The Unintended Consequences of Welfare Reforms: Universal Credit, Financial Insecurity, and Crime

Abstract

We evaluate the unintended effects of Universal Credit (UC), a monumental welfare reform that has increased the stringency of the UK social security payment system. We exploit the rollout of UC across constituencies, targeting first-time claimants, predominantly young males. Using monthly data from 2010 to 2019 for England and Wales, we first document the negative economic impacts of UC, showing it has led to an increase of around 6000 repossession orders from the social housing sector. We then focus on UC’s criminogenic effects, finding the reform has caused around 35,000 burglaries and 25,000 vehicle crimes. Collectively, our findings highlight the danger of welfare policies affecting the economic incentives of individuals at the bottom of the income distribution. They also have timely policy relevance considering 6.5 million benefit recipients will soon transition onto UC. (JEL K14, K42).