Recessions are known to create higher unemployment rates and lower levels of happiness and income. There is also growing evidence that workers who first enter the labor market during economic downturns suffer from poor job matching that impedes their career progression. But recessions have an even more disturbing effect – they contribute to initiating and forming criminal careers.
In a new IZA Discussion Paper Brian Bell, Anna Bindler and Stephen Machin show that young males who leave school in the midst of a recession are much more likely to become criminals than those who graduate in boom times. These effects are long lasting and persistent.
The researchers discover that entering the U.S. labor market at a time of recession – defined as a 5 percentage points higher than normal unemployment rate – results in a 5.5 percent increase in the probability of being incarcerated at some point over the next two decades. This effect, which is mainly driven by high-school dropouts, is similar in magnitude for the UK.
Even a decade after leaving school, there are strong and positive effects from entry unemployment on arrests, particularly for property crime. In the UK the influence on this sort of crime eventually dies out after 15 to 20 years post-school experience while it remains (and becomes even more significant) for violent crime.