As countries seek to contain it, the coronavirus outbreak is already showing its first effects on the economy, with businesses cutting jobs amid lower demand for several goods and services.
Norway plans to lay off up to 50% of its employees in all areas because of a decline in flights, while the Port of Los Angeles already fired 145 drivers and South by Southwest would lay off a third of its full-time employees — just to name a few.
An increase in the number of people being laid off is not only stressful for many families but can also lead to a growth in criminal activity, according to a recent study, the first one to link the two phenomena.
“Layoffs lead to an increase of criminal charges against displaced workers, while also decreasing their future earnings and full-time opportunities,” Mark Votruba, co-author of the study said.
Trying to understand the link between job losses and criminal activity, Vortuba said a key element was the drastic effect that layoffs have on daily schedules. The rate of crime, both violent and drug and alcohol-related, were much higher during the week than on the weekend, the study showed.
A laid-off worker has incentives to shift the use of time toward illicit earnings opportunities since displacements reduce legal earnings opportunities. At the same time, dismissals lessen the opportunity cost of a worker’s time during the period of unemployment.
“The old adage that idle hands are the devil’s workshop appears to have some truth to it,” said Votruba. “This unfortunate link (to weekday crimes) highlights the importance of psychological factors–such as mental distress, self-control, financial concerns and frustration–in determining counterproductive behavior.”
The findings were obtained by looking at data from over one million laid-off Norwegian workers, 84.000 of which experienced an involuntary job loss. The study found a 60% increase in property crime charges in the year after a downsizing and an overall 20% increase in criminal-charge rates in the year after a layoff.
The researchers said there are no records linking criminal and employment activity in the US. But they claimed there are reasons to believe that the effects of layoffs would be stronger than in Norway due to differences in society.
“Norway has a strong social safety net that makes job loss less painful there than in the US. Both the income and psychological effects of job loss are likely more severe in the US,” said Votruba, a research associate at Statistics Norway during the study.
The study could help policymakers better understand the link between job loss and crime, and consequently work on policies to reduce the costs that layoffs represent of the society. For Votruba, this could mean programs to discourage alcohol and drug abuse among displaced workers.
The study was published in Labour Economics.