Determining the Impacts of Labor Participation Rate, Unemployment Rate and Gross National Income Per Capita on Total Crime Rate in the Philippines

Ruel Kristofer C. Sabangan 3 – E1

Determining the Impacts of Labor Participation Rate,
Unemployment Rate and Gross National Income per capita
On Total Crime Rate in the Philippines
I. Introduction
Crime is inevitable, it occurs every day and it might be even happening right now. It is a nuisance and it greatly affects the society. People has their own reason for doing this kind of atrocity, it is a common understanding that if a person is without a job, he/she wouldn’t gain income, without income, he/she wouldn’t be able to buy their everyday needs, and without the basic needs he/she wouldn’t be able to survive, thus leaving him/her desperate for money, doing anything they can to get it, even if it means to commit a crime, crimes that might endanger the lives of others.

The crime rate in the Philippines has been reduced more than 15 percent in the first three months compared with the same period last year regardless of the recent slew of high-profile urban crimes, as said by the late Interior Secretary Jesse M. Robredo. For the first quarter of the year 2012, the national crime volume declined by 11,219 cases, a drop of 16.77 percent from a year ago, and Based on reports submitted to him by Chief Superintendent Alex Paul Monteagudo, Philippine National Police Directorate for Investigation and Detective Management (PNP-DIDM) chief, the PNP’s national crime solution efficiency rate for the first quarter of 2012 stood at 34.38 percent, slightly better than the 25.84 percent efficiency rate for the same period last year, this means that crimes are given justice more often than left unsolved. Evidently, crime rates are responsive to local labor market conditions. Surprisingly, little attention has been given by economists on whether crimes committed by optimizing individuals respond to labor market opportunities. Most recent research has been focused on the effects of criminal justice sanctions. However, most of the researches attempting to measure the effect of the labor market on crime are represented by studies linking unemployment and crime. (Patalinhung, 2011)

Unemployment in the country dropped from an estimate of 13.8 million individuals in the first quarter of the year 2012 to 10.9 million individuals in the second quarter, according to a recent survey by the Social Weather Stations, this is a proof of improvement in the labor force of the Philippines. However, more than half, or 51.2 percent of unemployed Filipinos, were in 15-to-24 age group, which only validates the difficulty faced by fresh graduates looking for work, said Rene Ofreneo of the School of Labor and Industrial Relations at the University of the Philippines. According to National Statistics Coordination Board (NSCB) as of October 2012, the Labor Force Participation Rate is 63.9% of the total population; this means that 36.1% of the total population is either voluntary or in-voluntary unemployed. Freeman (1982, 1995, and 1999) concluded that unemployment had the expected positive impact on crime, but the magnitude of the impact was modest. Thus, the existing studies on unemployment rate to measure labor market prospects of potential criminals may not be so insightful.
Gross National Income per capita may also contribute to the changes of Crime rate in the Philippines, since it determines the total value of good and service that an individual and includes the net factors from abroad. The Bangko Sentral ng Pilipinas (BSP) is confident that the country’s per capita income which is one of the lowest among emerging Asian economies, will significantly improve and may match those of its neighbors over the medium term. BSP Deputy Governor Diwa Guinigundo said ongoing government efforts, such as higher spending on infrastructure and social services would eventually help spread the benefits of economic growth.
The purpose of this paper is to determine whether Unemployment Rate, Labor Force Participation Rate and Gross National Income per capita has an impact on the changing Crime Rate in the Philippines, the researcher hypothesized that Unemployment Rate has a positive relationship with Crime Rate and both Labor Force Participation Rate and Gross National Income per capita has a negative relationship with Crime Rate.

II. Body
To determine the relationship among the variables, the researcher used Crime Rate (per 100,000 of the Total Population) as a measure for crimes, Unemployment Rate (per 100,000 of the Total Population) for Unemployment, Labor Force Participation Rate (per 100,000 of the Total Population) and GNI per capita (at current market prices in pesos).
Table 1.1: Data Year | Unemployment Rate | Labor Force Participation Rate | Gross National Income per Capita | Crime Rate | 1996 | 7.4 | 66.7 | PHP 32,300.54 | 117.6 | 1997 | 7.9 | 66.1 | PHP 35,288.41 | 97.32 | 1998 | 9.6 | 65.9 | PHP 46,084.63 | 98.04 | 1999 | 9.4 | 66.4 | PHP 49,226.60 | 113.04 | 2000 | 10.1 | 64.9 | PHP 54,667.47 | 109.68 | 2001 | 9.8 | 67.1 | PHP 58,630.84 | 98 | 2002 | 10.2 | 67.4 | PHP 62,289.30 | 106.9 | 2003 | 10.1 | 66.7 | PHP 68,339.78 | 102.2 | 2004 | 10.9 | 67.5 | PHP 75,869.18 | 92.5 | 2005 | 7.4 | 64.6 | PHP 84,432.26 | 90 | 2006 | 7.3 | 64.2 | PHP 91,378.00 | 82 | 2007 | 6.3 | 64.0 | PHP 98,281.54 | 72.9 | 2008 | 6.8 | 63.6 | PHP 109,306.84 | 73.9 | 2009 | 7.1 | 64.0 | PHP 117,034.35 | 545 | 2010 | 7.1 | 64.1 | PHP 129,544.00 | 426 | 2011 | 6.4 | 64.6 | PHP 136,733.00 | 256 | 2012 | 6.8 | 63.9 | PHP 144,633.00 | 169 |
The data were gathered from various resources NSCB, Asian Development Bank, Philippine Institute for Development Studies, and Philippine National Police.
Table 1.2: Regression Result Dependent Variable: LOG(CR(3)) | | Method: Least Squares | | | Date: 02/15/13 Time: 07:40 | | | Sample (adjusted): 1996 2009 | | | Included observations: 14 after adjustments | | | | | | | | | | | | Variable | Coefficient | Std. Error | t-Statistic | Prob. | | | | | | | | | | | C | 14.71477 | 11.73694 | 1.253714 | 0.2385 | UR | -0.164864 | 0.135402 | -1.217590 | 0.2513 | LPR | -0.132438 | 0.186011 | -0.711987 | 0.4927 | GNI | 3.99E-06 | 6.95E-06 | 0.574142 | 0.5786 | | | | | | | | | | | R-squared | 0.577706 | Mean dependent var | 4.883210 | Adjusted R-squared | 0.451018 | S.D. dependent var | 0.640253 | S.E. of regression | 0.474384 | Akaike info criterion | 1.581358 | Sum squared resid | 2.250404 | Schwarz criterion | 1.763946 | Log likelihood | -7.069508 | Hannan-Quinn criter. | 1.564456 | F-statistic | 4.560069 | Durbin-Watson stat | 2.356833 | Prob(F-statistic) | 0.029238 | | | | | | | | | | | | | |

The test result shows that the model is significant by lagging Crime Rate per by three periods. This means that Unemployment rate, Labor Force Participation rate and Gross National Income per capita have an impact on crime rates. 45.10108% of the changes in Crime Rates can be affected by changes in Unemployment rate, Labor Force Participation rate and Gross National Income per capita. As Unemployment rate increases, Crime rate also increases, as Labor Force and/or Gross National Income per capita increases, Crime rate decreases, ceteris paribus.

III. Conclusion
There is an identical result with Patalinhung’s (2011) study. From 1996 to 2012, GNI per capita fluctuate significantly. In contrast, unemployment rate fluctuates marginally. Our analysis using the data from 1996 to 2012 shows that Labor Force Participation Rate and GNI per capita income significantly affect the crime rates over the sample period. Although unemployment rate is sometimes significant in some specifications, the wage rate appears to be a more consistent and significant determinant of crime rate than unemployment rate because there has been no long-term trend in the unemployment rate. These results are robust to the inclusion of deterrence variables (police and prisoners) as well as controlling for urbanization rate. (Patalinhung, 2011)

This paper proves that the positive relationship between Unemployment rate and Crime rate may greatly influence a person without a job may commit a crime, depending on the circumstances. And the negative relationship of Crime Rate with Labor Force Participation rate and GNI per capita, that those who are not in the Labor Force and does not receive any income contributes to the change in Crime Rate.
It is already known the involuntarily unemployed people and may as well be institutionalized person, and/or is a criminal. Also we’ve seen children commit crimes, and children are not included in the Labor Force, this may also contribute to the change in the Crime rate. People who cannot support themselves with money because they earn too little or nothing at all, may result to desperation and lead to committing a crime.

The government should provide as many jobs as possible, in order to avoid crime, a person who has enough for a living has a lower tendency to commit crime. The government should also be strictly regulating the policies, rules, and security, In order to maintain the safety of its citizens.

Bibliography

Epictetus E. Patalinghug (2011), Crime rates and labor market opportunities in the Philippines: 1970–2008

Asian Development Bank (2012), Key Indicators for Asia and Pacific 2012

National Statistic Coordination Board

Philippine Institute For Development Studies

Philippine National Police
Michelle V. Remo (2012), Per capita income to rise significantly, says BSP
DJ Yap (2012), PH crime rate down 17% in 1st quarter—Robredo
Inquirer Research (2012), Unemployment falls to 26.6% in SWS survey