The Social Impacts of Recession

1
The Social Impacts of Recession

• Andy Green
• Centre for Learning and Life Chances in Knowledge
  Economies
• and Societies (LLAKES), Institute of Education
• Presentation to ESRC/Treasury Seminar
• 29.09.09

2
Constraints on Analysis

• Precise estimates of the social impacts of
  recession are difficult
• Many social effects may not yet be visible
• Social impacts often lag substantially behind
  labour market effects of recession which, in
  turn, lag behind economic crises.
• Social impacts vary across countries (not least
  due to policy responses)
• Regions in the UK are very unevenly affected
• There is no uniform pattern in past UK recessions
  (mid 70s, early 80s, early 90s, early 2000s) to
  use as a guide.

3
Impact of Rising Unemployment on Health

• Some studies suggest that recessions can lead to
  health gains by encouraging people to engage in
  fewer unhealthy activities such as
  overconsumption of food and alcohol. Traffic
  fatalities can go down if fewer people can afford
  to drive.
• However, research suggests rising unemployment
  can contribute to
• mental health and addiction problems
• the adoption of less healthy lifestyles (more
  consumption of cheap food, and alcohol and
  nicotine due to stress)
• heart attacks
• poor disease management due to overburdened
  health care services.

4
Impacts on Health and Crime

• Stuckler et al (Lancet 2009) looked at the
  effect of rising unemployment on health in 26
  countries, 1970 2007, using age-standardised
  and age-specific mortality data, and correcting
  for population ageing, past employment and
  mortality trends.
• The research only looks at effects within three
  years so may underestimate total effects.

5
Effects of Unemployment Rises on Health and Crime

• No overall effects on mortality rates.
• Rise of 1 in unemployment rates associated with
  
• 0.79 rise in suicides at ages below 65 yrs
• 0.79 rise in homicides
• 1.39 decrease in road traffic deaths.

6
Effects of Unemployment Health and Crime 2

• 3 increase in unemployment associated with
• 4 more suicides
• 6 more murders
• 28 increase in deaths from alcohol.
• Heart attacks only increased for 30-44 yr olds.

7
Crime and Recession

• Mixed results from earlier research on economic
  conditions and crime. Recent research finds more
  consistent patterns, using measures of economic
  output and perceptions of economic conditions,
  rather than unemployment (Arvanites and Defina,
  2006 Gould et al, 2002 Grogger, 1998 Resfeld
  and Fornage, 2007).
• Rosenfelds (2009) study of property crime and
  homicide in USA 1970-2006
• Measures for unemployment rates, GDP pc and index
  of consumer sentiment (controlling for
  demographics, age and race, and policing and
  sentencing) are correlated with each other and
  with both acquisitive crime and homicide.
• Economic crisis increases acquisitive crime and
  this in turn increases homicides by exposing more
  people to risky and lawless situations.

8
Mitigating Effects of Social Policy

• For every US 10 more investment in ALM policies
  there was a 0.038 lower effect on suicide rates
  of people under 65 across countries (Stuckler et
  al).
• At US 190 pc rises on unemployment had no
  adverse effects on Suicide.
• Both Finland and Sweden saw suicide rates drop in
  early 1990s despite rapid rises in unemployment.
  Stuckler et al put this down to better
  unemployment protection.

9
Recent Crime Trends in the UK

• The latest British Crime Survey (Dec 2008)
  reports a 25 increase in Thefts from the Person
  but cannot tell us much about trends since the
  first labour market effects of the recession
  (2008 Quarter 2) since data includes crimes going
  back to December 2007.
• The most recent Police Recorded Crimes data (for
  October to December 2008) post-dates labour
  market changes. Compared with the same period in
  2007 total recorded crime had continued to fall
  but certain categories of crime have increased
  (Domestic Burglary up 4 and Drugs Related up
  6).
• Substantial rise for Fraud and Forgery (up by 5
  on previous year) with a 16 rise year on year in
  previous quarter.
• One might expect to see a rise in ethnically and
  religiously related crime but this was not
  visible for data in 2008.

10
Percentage Change in Numbers of Recorded Crimes,
Oct to Dec 2008, Compared with Same Quarter in
Previous Year. (Home Office Statistical Bulletin
April 2009)
11
Effects of Recession on Social Cohesion

• Lack of annual data on the main measures of
  social cohesion (trust in other people and
  institutions, tolerance etc) makes it difficult
  to match trends in these measures with recession
  indicators.
• However, various indicators of social cohesion
  (trust violent crime) co-vary with income
  inequality across countries.
• If recession leads to further rises in inequality
  we may impute that trust in others and in
  institutions is likely to drop further.

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Trends in Interpersonal Trust Percentage
saying most people can be trusted
Sources Almond and Verba (1963) and World Values
Survey Waves 1-5
13
Trends in Institutional Trust Percentage
expressing a great deal quite a lot of
confidence in parliament. Source WVS
14
Trends in Ethnic Tolerance Percentage not
objecting to having immigrants / foreign workers
as neighbours (Source WVS)
15
Trends in Turnout in Parliamentary Elections
Proportion of eligible voters
voting (Source International Institute for
Democracy and Electoral Assistance)
16
Income Inequality and Interpersonal Trust
(Source World Bank and WVS)
Correlation r -.38 p .044 N 28
17
Inequality and Violent Crime
Violent crime no of homicides, rapes and
robberies per 100.000 Data from
Interpol Correlation r .71 p .000
N 24
18
Trends in Household Income Inequality the UK

• Household income inequality rose for the
  third successive year to 2008/9 and is now at the
  highest level since 1961when the current series
  began (IFS, 2009).
• It is hard to predict the future trend. Past
  experience of recessions suggests no clear
  pattern.
• Inequality declined during mid 1970s recession
  (when top rates taxes were at 70) rose during
  the early 1980s recession (when top rates taxes
  were brought down) and remained stable during
  early 1990s recession.

19
Real Income Growth in GB by Quintile Group
2007/7 2007/8 (Source IFS, 2009)
20
Trend in Income Inequality by Ginis, 1961 to 2007
(Source Muriel and Sibieta, IFS, 2009)
21
Factors Affecting Future Trend

• Reduced incomes from property and other
  investments, along with moderation in pay and
  bonus payments at the top end, would tend to
  reduce inequality. However data from 2008
  suggests salaries and bonuses of highest earners
  still rising (Pirc and Railpen, 2009)).
• Unemployment is hitting younger people and the
  less educated and lower paid the most. This will
  tend to increase inequality.
• Future cuts in public services likely to impact
  most on those below average incomes, on some
  estimates (IFS) increasing unemployment by at
  least another million.
• If earnings at the top are brought down,
  overall inequality may decline or remain stable.
  If they do not, inequality is likely to increase.

22
Unemployment Growth (Claimant Count) by
Occupation, March 2008 March 2009 (Source
Muriel and Sibieta, IFS, 2009)
23
Unemployment Growth by Education Group, 2005-8.
(Source Muriel and Sibieta, IFS, 2009)
24
Effects of Recession on Social Cohesion Depend
on Policy

• Historical examples suggest that recessions
  produce very different mid- and long-term effects
  on social cohesion in different political
  contexts.
• The 1930s depression contributed to the eclipse
  of democracy in much of continental Europe. In
  the US the long term effect was to strengthen
  democracy and civil society.
• The New Deal is often credited with ushering
  what Putnam calls the Golden Age of social
  capital in the US.

25
Likely Effects of Recession on Social Cohesion

• In the absence of more policy interventions to
  mitigate inequality, the current recession in the
  UK seems likely to exacerbate many negative
  aspects of social cohesion, reinforcing the
  downward trend in trust and tolerance.
• We are already seeing evidence of growing
  intolerance in some areas.
• Growing support for BNP and England Defence
  League .

26
Long-Term Erosion of Trust

• Trends in level of social and institutional
  trust are of particular concern (not least
  because they are good predictors of GDP growth
  and well-being). Trust is likely to have declined
  to historically low levels even before the
  recession.
• The effect of recent revelations about MPs
  expenses and financial abuses will almost
  certainly have reduced public trust further. (cf
  Recent Guardian/ICM poll showing only 14 believe
  the government is telling the truth about the
  current financial situation).
• Further rises in inequality, and perceptions
  that ordinary people are unfairly carrying the
  burden of the financial problems caused by
  financial speculators, could reduce trust in
  Britain to levels normally associated with Latin
  American countries.

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Policy Implications

• Priority must be given to reversing the long run
  increase in inequalities in income (and wealth),
  which stifle mobility, and to mitigating the
  adverse social effects of unemployment.
• Active Labour Market policies have been shown to
  reduce income inequalities (Nickell and Layard,
  1998) and to reduce adverse health effects of
  unemployment. These must be targeted equally at
  young and older people alike.
• Enhancing trust requires a long-term cultural
  shift that can only be achieved by restoring
  public perceptions of fairness.
• Requires effective measures to curb excessive
  earnings at the top (Changes in Corporate
  Governance?) and to re-distribute some of the
  individual gains from speculation in finance and
  housing (Tobin and Land Value taxes?).