Crime and Hand Unemployment Rate Essay Example

in crime rates.

The determining factor for crime rates are wage inflation and unemployment. When inflation occurs, many people are employed that result to a lowest possible crime rates. But as unemployment occurs, there is a wage deflation that’s why people are committing different criminal activities.

Background of the Study

The National Capital Region (NCR) is the center of Luzon, also called as Metro Manila, is often and considered as the political, economic, social and cultural center of Philippines. It is subdivided into 17 local government area- 16 cities and is municipalities.

Metro Manila is a region in the Philippines that is populated by different cultural groups from all over the country. The primary language spoken here is Tagalog, but English is also widely used. As the country's main business hub, Metro Manila offers various transportation options, housing and commercial infrastructure, communication services, power supply, and recreational facilities. It proudly showcases world-class malls and commercial centers. With a total land area of 6,3610 square meters, Metro Manila encompasses residential, industrial, institutional, agricultural areas as well as unclassified public forests.

The population of the region was 10,492,000 in 2000 and increased to over 13 million during the daytime due to a large workforce residing nearby but working in the city. Crime is seen as a problem in the national capital region, providing an opportunity for impoverished individuals to obtain material goods they can't get legally. Crime has been present since the beginning and still disrupts people's lives. The main factors determining crime rates are inflation and unemployment rates. Conversely, all eight regions experienced an increase in unemployment rate, with NCR having the

highest increase.

The population of the region was 10,492,000 in 2000 and rose to more than 13 million during daylight hours because many workers who live nearby commute into the city. In this national capital region (NCR), crime is viewed as an issue that allows economically disadvantaged individuals to acquire goods illegally. Crime has persisted from early on and continues to negatively impact people's lives. Key factors influencing crime rates include inflation and unemployment rates. Interestingly enough, all eight regions encountered a rise in unemployment rate; however, NCR exhibited the largest increase.

The unemployment rate in NCR rose from 19.7% to 22.5% compared to the previous year, and the inflation rate increased from 144 to 148.4%. In addition, the index crime rate in NCR slightly increased from 80.2% to 81.

The devaluation of labor through inflation results in the depreciation of money, leading to a loss of our hard-earned wages. Unemployment worsens this problem as individuals feel that their work is being unfairly taken away. Consequently, crime rates may rise as people are more likely to participate in illegal activities under these circumstances.

Theoretical Framework

The subject matter of the study will be clarified by the following theories.

There are two theories mentioned in this text: the Philips curve and rational choice theory. The Philips curve, introduced by A. W. Philips in 1958, describes an inverse correlation between unemployment rates and the rate at which wages increase. Essentially, as unemployment rates rise, wage inflation decreases.

The Philips curve illustrates a trade-off between wage inflation and unemployment, showing that as the employment rate decreases, the rate of wage inflation also decreases. As wages increase, prices rise, leading to full employment and

low unemployment in the economy. This relationship can be observed by comparing current wage levels to past levels using the equation for wage inflation. Rational Choice Theory is a social science approach used to understand human behavior, widely applied in disciplines such as Economics, Sociology, Political Science, and Anthropology. Various authors have discussed extending the rational choice approach beyond economic issues. Rational choice theory is the main theoretical framework in contemporary microeconomics.

The concept of rationality is widely used in various disciplines such as microeconomic models, political science, sociology, and philosophy. In microeconomic analysis, rationality refers to individuals' behavior and is also known as instrumental rationality. It focuses on finding the most effective means to achieve a goal without considering its value. Gary Becker, an early advocate of rational actor models, was awarded the 1992 Nobel Memorial Prize in Economic Sciences for his research on discrimination, crime, and human capital. However, it's important to note that the definition of "rationality" in rational choice theory differs from its colloquial and philosophical interpretations. While many people associate sanity and thoughtful decision-making with rationality, rational choice theory defines it more narrowly as balancing costs and benefits to maximize personal advantage.

Rational choice theory suggests that the thought process behind all decisions, whether rational or irrational, is alike. It focuses on how desires are expressed within particular social or economic contexts. However, this theory does not explore the origin, nature, or validity of these desires. Nor does it consider the biological, psychological, and sociological factors that influence individuals' motivations for actions like kissing someone, cheating on a test, using cocaine, or committing murder.

Strict rational choice theory does not consider a criminal's

self-punishment through remorse, guilt, or shame and their impact on the costs of committing a crime. It also fails to take into account an individual's moral or ethical values in decision-making. Some economists restrict the application of rational choice theory to studying business behavior due to its limited understanding of consumer motivation. Regardless of the specific models used, all variations within this theory assume that individuals make choices based on consistent preference functions and constraints. Additionally, most models incorporate other assumptions.

While the rationality assumption may not be verifiable or falsifiable, it is a tautology that fails to explain individual goals. However, certain models derived from this assumption can be empirically tested. In recent years, behavioral economics experiments have cast doubt on the theoretical framework of rational choice theory. As a result, concepts of bounded rationality are now embraced by social scientists in fields like economics, political science, and sociology to acknowledge the challenges associated with data-processing and decision-making. Currently, economists are increasingly looking to disciplines such as psychology for a more precise understanding of human decision-making compared to what rational choice theory provides.

Other social sciences, such as sociology and political science, have also embraced economics due to its success in understanding markets. This adoption has had significant effects on political science, particularly in areas like interest group research, elections, behavior analysis in legislatures, coalitions, and bureaucracy.

Models that are based on rational choice theory frequently utilize methodological individualism as a foundation. They assume that individual actions alone determine social situations or collective behaviors without considering larger institutions. However, the limited use of rational choice theory in sociology can be explained by the discrepancy between sociological perspectives

on social situations and rational choice theory.

Sociology emphasizes how social institutions shape individual tastes and perspectives while rational choice theory assumes that these factors are fixed and unexplainable.

The Conceptual Framework

The study's conceptual framework outlines the flow of research.

This study utilized a closed-system approach, with a system consisting of three frames: input, process/operation, and output. The first frame, the input, includes the independent variables of inflation rate and unemployment rate as determinants. These variables are considered determinants because inflation diminishes the value of money, making it more difficult for individuals to survive and causing their hard-earned money to be misused and destroyed. Inflation also leads to an increase in crime rates among citizens. As a result, the dependent variable chosen for this study is the index crime rate. The second frame, the process, involves the researcher implementing multiple regression analysis as the method to be used.

This method serves as a statistical technique that demonstrates the individual effects of multiple explanatory variables as a single variable. The third frame displays the study's potential outcome resulting from the researcher's process, specifically analyzing the impact of inflation and unemployment rate on the index crime rate.

Feedback

The arrow illustrates the flow of information in the research paper. The feedback loop establishes a connection between the input, process, and output, enabling a continuous system.

The field of economics has analyzed the factors contributing to criminal behavior, both theoretically and empirically. This study aims to provide credible information on how inflation and unemployment rates impact the crime rate index. Our research aligns with the expanding economic literature on crime, offering insights for this specific investigation. As researchers, we will gather data to analyze this

topic and explore potential solutions that others can rely upon. The study is expected to offer valuable information for individuals and organizations, especially residents of the National Capital Region who will become aware that economic issues like inflation and unemployment can lead to crime. Policy makers will also benefit from this study as it can serve as a basis for implementing measures to reduce inflation, unemployment, and crime rates, particularly related to property crimes such as robbery and theft. It is recommended that policy makers prioritize stabilizing the economy since it significantly influences changes in the crime rate. Additionally, this study will contribute relevant information on how the government investigates economic problems, enhancing understanding among economics students.

This study is a valuable resource for researchers, specifically in the field of economics. It aims to explore how wage inflation and unemployment rate affect the index crime rate. The research will be conducted in the National Capital Region (NCR) from 1989 to 2008. A statistical model will only examine certain potential factors that influence crime while excluding others.

The study utilizes time series observation to measure the two economic conditions of real wage and unemployment alongside crime. Secondary data from reliable sources such as the Philippine Statistical Yearbook, National Statistical Coordination Board, and National Statistics Office will be used to obtain accurate data on real wage and unemployment. It is important for the researcher to rely on these credible and informative resources to ensure a credible research study. The study also provides a definition of crime as the violation of rules or laws that can lead to a conviction by a governing authority through legal systems.

Crime differs among societies,

with some acts being illegal but not considered crimes. Breaches of civil law may be classified as "offences" or "infractions". In contemporary societies, crimes are typically seen as offenses against the public or state, distinguishing them from torts which involve offenses against private parties and can result in civil lawsuits. The crime rate indicates the proportion of crimes in a specific area relative to its population, usually expressed as per 1000 population per year. Source

Crime rate is the term used to describe index crimes, which are violations of the penal code that have socio-economic significance and occur regularly enough to be significant. These violations include crimes against individuals such as murder, homicide, physical injury, and rape, as well as crimes against property like robbery and theft.

All crimes, except non-index crime, are considered non-index crime. Inflation refers to the increase in the overall price level of goods and services in an economy over a specific period. This results in a decrease in the purchasing power of money and a loss of real value within the economy's internal medium of exchange and unit of account. The inflation rate is an important measure of price inflation, representing the annualized percentage change in a general price index (usually the Consumer Price Index) over time. The Phillips curve shows a historical inverse relationship between unemployment rate and inflation rate in an economy - simply put, when unemployment is low, inflation tends to be high. However, this short-term trade-off between unemployment and inflation does not hold true in the long run.

The term wage refers to financial compensation received by workers in exchange for their labor. Employees, on the other

hand, receive compensation in the form of salary. Wage Rate is the rate of pay based on per unit of production or per period of work time on the job. Real wages, which are adjusted for inflation, are contrasted with nominal wages or unadjusted wages. Unemployment refers to the state of being able and willing to work but currently without work.

The prevalence of unemployment is typically calculated using the unemployment rate, which is defined as the percentage of individuals in the labor force who are without a job. The unemployment rate represents the percentage of the overall labor force that is actively seeking employment and willing to work.

Chapter II Review of Related Literature Studies

This chapter offers a more comprehensive comprehension of the impact of inflation and unemployment rate on the index crime rate. By utilizing relevant literature and studies, researchers can gain a better understanding and perspective on the current issue.

Foreign Literature

The literature on Economics of Crime originated from the groundbreaking contributions made by Becker (1968) and Ehrlich (1973). In 1968, Becker published a paper that revolutionized the understanding of criminal behavior. He was the first to develop a model that focused on the choice of criminal activity, emphasizing the financial and other incentives criminals receive compared to legal employment. This model took into account the likelihood of getting caught and convicted, as well as the severity of punishment. Becker's paper paved the way for a new field of empirical research, which aimed to examine and analyze the socioeconomic factors that influence crime. Since then, numerous empirical studies have been conducted to test the predictions of the Becker-Ehrlich model

and investigate whether the impact of unemployment on crime rates is significant. Despite extensive research, scholars have not been able to reach a consensus on whether higher levels of unemployment lead to an increased incidence of crime.

In the literature survey conducted by Box (1987), 35 reliable studies were examined. Out of these, 20 studies found a positive correlation between unemployment and crime, whereas the remaining studies did not find any such relationship. Steven D. Levitt, the renowned author of "Freakonomics," sheds light on the decline in crime in his article titled "Understanding Why Crime Fell in the 1990s: Four Factors that Explain the Decline and Six that Do Not." He agrees with Becker's belief that advancements in labor market opportunities have a significant impact on crime if there is a financial motive to commit it. Levitt further states that a "one percent increase in the unemployment rate leads to a one percent increase in property crimes," highlighting the prevalent use of double-log regression in previous studies.

However, the author emphasizes that the economy has the most impact on crime through increased spending on police and prisons in state and local government budgets. The threat of execution and increased gun control laws have no effect on the decline in crime. The author's research shows that the increase in police force, prison populations, the crack epidemic, and controversial legalization of abortion are the four factors that explain the decline. The economics of crime is closely linked to various fields such as sociology, criminology, psychology, geography, and demography. It is connected to poverty, social exclusion, wage and income inequality, cultural and family background, level of education, and other economic

and socio-demographic factors that can influence an individual's likelihood to commit crime, such as age, gender, and urbanization. This has led to the emergence of a new field of investigation called economics of crime, as criminal activities have rapidly increased in many Western and Eastern countries. There is abundant literature available on the relationship between crime and its main determinants in countries like the United States, United Kingdom, Germany, and Italy.

Some studies have analyzed the determinants of crime in Latin American countries like Colombia and Argentina, such as Buohanno (2003). Previous research has found that violent crime, as opposed to burglary and theft, tends to increase during good times. This overall trend may be due to the disregarding of other factors that contribute to crime rates. One of these factors is alcohol consumption, which tends to be higher during prosperous periods but is a significant factor in various types of crime.

And there are additional factors that need to be considered when analyzing overall crime statistics. One such factor is the relationship between crime and unemployment, as crime can also contribute to higher levels of joblessness. The authors refer to this as the ‘scarring effects effect of incarceration or a greater reluctance among the criminally initiated to accept legitimate employment…’ When these statistical issues are properly addressed by the authors, they discover that unemployment has a positive impact on both property and violent crime.

Local Literature

Despite some improvement in law and order, crime continued to be a significant issue until the end of the 1980s. Police attributed the country's persistent crime problems to various social and cultural factors. Widespread poverty and

rapid population growth were frequently mentioned. The migration of people from rural areas to cities due to population pressures, limited land, and job shortages was commonly cited as a cause for increased crime rates.

According to the police, serious crime increased from around 250 crimes per 100,000 population in 1979 to approximately 310 crimes per 100,000 population during the years 1984 to 1987. However, it declined in 1988 and 1989. In 1988, the crime rate dropped below 300 crimes per 100,000 people and further decreased to 251 crimes per 100,000 citizens in 1989. Comparing Philippine crime rates to those of other countries was challenging due to varying reporting practices and degrees of coverage. Government officials credited improved police work for the decrease in crime, but economic conditions also played a significant role. The deterioration in law and order in the early and mid-1980s coincided with a worsening economy, while the improvement in the late 1980s aligned with renewed economic growth under Aquino.

Not surprisingly, crime rates were highest in major urban areas, where unemployment was the highest. Regionally, peninsular southern Luzon, the western Visayan islands, and portions of Mindanao--impoverished rural areas where insurgents were active--had the most criminal activity in the mid-1980s.

Foreign Studies

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 they 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 categories. A study by the Heritage Foundation found that "For every 1 percent increase in civilian labor force participation, violent crime is expected to decrease by 8.8 incidents per 100,000" people.

In summary, studies have shown a correlation between employment rates and violent crimes. A survey conducted by the Bureau of Justice Statistics found that a significant percentage of state and federal prisoners were unemployed at the time of their arrest in 1991. Researchers analyzing crime and unemployment rates between 1979 and 1993 determined that the unemployment rate among non-college-educated men accounted for a considerable portion of the rise in property crime and violent crime during that period. Previous research has consistently shown that violent crime tends to increase during prosperous times.

There are various factors that contribute to overall crime rates, and alcohol consumption is one significant influence. Despite being more common during prosperous times, alcohol consumption is closely linked to crime rates of all types. Additionally, there are other important factors that need to be considered when examining overall crime statistics, such as the relationship between crime and unemployment. It has been observed that crime can lead to joblessness, a phenomenon referred to as the 'scarring effects effect of incarceration or a greater reluctance among the criminally initiated to accept legitimate employment...'. After accounting for these statistical issues, the authors discovered that unemployment has a positive impact on both property crime and violent crime rates. The study utilized data from the FBI's Uniform Crime Reports in the United States between 1970 and 1993.

According to the authors, the data is categorized by different types of crime and is also adjusted for poverty and demographic

factors. The authors highlight that during the period from 1992 to 1996, when unemployment was decreasing, there was a significant decrease in all types of crime. They suggest that if job opportunities were improved for unemployed individuals, especially in inner cities, crime rates would decline further. A study conducted by Fleisher (1966) examined how income influenced individuals' decisions to engage in criminal activities.

The author explains that the main reason for believing that low income individuals are more likely to commit crime is because the potential consequences of getting caught are perceived as being relatively insignificant. This is due to the fact that individuals with low income have a negative outlook on their legitimate earning prospects throughout their lives, so they believe they have little to lose in terms of potential earnings by acquiring criminal records. They also believe that the opportunity cost of engaging in delinquent activities or spending time in jail is relatively low. Becker (1968) introduced a model focused on weighing costs against benefits.

His approach is based on the analysis of expected utility, which suggests that people will commit crimes if they believe it will bring them greater benefits than other activities. Ehrlich (1973) argues that unemployment affects crime rates by reducing the income opportunities available in the legal labor market. As a result, increasing unemployment rates lead individuals to engage in criminal activities. Fajnzylber et al. (2002) demonstrate through simple correlations, OLS regressions, and dynamic Generalized Method of Moments (GMM) for panel data that there is a positive relationship between income inequality and crime rates.

Lee (2002) investigates the association between labor market conditions and crime rates in three Asia-Pacific countries: Australia,

Japan, and South Korea. The study utilizes Johansen maximum likelihood cointegration and Granger causality tests on time series data to determine whether a long-run equilibrium or causal relationship exists between unemployment and crime variables. The findings demonstrate strong evidence of a long-run equilibrium relationship between unemployment and various types of crime. In a separate study, Coomer Nicole (2003) explores the impact of macroeconomic factors on crime.

In his analysis, he utilized OLS regression to examine the findings. Initially, he included various independent variables such as unemployment, poverty, prison population, high school and college education levels, and income disparities. He conducted the regression to establish the relationship among these variables. Then, he removed the insignificant variables and reran the regression. The subsequent analysis revealed that unemployment, inflation, and poverty positively affect crime rates.
Gumus (2004) conducted an empirical study using OLS regression technique on a dataset comprising major cities in the US. The study aimed to investigate the determinants of crime in urban areas. The findings indicate that income inequality, per capita income, and the presence of a black population all play significant roles in determining crime rates in urban areas.

The impact of unemployment rate and police expenditures on crime is also significant. According to Teles (2004), the effects of macroeconomic policies on crime were investigated. It was discovered that fiscal and monetary policies have an influence on crime. The findings reveal that fiscal policies impact crime through government spending, while monetary policy affects crime through inflation. In the Philippines, a developing country, crimes are not uncommon. Newspapers and television news frequently report various forms of misconduct such as murder, rape, theft, robbery, and more.

Crime volume, measured as

the number of crime incidents per 100,000 population, has been fluctuating over the last four years. In 2000, it reached 80,108 incidents, while in 2001 it decreased to 76,991. However, in 2002 it rose to 85,776 and slightly decreased to 83,704 in 2003. As for the period between January and November of 2004, the total crime volume recorded is 8 incidents.

There was a 5% decrease in crime compared to the same period last year. Of the total crime volume, 55% were index crimes and the remaining were non-index crimes. The crime rate for January to November 2004 was 7.84 per 100,000 population, which represented a decrease of 10.2% compared to the previous rate of 8.

There has been a decrease in the crime rate for the same period in 2004 compared to 2003, with a decrease of 1.3%. The overall crime solution efficiency has also decreased from 91.19% in January to November 2003 to 90% in January to November 2004. The National Capital Region (NCR) had the highest total crime volume, accounting for 23.5% of the total crime volume nationwide. The highly urbanized cities of Quezon, Manila, and Caloocan had the highest prevalence of crimes in the metropolitan area.

From January to November of 2004, the recorded volume of index crime was 39,400. This year, it stands at 39,126, indicating a reduction of 0.70%. Among the classification of index crimes, 57% are crimes against persons, while 43% are crimes against property.

Among the 17 regions, NCR recorded the highest volume of index crimes. Index crimes, including murder, homicide, physical injuries, rape, robbery, and theft, were prevalent in Quezon City, Manila, and Caloocan City. The number of theft

cases last year was 9,033, but this year it rose significantly to 9,892 incidents.