Kicking You When You're Already Down: The Multipronged Impact of Austerity on Crime

TL;DR

This study provides evidence that UK welfare reforms from 2012 to 2015 increased crime rates and concentration, especially violent crime, in deprived areas, with significant welfare losses outweighing government savings.

Contribution

It offers the first empirical analysis linking welfare cuts to increased crime and concentration, quantifying welfare losses and highlighting inequality impacts.

Findings

Welfare reforms increased overall crime, especially violent crime.

Crime became more concentrated in affected areas.

Deprived neighborhoods experienced the largest increases in crime.

Abstract

The UK Welfare Reform Act 2012 imposed a series of deep welfare cuts, which disproportionately affected ex-ante poorer areas. In this paper, we provide the first evidence of the impact of these austerity measures on two different but complementary elements of crime -- the crime rate and the less-studied concentration of crime -- over the period 2011-2015 in England and Wales, and document four new facts. First, areas more exposed to the welfare reforms experience increased levels of crime, an effect driven by a rise in violent crime. Second, both violent and property crime become more concentrated within an area due to the welfare reforms. Third, it is ex-ante more deprived neighborhoods that bear the brunt of the crime increases over this period. Fourth, we find no evidence that the welfare reforms increased recidivism, suggesting that the changes in crime we find are likely driven by new criminals. Combining these results, we document unambiguous evidence of a negative spillover of the welfare reforms at the heart of the UK government's austerity program on social welfare, which reinforced the direct inequality-worsening effect of this program. Guided by a hedonic house price model, we calculate the welfare effects implied by the cuts in order to provide a financial quantification of the impact of the reform. We document an implied welfare loss of the policy -- borne by the public -- that far exceeds the savings made to government coffers.