Effect of Earnings Decline on Crime Levels

Effect of stipend Decline on offense LevelsModule Contemporary Issues in the UK sparingUse an appropriate cut and demand cloth to explain how a decline in earnings from legitimate work would be judge to affect the take of villainy. To what extent does evidence from the UK support this hypothetical anticipation?The idea that petty(a) earnings affect annoyance is non a new idea Aristotle (350 B.C.) himself said poverty is the pargonnt of revolution and curse (pg. 32). Since then, in that respect has been much research in the field since policymakers require this tuition to create effective offense-reducing policies. In recent years, illumineing real pay upment has been a significant issue since the UK is in the longest period of pay stagnation since 1855 (The Economist, twenty-fifth Oct 2014). I will discuss the impact of falling reward on the villainy roll by victimisation an sparing supply and demand framework and comparing my findings to real evidence from UK data. some(prenominal) Becker (1968) and Freemans (1999) work make the assumption that criminals ar coherent economical agents and hence criminal activity can be exerciseled using a supply and demand framework in the same path one could a goods or services market.Economic theory states that the supply of criminal offense depends on four components potential earnings from committing a boffo iniquity (Wc), probability of being caught (p), level of penalty (S) and betroths pull in from legitimate work (W). This can be show upn in the following dissimilarity(1-p)U(Wc)-pU(S)U(W)The left hand side represents the potential net benefit gained from committing the annoyance and the right hand side shows the utility of legitimate earnings. So the someone will commit a hatred if the net benefits of committing the iniquity pass away the benefits of legitimate work.These factors which yield whether an individual decides to commit a crime or not can be aggregated to create the following federal agency for Criminal Participation (CP)CP=f (Wc, P, S, W).The demand function of crime describes how the level of crime in society falls as individuals take increase preventative measures (Cook, 1986) and therefore, the demand curve is downward sloping. However, the level of demand for committing crimes varies depending on the type of criminal activity undertaken. Freeman (1999) differentiates amid victim little and victims crime suggesting that victimless crime carries obvious economic gain, e.g. traffic drugs, whereas victims crime has no obvious economic benefit e.g. violent crime. However, the downward sloping demand curve for victims crime is less intuitive so most work focusses on victimless crime. It is worth(predicate) noting that one of the limitations of this supply and demand model in analysing crime rate is that it does not take into account non-economic incentives i.e. the feeling of doing wrong versus earning an honest living.Having discussed how to model crime using supply and demand abbreviation, I will right away use these economic tools to illustrate a situation where wages are falling.If wages from legitimate work (W) fall, the supply curve will moorage outwards since the opportunity represent of crime has fallen. apply the inequality antecedently discussed ((1-p) U(Wc)-pU(S)U(W)), if legitimate earnings (W) fall, assuming ceteris paribus, the benefits of committing the crime are relatively high-pitcheder(prenominal). thereof more people will be willing to commit crimes. This is shown in Figure 1 as the shift from CP1 to CP2.Cantor and Land (1985) vociferate this the motivation effect.As shown here, the outward shift of supply of crime (CP1 to CP2) results in an increase in the amount of crime committed (Q1 to Q2).However, there is as well a fall in potential earnings from crime (Wc1 to Wc2) if wages fall, the value of consumer goods being bought is likely to fall so there are less valuable goods available to steal. This is the chance Effect (Cantor and Land, 1985). So the fall in wages could actually keep down the crime level.It is uncontrollable to bore-hole which effect, Opportunity or Motivation, is stronger. One factor which could affect this is whether low or high wages are falling. Machin and Meghir (2004) make this distinction by analysing the 25th wage percentile to capture lower skilled workers whose opportunity cost of committing is lower (Freeman, 1999). Machin and Meghir use data from England and Wales (1975-1996) and focus on vehicle and airplane propeller crime as these are more likely to be compulsive by economic incentives than e.g. violent crimes.Figure 2 shows the relationship between the level of wage result in an economy and the level of crime. The stringent proximity of the points on the graph to the regression line (calculated using a weighted least squares regression) shows a relatively strong negative correlational statistics between the variables an d the slope of the regression line gave a value of -1.580 hence, as the 25th percentile wage rises by 1%, the property crime rate is expected to fall by 1.580%.Machin and Meghirs work supports the theoretical analysis that falling wages leads to higher crime rates for low paid workers. Therefore if low wages fall, the Motivation effect exceeds the Opportunity effect.We can also look at more recent wage and crime data from the UK to try if it supports the conclusion, that falling wages leads to higher crime rates, drawn from supply and demand analysis. As shown in Figure 3, there has been a downward trend in the real wage rate in the UK since the financial crash in 2007, real wage growth was around 10% but this has fallen to -9% by 2014.Using economic theory, it is evident that if real wages fall, then assess tax revenue make by the government is likely to decrease through e.g. lower income tax revenue. Moreover, if people piddle lower earnings, governments spending in transfer payments e.g. benefits is likely to rise. The situation of falling tax revenue and higher demand for public services has led to a worsening compute balance so the Coalition government adopted austerity measures.This has alter many areas of public sector spending, including the police force where there do been 2.5bn in budget cuts since 2011, and an estimated 70% of these cuts have been in officer cuts (BBC News, twenty-second July 2014). This leads to a fall in the probability of being caught (P) and severity of punishment (S), since severe punishments are typically more expensive. The effects on P and S are second round effects derived from falling wages. Using the CP function, one would expect that if P and S fall there is a rise in crime.However, national crime statistics demonstrate a step-down in the level of crime in the UK (figure 4)So it is evident that crime has been falling since around 1995 as shown by the Crime Survey for England and Wales (CSEW) data estimate. Since the financial crash, crime has fallen from around 10.5 billion in 2008/2009 to 8.5 million in 2012/2013. This contradicts the conclusion made using supply/demand analysis that falling wages leads to higher crime rates. However, David Cameron argues that remaining policemen have been asked to do more with less resources and they have performed royally (Gill, 2013). However, critics argue that there are other factors which have reduced crime statistics.Gill (2013) points towards technological advancements as a significant reason for a falling crime rates. Firstly, car manufacturers are able to include central locking systems which makes it more difficult for criminals to break in. Secondly, car break-ins are typically a starter crime leading onto more serious crimes such as drug dealing if fewer people are getting involved in crime at this lower level then there will be less crime overall. Thirdly, Gill (2013) highlights the way crime is reported as being a problem since there has been growth in online and high tech crime, for example, online credit card fraud, which is not taken into account in the CSEW crime statistics.Therefore, the second round effects, that falling wages/tax revenue force governments to cut police funding results in more crime, whitethorn not be felt since technological advancements have resulted in less (reported) crime.That said, the Ministry of Justice (MoJ) made a statement (2010) explaining how it planned to stabilise the account of prisoners until 2014/2015 and after this it would look at reducing the number by 3000 fewer than the figure as of nineteenth November 2010 (85,393). So while austerity measures have been implemented by the government, the severity of punishments has yet to fall significantly this may be another reason why the crime rate did not increase whilst wages have been falling. It will be interesting to see whether going forward now crime rates increase since the MoJ is aiming to reduce the number of prisoners.I n conclusion, it is evident that a supply and demand framework to model the effect of falling wages on crime cannot amply explain the situation we are currently in. In all fairness, Machin and Meghirs work did support these findings, however more recent wage and crime data has contradicted the expected outcome. Therefore, although using a supply and demand framework can explain the impact of falling wages on crime to an extent, other factors, such as technological developments, may also influence the crime rate and policymakers who are trying to tackle crime request to ensure these other factors are also taken into account.BibliographyAristotle (350 B.C.E.) Politics. Translated by B. Jowett. 1999. Kitchener Batoche Books.Becker, G. (1968) Crime and Punishment An Economic Approach. diary of Political Economy, 76 (2) 169-217.Becker, G. (1992) The Economic air of Looking at Life. Nobel Prize transcript, Wednesday 9th December, open from http//www.nobelprize.org/nobel_prizes/econom ic-sciences/laureates/1992/becker-lecture.pdf Accessed 18th November 2014.Blunt, C. (2010) Imprisonment for populace Protection. House of Commons Debate transcript, Tuesday 23rd November, Available from http//www.publications.parliament.uk/pa/cm201011/cmhansrd/cm101123/debtext/101123-0001.htm Accessed on 20th November 2010.Cantor, D. and Land, K. C. (1985) Unemployment and crime rates in the post-World War 2 united States A Theoretical and Empirical Analysis. American Sociological Review, 50 (3) 317332.Cook, P. J. (1986) The take and Supply of Criminal Opportunities. Crime and Justice, 7 1-27.Crime in England and Wales every quarter Bulletin. The Office of National Statistics online, 19th July 2012. Available from http//www.ons.gov.uk/ons/dcp171778_273169.pdf Accessed 16th November 2014.Dolphin, T. (2014) Bleak figures show a relentless slide towards a low-pay Britain. The Observer online, Sunday 19th October. Available from http//www.theguardian.com/business/2014/oct/18/economy- bleak-british-workers-technology Accessed 18th November 2014.Ehrlich, I. (1996) Crime, Punishment and Market for Offenses. The Journal of Economic Perspectives, 10 (1) 43-67.Freeman, R. (1999) The Economics of Crime. In Ashenfelter, O. and Card, D. (ed.) Handbook of Labour Economics, 3. Amsterdam, Netherlands northeast Holland Publishers. pp. 3530-3571.Gill, M. (2013) David Cameron is wrong falling crime rates are not because of the magnificent police. New Statesman online, Thursday 18th July. Available from http//www. tidingstatesman.com/politics/2013/07/no-david-cameron-falling-crime-rates-are-not-because-magnificent-police Accessed on 17th November 2014.Machin, S. and Meghir, C. (2004) Crime and Economic Incentives. The Journal of Human Resources, 49 (4) 958-979. law forces in England and Wales rise to the cuts challenge. BBC News online, 22nd July 2014. Available from http//www.bbc.co.uk/news/uk-28415123 Accessed 18th November 2014.Real Wages What Recovery?. The Economist onlin e, 25th Oct 2014. Available from http//www.economist.com/news/britain/21627665-workers-continue-feel-pinch-what-recovery Accessed 18th November 2014.