Embargo: 00:01 hours Wednesday 7 April 2004 BENEFIT CUTS AND CRIME The tougher unemployment benefit system introduced in 1996 – the Jobseekers Allowance – may have pushed people out of unemployment and into crime activities. That is the conclusion of new research by Professor Stephen Machin and Olivier Marie, to be presented at the Royal Economic Society’s Annual Conference on Wednesday 7 April. The research sheds new light on the role played by economic incentives in affecting participation in crime. It also points to possible unintended negative consequences of government labour market policy. Machin and Marie have investigated the potential effects on criminal behaviour of more stringent benefit entitlement rules and benefit cuts in a careful study of the impact on crime rates of the 1996 overhaul of the unemployment benefit system in England and Wales, the Jobseekers Allowance (JSA). They find that: The main feature of the JSA was a reduction of the length of contribution based unemployment insurance from 12 to 6 months. It also introduced a 20% lower benefit rate for people aged under 25 and the £30 adult dependent supplement was scrapped. More stringent job search and availability requirements for claiming were brought in, coupled with more power to impose sanctions for Employment Services staff. In the quarter (October to December 1996) following the introduction of JSA, nearly 15% of unemployed claimants left the count. This was a substantial increase compared with the nearly 12% average in the four preceding quarters. The proportion of claimants who exited the count to a state other than work, education/training or other benefits also significantly rose. This proportion going to ‘nowhere’ went from an average of 21% in the four quarter prior to JSA to 24% in the three months following its introduction. Between October and December 1996, the unemployment outflow rate and the relative outflow to ‘nowhere’ went up by more in areas where a larger proportion of claimants were affected by the new shorter six months entitlement rule (the ‘at risk’ population). This establishes the first stage relationship such that the policy seemed to do what one would expect: a tighter benefit regime led to an increased outflow from the stock, with a more marked flow to ‘nowhere’. The next stage looks at whether the areas characterised by increased outflows had differential changes in crime. A difference-in-difference approach, looking at changes in crime in areas respectively with higher and lower proportions of ‘at risk’ claimants prior to JSA introduction shows crime rose by more in areas where benefit sanctions resulted in higher outflows. For example a 1.3 percentage point increase (one standard deviation) difference in area at risk populations was associated with a 2-3.6% increase in the property crime rate. These findings are robust to benchmarking on earlier time periods guaranteeing that the relationship is not coincidental or simply seasonal. These findings are important in two respects. First, they shed a new light on the role played by economic incentives in affecting crime participation. The particular mechanism here is loss of benefit income through the benefit reform. Second, they point to possible unintended negative consequences of government labour market policy. Here the tougher benefit system may have pushed people out of unemployment and into crime activities. The research thus argues for a more cautious approach to the usual cost-benefit analysis of such policies. ENDS Notes for Editors: ‘Crime and Benefit Cuts’ by Stephen Machin and Olivier Marie will be presented at the Royal Economic Society’s 2004 Annual Conference at the University of Wales Swansea on Wednesday 7 April. Machin is Professor of Economics at University College London (UCL), Director of the Centre for the Economics of Education and Research Director of the Centre for Economic Performance at the London School of Economics (LSE). Marie is a Researcher at the Centre for Economic Performance at LSE and at the Institute for Fiscal Studies (IFS). For Further Information: Before and after the conference: contact Stephen Machin at UCL on 020-7679-5870 (mobile: 07979-916702; email: email@example.com); Olivier Marie at LSE on 020-7955- 7800 (mobile: 07811-788925; email:firstname.lastname@example.org); or RES Media Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email: email@example.com). During the conference (5-7 April 2004): contact Romesh Vaitilingam on 07768-661095 (email: firstname.lastname@example.org).
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