How Income Inequality Affects Crime Rates

Category: Financial News

The connection between income inequality and crime rate is a subject that has baffled many social scientists, economists, and even those in the legal and justice systems. This is because of recent developments in the directions of these two issues: in the United States, for instance, crime rate has been on a decline since the 1960s. On the other hand, since the 1970s, income inequality has been soaring.

Experts cite factors such as differences in monetary valuation over time (with references to inflation, purchasing power, consumer price index), and the faster expansion in wealth distribution gap in the last few years.

On the enforcement side, expansion and modernization of the police force, improved apprehension system, stricter implementation of punishments, changes in legal and justice systems, and general advancements in education, values and societal norms and conducts account for the lesser crime rate. There are also negative factors involved such as low crime reporting and undocumented offenses.

Income Inequality as Determinant of Crime Rate

How big is income inequality or financial deprivation as a determinant of crime rate? In studies where economic data are isolated and solely used, the connection seems to be overwhelming.

In a 2002 study by World Bank economists Pablo Fajnzylber, Daniel Lederman, and Norman Loayza, it was found out that crime rates and inequality are positively correlated within countries and also between countries. The correlation is a causation – inequality induces crime rates.

This finding is parallel with the theory on crime by American economist Gary Becker, who pronounces that an increase in income inequality has a big and robust effect of increasing crime rates. Not only that, but a country’s economic growth (GDP rate) has significant impact in lessening incidence of crimes. Since reduction in income inequality gap and a richer economy has an alleviating effect on poverty level, it implies that poverty alleviation has a crime-reducing effect.

The analysis may have been made clearer and simplified. The problem now lies on the two factors being able to produce the desired effects that are poverty alleviation and lesser crime rate. Reality presents the people with shaky economic growth and worsening income inequality.

The U.S., which ranks 3rd among the most income-unequal nations, and the worst in terms of income gap growth, also has the largest percentage of its population in prison among industrialized democratic nations. Is it a mere coincidence or does it reflect the social ills that a big wealth disparity and overt rich-poor distinction brings?

Wealth Gaps and Crime Rate

In the 2010 International Statistics on Crime and Justice report by the United Nations Office on Drugs and Crime (UNODC), datasets show that globally,  violent (murder, homicide, assault, rape, robbery) and property crimes (theft, robbery, arson) have taken different directions. While property crimes generally decreased, violent crimes have increased but on a lesser pace.

The highest homicide levels are found in the Americas and Africa region, with the lowest homicide levels generally in countries in Europe. Majority of countries that provided trend data show decreasing or stable homicide rates. However, the Latin Americas show high and increasing rates, and these are linked to prevalence of organized crime, gang activities, and drug trafficking.

The U.S. reports a continuous decrease in crime rates in the last 4 years for violent crimes (murder, homicide, rape, robbery) and 8 years for property crimes (burglary, theft, arson). Nationwide in 2010, there were an estimated 1,246,248 violent crimes, with robbery accounting for 29.4 percent of this category, costing $532 million in total, or an average loss of  $1,258 per victim. Property crime numbered at 9,082,887.

Homicide. The same UNODC report showed that the 2012 worldwide rate for intentional homicide, or the unlawful death purposefully inflicted on a person by another person, was at 6.9, or 7 out of every 100,000 population.

There is low homicide levels in countries from Europe, Asia, and North America, which correspond to these regions’ criminal justice and public health data. In contrast, both criminal justice and public health data show significantly higher rates in South America, Central America, the Caribbean, and Southern Africa.

Murder. In the offense of murder, income inequality and crime level can be noted as reciprocal in trend. Again, countries in the high income inequality belt in the African region, Honduras (91.6), El Salvador (69.2), Jamaica (52.2), Belize (41.4) and South America (Venezuela 45.1) have the highest rates per 100,000 population, while countries in Europe (Monaco 0, Iceland 0.3, Norway 0.6), Oceania (Palau 0), Eastern Asia (Hong Kong 0.2, Singapore 0.3) have the lowest.

Per country, Mexico which ranks worst in income inequality has a very high 22.7 rate, compared to the U.S. with a much lower rate of 4.8. Here, enforcement, law and justice systems, among others, come into play.

Rape. The same connection is seen in the incidence of rape, which is considered the most under-reported violent crime. Compilations of United Nations reports from 65 countries showed that over 250,000 cases of rape or attempted rape were recorded by the police annually. Varying definitions of this crime also lessen the reports and documentation for this crime.

South Africa leads the world with the worst income inequality and highest  rape incidence at 500,000 annually. In the US, despite a 60 percent decline since 1993, it still has a higher rate of rape cases when compared to other developed countries. Prevalence of prison rape is seen as a factor.

It is also interesting to note that Sweden, which has a good performance in income inequality mitigation, registered the highest incidence of rape in Europe, and among the highest in the world, with 46 rape cases per 100,000 in 2009 (twice that of the U.K. and four times the rate of Nordic countries, Germany and France. Swedish authorities cited the manner of reporting as the reason for the high documentation since the country has a broader legal definition of rape and a firm policy to register all suspected cases.)


Robbery. As differentiated from theft, it also included mugging, bag-snatching and theft with violence. This crime was most common in the Americas (Latin America and Caribbean) with a rate of 21 percent. The 35 countries included in the UNODC report showed increasing rate of robbery parallel to an increase in assault over a 10-year period. Robbery and assault are among the most commonly reported crimes in neighborhoods and communities that are predominantly poor.

While there are varying determinants, when it comes to economic factors, a parallel direction can be clearly seen on a global and per-nation analysis. Places with high income inequality have higher incidence of crime; and people living in poorer communities with majority of population among low income earners are exposed to more crimes.

Likewise, the consistency displayed by income inequality and crime rate levels show that people and places considered as lower in economic and social class have higher crime rates than wealthier groups.

The Role of Income Inequality Reduction

Reducing crime rate is a heavy load not only for law enforcers but also for the community. Important improvements in law enforcement and justice system keep the prevalence of crimes at bay, instilling the fear of punishment and apprehension consequences that deter aggressors and offenders from committing criminal acts.

These, however, do not provide the motivation to change ways. The will and intent to become productive and contributing members of society can be provided by actions addressing income inequality. Solutions like better wages, job security and availability, better access to self-development programs, and family support services will help eradicate desperation that lead most income-deprived people to commit crimes, and move them to aspire for a better way of life.

Where income inequality is concerned, efforts at reducing income gap will provide the long-term solutions to the crime problem, both within the poor and unsecured neighborhoods as well as to crimes targeted at richer residents.

Addressing the problem of income inequality will complement efforts by the law and justice system to bring about crime rate reduction, resulting to a safer, more peaceful and more orderly  communities.

By Jenny Chang

Senior writer at FinancesOnline who writes about a wide range of SaaS and B2B products, including trends and issues on e-commerce, accounting and customer service software. She’s also covered a wide range of topics in business, science, and technology for websites in the U.S., Australia and Singapore, keeping tabs on edge tech like 3D printed health monitoring tattoos and SpaceX’s exploration plans.

Marlon Dela Rosa says:

I do believe that rules and regulations and policies and lobbyists create a more favorable environment for the rich rather than the poor. I wanted to invest my money or find out what the holdings were in a fund however of course and unfortunately i did not meet the minimum amount of $100,000.00. I think if we teach the poor to invest and budget their money and offer a more favorable loan options for the poor will ease their financial strains. Earn, Share Knowledge and Wisdom, Donate and Repeat should be the motto for all rich people. If they can make a job center, i am sure they can make an investment center. There's always time for the rich to reach out to the poor. Then the classes will only be two: investors and non-investors.

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steve says:

If one divides our adult population into five quintiles by income, the mean of a measure of cognitive ability decreases monotonically as one moves from the highest income quintile to the lowest income quintile. This is a population statistic and it cannot be applied to every individual in the quintile. This translates into a higher rate of poor decisions per capita as one moves from the highest income to lowest income quintiles. In other words, the lowest income quintiles are more likely that the highest incomes quintiles to make poor decisions such as having children out of wedlock, drug abuse, failure to finish high school, and committing both property crimes and assaults. Government cannot change the cognitive status of people; a quintile with low cognitive ability will continue to have low cognitive ability even if government pays their bills. Government can make the people in the lowest income quintile more comfortable, but this quintile will continue to make poor decisions at a higher per capita rate than the highest quintiles. Government may be able to incentivize the private sector to create assembly line style manufacturing jobs that pay more than service sector jobs and can be performed by the low skilled people in the lowest income quintiles. More manufacturing jobs for the lowest income quintiles will decrease the diversion of income from the higher incomes quintiles to pay the bills of the lowest income quintiles. However, the social problems associated with the cognitive status of the lowest income quintiles will persist.

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robduke says:

Well said. The problem is that when the have's make the rules to maintain there status the have-nots are at a huge disadvantage. How do they ever get a fair chance. Do they not deserve the same chances. You sound intelligent. Think about the rhetoric you are defending please

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GarrettB says:

Steve, you claim a correlation between cognitive abilities and income as fact but how do you define cognitive ability and pray tell what is your source? Then you make the logical leap to "poor decisions." Unless you can provide or rely on real data defining and tracking "poor decisions" we must assume that they are just as likely a result of psychological health and learning disabilities as what you call "cognitive ability." What about such variables as age (i.e., experience/wisdom), physical and mental health, education, parenting, and on and on?

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In reply to GarrettB's comment, Jim says:

Steve, your comment seems to imply that poor decisions are defined as ones which do not make greater money. This is a pervasive overvaluation and over estimation of the market economy's ability to compensate people accurately according to actual human social values. I think if one compares annual financial compensation of various career choices you will see that some high-paying careers are profit driven and have little or no value creation at all, or if it adds value, it only adds value relative to someone else's ability to gain more profits. Other highly important roles are not compensated at all, such as motherhood. The fact that some activity is more easily turned into a commodity bears little relationship to the actual value. There are other jobs, such as fast food workers, which have both low social status value and low pay. Since money problems are one of the main causes of stress and a variety of health problems, inequality increases and exacerbates feelings of injustice, lack of human respect and relative powerlessness. These are the feelings from which violence grow.


vincent says:

I personally think that it is the lack of opportunities for people to legally increase their wealth and social status rather than just the income they start out with compared to their peers or superiors in these regards.
It seems that many people who have the things people aspire to want to vote for laws that make it harder for those who wish to try to reach their level from much further below.
After all, who has money to go into massive debts for years to pay for a degree if their parents can barely pay the rent, council tax, car(if they have one) bus or train fares for commute, food, clothes, water gas electricity bills?
And even then not get a degree-related job after four years of post-school study?
I did not try as hard as I could have to excel at school to go to university as I was very aware of these realities before leaving school at 16. I had to get jobs.

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