The Cost of Crime on Job Earnings

This blog is a part of our series, “Perspectives in Crime” where we explore leading academic studies that touch on crime data.

Criminological and economic analysis enables researchers and policymakers to view the societal cost of crime, the estimated figures of the time and resources spent by law enforcement and the justice system. While this body of literature has explored the spillover economic effects on offenders and their families, there is a less formally established knowledge of the direct economic impacts on the victims of crime. A recent study by Anna Bindler and Nadine Ketel attempts to fill this gap.

Crime victimization effects on job earnings

The 2022 paper by Anna Bindler and Nadine Ketel, “Scaring or Scarring? Labor Market Effects of Criminal Victimization” published in the Journal of Labor Economics works to shed light on the short- and long-term impact of crime victimization on job earnings, as well as victims’ use of welfare benefits available to them. These two figures help researchers build a sense of the cost of crimes from the perspective of crime victims.

Using crime and welfare benefit data from the Netherlands spanning from 2005-2016, researchers measured and analyzed the economic impacts of assault, threat of violence (including stalking), street robbery, and burglary. As suggested by the paper’s title, researchers were interested in the lasting impact of financial effects from victimization asking, “Are these effects primarily short-term (scaring) or do they reveal a longer impact (scarring)?”

Bindler and Ketel’s results found an immediate negative effect on earnings across all four analyzed crimes. In men, the most significant impact on earnings was associated with robbery (-8.4%) followed by assault (-4.5%), violent threat (-1.3%), and burglary (-1%). Twelve months later, the negative effect on earnings increased for most offenses: -7.5% for assault, -7.5% for violent threats, and -4.3% for burglary. Robbery remained negative but receded to -6%.

Violent crime and welfare benefits: how assault and robbery affect victims

In the Netherlands, individuals can receive welfare benefits in the forms of unemployment, sickness, and disability insurance benefits. Researchers found a relatively mirroring uptick in days of benefit receipt. Assault and robbery produced a sharp increase in benefit days and remained relatively stable for a year. Violent threats and burglary produced a more gradual effect. Offenses of assault and robbery also produced a discernable increase in the usage of Disability Insurance, consistent with researchers’ expectations as both offenses involve violence.

The paper also constructed measures of annual mental health expenditure and total annual health expenditure. With the exception of a short-term increase in mental health expenditures in instances of threat, they observed little overall health cost increases for non-violent offenses for men. Figure 1 shows the Labor Effects of Assault and Burglary on Male victims.

Women’s benefit receipt was similar to male victims but with stronger effects. The immediate increase in welfare benefit receipt was more than twice as large for women as for men. The overall difference in benefit receipt between men and women was driven by welfare. Disability benefits increased for assault and threats, and mental health expenditures also increased significantly following assault and threats. Figure 2 shows the labor effects of Assault and Burglary on Female victims.

Results among women showed stronger losses in income than in men. At 12 months after victimization, women’s lost income from the found observed offenses were robbery (12.9%), followed by threat (-10.4%), assault (-8.8%), and the smallest effect, burglary (-2.6%). These findings excluded the data from the sample that researchers determined to be victimization stemming from episodes of domestic violence.

The impact of domestic violence on women’s earnings

While not a separate crime category in the Netherlands, the dataset enabled researchers to identify assault and threat charges representing domestic violence and run a separate analysis for this crime category. They used register data that showed the victim and perpetrator as having the same address and determined that 21.4% of assaults and 10.1% of violent threats from their sample were domestic violence incidents.

Analyzing the question of domestic violence by gender, researchers did not have enough incidents where men were victimized to generate adequate statistical power for analysis, so they focused analysis on women victimized by persons sharing an address. The results showed an immediate loss of earnings in cases of assault, with more gradual losses accruing in instances of threat — women who experienced a domestic violence assault also experienced an earnings decrease of 8.9% in the month immediately after an assault, further decreasing to 14.4% 12 months after. In the instance of a domestic violence threat, their initial effect was relatively small but grew to 17.9% 12 months after the incident.

The long-term impact of victimization on earnings and disability benefits

Crime literature consistently finds that criminal offending is a life-changing event. Not surprisingly, the work of Bindler and Ketel empirically demonstrates that victimization is also life changing. Their results show significant impacts on both earnings and benefit receipt, lasting up to four years. Offenses involving physical violence show immediate strong labor market effects. Additionally, they involve increases in total health expenditure and increase the likelihood of a victimized individual receiving disability benefits. The labor market effects of non-violent crimes are experienced more gradually, involving medical costs for mental health.

Bindler and Ketel found that labor market victimization impacts are often stronger for women. The researchers’ back-of-envelope calculations estimate that the average accumulated losses within the first year after an assault are 1,476 euros ($1565) for men and 1,743 euros ($1848) for women. They also estimate that the average accumulated losses within the first year for women who have been victims of domestic violence are 1,301 euros ($1380). Combined losses for all four offense types in the first year following victimization add up to an average total of 72 million euros per year.

Bindler and Ketel's research contributes to the nascent literature designed to understand the costs surrounding victimization, to help criminologists, policymakers, and risk professionals understand this facet of the aftermath of a crime. It also helps demonstrate the long-term recovery and rehabilitation journey. Pinkerton’s broad portfolio of services helps organizations understand their risk vulnerabilities and how to keep themselves and their employees safe.