Office figures show that over a very long period of time, crime rose steadily in Britain--even when you allow for the fact that criminal activity varies with the business cycle. From the late 1970s onwards, the increase was particularly rapid, though it has begun to fall since the mid-1990s.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">When they are not actually reporting crime, the newspapers and broadcast media tend to spend a good deal of time trying to come up with explanations for its increase.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">Unemployment, social alienation and TV violence have all at various times been put forward as theories. But these are often only theories: many armchair pundits don't bother to look for evidence to support their pet thesis. We decided to look at some hard data to test one specific hypothesis: that there is a link between low wages and low growth in wages and rising crime. Police force data in England and Wales provide evidence to support the idea of a link between more rapidly rising property crime and declining labour market opportunities.</span><br><br><span style="font-size:x-small;"><strong>Spotting the trend</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">There are striking--and surprising--international differences in the incidence of crime and its trend. One recent study showed unexpected differences between the pattern of crime in England and Wales and that in the United States. According to police statistics and victim surveys, overall crime rates are actually higher in England and Wales. Robbery, assault, burglary and car theft are all higher, according to 1995 victim surveys. The notable exception to this pattern involves some crimes against the person: the US murder rate is much higher (six times as high in 1996, for example). Even here, England and Wales are catching up. The murder and rape rates rose in the US in the 1980s and 1990s: but they rose even faster in England and Wales between 1981 and 1996, thus narrowing the gap. And property crimes fell in the US over this period while continuing to rise in England and Wales.</span><br><br><span style="font-size:x-small;"><strong>The economic theory of crime</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">The standard economic approach to crime is a simple one. It states that individuals weigh the expected costs and benefits from crime, taking into account the probability of being caught, and participate in illegitimate activities only if the expected benefits exceed the expected costs. If an individual is making a choice between work and crime, it is clear that a crucial factor will be the level of wages he or she could obtain.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">We know from well-documented evidence that the gap between the more highly paid and the lowest-paid workers has widened rapidly since the late 1970s. The wages on offer in many new jobs have worsened, suggesting deteriorating labour market prospects for recent entrants, particularly the less skilled. Joblessness among low-skilled workers has also risen. These factors have combined to produce significantly worsening labour market opportunities for people at the bottom end of the wage distribution. According to the economic models, these worsening wage opportunities would lead to a rise in the crime rate. We set out to see if that is what happened.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">We began by looking at police force area level data between 1975 and 1996. We concentrated on property crime: this is the sort of crime most likely to correspond with the economic models of crime. Other sorts of recorded crime, such as crimes against the person, often have other motivations which aren't associated with monetary gain. On the income side of the equation, we looked at data on hourly wages for workers at the bottom 10 percent of the wage distribution: those people most likely to be making the crime-work choice at the margin will be those on low wages.</span><br><br><span style="font-family:Verdana; font-size:x-small; "><a href="1947_sidebar1.html" TARGET="_blank"><img src="1947_figure1_sm.gif" WIDTH="175" HEIGHT="118" border="0" vspace="10" hspace="10" align="right" alt="figure 1"></a> Figure 1 reports what happened to property-crime rates between 1975 and 1996. They rose for most of the period, and then started to fall in the mid-1990s. Despite this decline at the end, there is nevertheless a large net increase, up from around 24 crimes per 1,000 people in 1974 to around 70 crimes per 1,000 people by 1996.</span><br><br><span style="font-family:Verdana; font-size:x-small; "><a href="1947_sidebar2.html" TARGET="_blank"><img src="1947_figure2_sm.gif" WIDTH="170" HEIGHT="122" border="0" vspace="10" hspace="10" align="left" alt="figure 2"></a> Figure 2 shows the (by now) well-known story about wages at lower points in the wage distribution falling behind those higher up the distribution. It shows wage changes (indexed at 1 in 1975) for a person 10 percent from the bottom of the wage distribution (the 10th percentile), someone in the middle (the 50th percentile) and someone 10 percent from the top (the 90th percentile). It is very clear that, since the late 1970s, the 10th-percentile worker's wage has grown by less than either of our examples higher up the distribution.</span><br><br><span style="font-size:x-small;"><strong>A clear-cut case?</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">So far, so good. We know crime rates rose. We know wage inequality rose. But these findings don't tell us whether the two developments are linked. We want to know whether the rises in crime were most pronounced in those areas where wage inequality also rose more sharply. Using geographically based data we can demonstrate the link. Those areas with lower-than-average wage growth in the bottom 10th percentile were also those areas with the largest rises in crime. Worsening wages for low-paid workers do therefore seem to go hand in hand with rising crime.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">Of course, we then tested this finding, a basic negative correlation, to a rigorous statistical testing procedure. We used statistical models that allow us to control for differential conviction rates (to net out differences in the impact of deterrence across areas), previous crime rates (to net out persistence in crime within areas due to peer group or neighbourhood effects) and estimates of the returns to crime. The basic relationship remains: crime rates went up by more in those areas where wage prospects at the bottom end of the wage distribution deteriorated the most.</span><br><br><span style="font-size:x-small;"><strong>The models got it right</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">Economic models of crime that emphasise the role of market wages in the incidence of crime are therefore clearly in line with the experience in England and Wales since the mid-1970s. Property crime rose by more where wage opportunities declined by more. This reinforces the view that what happens in the labour market is important in explaining why individuals turn to crime in the absence of anything better. A buoyant labour market with good wages on offer at all points on the income distribution could therefore be central in reducing the potentially large social costs of crime. Our findings present a significant challenge to policymakers--those concerned with the labour market and those concerned with crime prevention.</span><br><br><span style="font-family:Verdana; font-size:x-small; "><div style="font-family: arial; font-size: x-small; font-style: italic; position: relative; top: 40px">This article is taken from CentrePiece magazine, published by the Centre for Economic Performance at the London School of Economics and Political Science. Copyright The London School of Economics and Political Science.</div></span><br><br><span style="font-family:Verdana; font-size:x-small; font-style:italic; "></span></td> </tr> </tbody></table> </body></html>