The Safety and Security Cost of Job Loss: Measuring the Cost of Layoffs and Unemployment

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The Safety and Security Cost of Job Loss: Measuring the Cost of Layoffs and Unemployment

Whitepaper:

The Safety and Security Cost of Job Loss: Measuring the Cost of Layoffs and Unemployment

In this report, we discuss the research that shows how unemployment in the community at large and layoffs / hiring freezes within an organization increase safety and security risk.

The hidden costs of OSHA fines, litigation, workman's comp claim frequency/severity, downtime, theft, vandalism, and forced entry are being ignored as companies calculate the benefits of a layoff.

This report was prepared on Dec 17th 2025. Although the Nov jobs report showed U6 unemployment already at 8.7%, which is neither historically high nor low, 1.7 million WARN notice layoffs had been announced, which is rather unprecedented. This is one of the highest number of announced layoffs ever on record - to put this number in perspective this is roughly 1% off all US workers. A WARN (Worker Adjustment and Retraining Notification) notice is a formal 60 or more day advance warning required by U.S. law for employers to notify employees, unions, and government officials about significant mass layoffs or plant closings. This is rather unusual and inspired us to create this report.

If you are considering a layoff, we hope this report offers you a new perspective. If your organization is facing an imposed layoff or if your community is facing higher unemployment, this report can help security teams understand what to expect. The final section offers some statistical analysis on what security devices in which locations offer the most benefit in terms of injury reduction and crime prevention.

Executive summary

In a community, when unemployment increases, so do property crimes such as theft and vandalism at a rate between 1 and 3.5% crime growth per percentage of unemployment. Other types of crime such as violent or white collar crime, do not rise as unemployment rises, but benefit fraud and identity theft do as well.

Within an organization, layoffs do not decrease the total number of physical injury events -- even as headcount drops -- which means the rate of injury increase in almost perfect proportion to the size of the layoff. For retained staff, mental health prescription use increases dramatically as do hypertension and heart disease, increasing future health insurance costs. Safety ratings decline which raise insurance costs and OSHA fines. Physical Injury claims increase in cost and severity significantly raising liability risks and operational disruption.

Within an organization, layoffs increase internal theft (shrinkage), supply chain damage / vandalism, threats of violence against remaining employees, and intellectual property theft. This risk skyrockets on the day of the layoff but also remains elevated for 2 to 3 years after the event.

Within an organization, both layoffs and hiring freezes increase the frequency of operational disruption.

When leadership plans or implements reductions in force (RIFs), most visible costs — severance, outplacement, legal fees — are budgeted. Less frequently quantified are the indirect safety and security costs that follow. These hidden costs can be substantial and persistent; planning solely on immediate payroll savings risks underestimating total costs over the 36 months after a layoff. These effects must be considered alongside short-term cost savings from headcount reduction but are not present in layoff benefit calculations.

Security devices reduce crime and lower workplace injury incidents.

Part 1: Unemployment in a Community Increases the Need for Security

Mechanisms:

Unemployment is linked to property crime: Multiple econometric studies, find a positive statistical association between unemployment and property crime (burglary, theft, motor-vehicle theft). This effect is stronger as the magnitude of the economic crisis increases. In other words, a small increase in unemployment in a community has a negligible effect, but large-scale or geographically concentrated job losses raise the probability of elevated property crime in their relevant communities.
Journal of Law and Economics: Identifying the Effect of Unemployment on Crime

Layoffs degrade mental health and increase substance abuse: For those directly affected by a layoff, there is often an associated increase in psychiatric distress which is often accompanies by alcoholism or substance abuse. There is a strong and well-documented association between substance abuse and property crime, driven by the need to acquire money or goods to fund a drug habit.
Depression and unemployment: panel findings from the epidemiologic catchment area study
Department of Epidemiology and Public Health, University College London
US Dept of Justice:: Probing the Links Between Drugs and Crime

Policymakers and security planners should therefore expect elevated property-crime risk in areas and periods with long term and rising unemployment. University of California, Berkeley, University of Linz, and Center for Economic Policy Research, London. Published by the University of Chicago

These studies supports the conclusion that reduced legitimate income opportunities increase incentives for property crime in some, but not all, contexts. Underemployment, welfare generosity, substance abuse program availability, and the length of unemployment matter and can alter the outcomes, but generally there is an empirical link between local labor market deterioration and certain property crimes.

Property crime increases not violent crime: It is important to note that these studies paint a broad picture about property crime only. Unemployment increases result in more vandalism, trespassing, burglary, theft, and arson. Unemployment does not seem to increase other types of crime, such as violent crime (theft and burglary go up but robbery does not), cyber crime, or white-collar crime.

Forty percent of property crime is drug-related: Property crimes committed by drug users are typically economic-compulsive and impulsive, driven by the need to fund their addiction and their target is chosen based on their perceived odds of success. 40% of property crime inmates committed their offenses to obtain drugs or money for drugs, compared to a much lower percentage for violent crimes.
DOJ - Drug Use, Dependence, and Abuse Among State Prisoners and Jail Inmates

Certain types of fraud also increase with unemployment: higher unemployment rates are positively associated with increased cybercrime complaint - especially those surrounding identity theft, benefit fraud, use of stolen credit cards, and intellectual property theft. There are far fewer studies around cyber crime and unemployment than property crime, so we have focused this report around property crime. The main reason less study has been done on cyber crime is that the Covid19 time period is really the only large unemployment event that can be measured since cyber crime became an everyday concern, and it remains to be seen if that was driven by the unemployment rate or something specific to the Covid19 pandemic. It is our opinion that it seems likely that the relationship between unemployment and certain cyber crimes holds.
Research on the Relationship Between Unemployment Rate and Cybercrime

Mathematical Model:

How much does property crime increase per point in unemployment increase? Here's the formula:

$\ln(C) = \alpha + \beta \ln(U) + \epsilon$

Where:

$C$ = property crime rate
$U$ = unemployment rate
$β$ = elasticity coefficient
$ϵ$ = error term

Within normal economic ranges, this roughly translates to a 1 percentage-point increase in unemployment being associated with a 1.5–3.5% increase in property crime. This effect occurs within 3–12 months after unemployment increases. This range is logarithmic - so it increases depending on how high the unemployment rate and crime rates are in that environment, already. Increasing from 5% unemployment to 6% in a low crime area will be on the lower end of that scale, while increasing from say 15-16% in a higher crime area is going to be on the larger range of the effect. This effect can be expressed as a hopelessness effect - if the recently unemployed are more likely to think they will be employed again soon, the effect is going to be smaller.

Part 2: Executive Teams are Missing Hidden Costs to Safety and Security when Considering Layoffs and Hiring Freezes

Safety Mechanisms:

No matter how many people an organization lays off, physical Injuries stay about the same: Let's start with the most profoundly counterintuitive result from the research on layoffs: when you decrease the size of your workforce you do not decrease the number of physical injuries by much (0.6% reduction across hundreds of studied layoff events). The reasons for this are detailed below.

Mental health increase; hypertension and heart disease increase greatly: Days missed due to mental health is significantly increased (slightly more than doubling in rates). Hypertension and Heart Disease also increase greatly, increasing the odds by 35 - 85%.
The Experiences of Layoff Survivors: Navigating Organizational Justice in Times of Crisis

Surviving Employees are more likely to cope with psychotropic drugs: Employees who survive a downsizing often experience heightened workloads, express increased insecurity and loss of control. This correlates to more than doubling the rates of most psychotropic drug (antidepressants, benzodiazepines, hypnotics, cannabis, and opioids) use. It more than tripples the use of anxiolytics. Before a layoff rates of psychotropic drug use is typically around 1.3% of staff - after this swells to an average of 3-4%. Organisational downsizing and increased use of psychotropic drugs among employees who remain in employment

Psychotropic drugs are correlated with increased workplace injuries: Psychotropic drugs can cause drowsiness, dizziness, slowed reaction times, poor coordination, and impaired judgment, directly affecting performance in physical tasks. Studies showing mental health issues and medications like antidepressants (especially long-term SSRI use), benzodiazepines (BZDs), and opioids raising risks for accidents due to impaired concentration, coordination, and altered perception. These effects are large - with a range of doubling to tripling workplace injury incidents.
Occupational Injuries and Use of Benzodiazepines: A Systematic Review and Metanalysis

Layoffs degraded workplace safety for remaining workers: Research on layoff survivors shows increased stress, worse physical and mental health outcomes, higher anxiety, burnout, and increase likelihood to become distracted. These cognitive effects reduce attention and compliance with safety procedures, raising accident risk. Evidence links downsizing to increased on-the-job injuries and reduced safety performance among remaining workers. J Epidemiol Community Health. Published by The National Library of Medicine and Safety Practices,Firm Culture, and Workplace Injuries by Richard J. Butler and Yong-Seung Park

Surviving Employees experience anxiety and reduce concentration Anxiety and cognitive distraction among survivors raise human error rates and reduce situational awareness, increasing accident risk.

Near-miss reporting declines after a layoff: Fear of retaliation or panic about instability reduces near-miss reporting and whistleblowing, allowing hazards to persist uncorrected.
The Experiences of Layoff Survivors: Navigating Organizational Justice in Times of Crisis

Workers are less motivated to care about safety after a layoff: Employees who perceive their jobs to be insecure report lower levels of safety knowledge and reduced motivation to comply with safety policies.
Layoffs and the mental health and safety of remaining workers (Note: this is a different study as the other cited on this page with the same name. This one is published by the CDC while the other was the National Institutes of Health.)

Claims per employee increase in frequency: While overall injury numbers largely stay the same, the rate of injury per employee roughly increases by the percentage of the cut. In other words, if a organization had an average of 10 injuries a year with 1000 employees, if they were to layoff a 200 of those workers, the rate of injury for the company would lower to 9.96 per year with 800 employees. This is true of nearly any layoff cut - in other words if you laid off half your workforce you would still get around the same number of injuries, but now the odds of injury to the remaining worker is much higher to that smaller workforce.

Claims per laid off employee increase in frequency: employees can file workers’ compensation benefits even after a layoff and employees facing job elimination may be incentivized to file new workers’ compensation claims or prolong their existing claims. The number of new workers' compensation claims often spikes after a mass layoff.

Injuries increase in severity and claims increase in cost: because spared employees are reluctant to claim smaller injuries, claims increase in size, scope, and cost. The number and duration of disability claims for cumulative injuries tend to increase as the unemployment rate increases.

Hiring Freezes significantly worsens outcomes: Hiring freezes can occur with or without layoffs, and even one round of layoffs can create the perception of more layoffs coming. Hiring freezes or the perception of further cuts increase the effects discussed above, because of four main effects. First, they often create turnover of your top performers rather than your worst, who often see a layoff or freeze as a lack of effective leadership. Secondly, when managers lack confidence in being able to backfill vacated positions, they slow down or even cease their efforts to get rid of their deadweight employees. Thirdly, reduced confrontation of low performers, weakens manager perception among the whole team and creates incentives for top performers to look elsewhere. Lastly, fear of further cuts or the inability to hire replacements lowers near-miss reporting and reduces employee willingness to raise safety concerns and reduce lower level management's willing to investigate shrinkage, diminishing corrective action, allowing safety violations and internal theft to flourish.
OHS: Leading Through Downsizing.

These effect varies by what positions are eliminated Layoffs that remove experienced staff or safety personnel, reduce training, or increase workloads that this can materially raise injury risk and degrade hazard reporting systems. Maintaining safety oversight during restructuring is crucial to avoid measurable upticks in incidents.

Digital surveillance tools are associated with reductions in safety incidents, including substantial drops in high-risk behavior and workplace injuries
AI, Sensors, and Wearables: Preventing Workplace Accidents

Continuous monitoring is key, real-time monitoring enhances safety decision-making and proactive risk response, which contribute to injury prevention. Recording and reviewing offers little benefit.
Digital Innovations for Occupational Safety: Empowering Workers in Hazardous Environments

Security Mechanisms:

Laid off workers pose increased physical threats In a survey of post-layoff environments, 25% of security chiefs had a former employee threaten or harm current employees and 34% reported an insider abusing access for property theft or supply chain damage. Male employees, in particular, who were involuntarily laid off experienced a 20% jump in property crime charges over the next year, with those property crimes disproportionally targeting their previous employer.
Job displacement and crime

Layoffs double the risk of IP theft: Layoffs are associated with a 109.3% increase in data exfiltration on the day of a layoff. This effect cools over time, but persists for three years at around a 44% increased rate.

Mathematical Model:

The common "rule of thumb" formulas used by many private-sector companies and MBA programs used in calculating the cost and / or benefits of a layoff is::

$\text{NPV} = \sum_{t=1}^{T} \frac{\text{Annual Savings}}{(1 + r)^t} - \text{Layoff Costs}$

Where:

$T$ = time horizon (years)
$r$ = discount rate (cost of capital)

With layoff costs and Annual Savings being defined as the formula below:

$\text{Layoff Costs} = \sum_{i=1}^{N} \left( P_i + L_i + R_i \right)$

Where:

$P_i$ = severance pay
$L_i$ = legal and compliance costs of the layoff event
$R_i$ = rehiring, retraining, or replacement costs (if applicable)

$\text{Cost Savings} = \sum_{i=1}^{N} \left( S_i + B_i + O_i \right)$

Where:

$N$ = number of employees laid off
$S_i$ = annual salary of employee
$B_i$ = annual benefits cost (healthcare, payroll taxes, retirement, etc.)
$O_i$ = overhead per employee (office space, equipment, software, utilities)

The shortfall of this financial model should be inherently obvious: there are no ongoings costs represented. When leadership plans or implements reductions in force, most visible costs — severance, outplacement, legal fees — are budgeted. Less frequently quantified are the indirect and ongoing safety and security costs that follow.

There needs to be a variable that represents the rate and cost of liability, since we know that layoffs degraded incident reporting and safety oversight leading to higher frequency / severity of workplace injuries among remaining staff which result in OSHA fines, litigation, workman's comp claim frequency/severity.

There needs to be a variable that represents the rate and cost of security incidents, such as opportunistic theft, vandalism, and property crime from both internal and external (especially if multiple nearby employers lay off workers) sources.

There needs to be a variable that represents the increased operational costs, such as higher overtime, fatigue, and operational disruption that reduce productivity.

An Improved Mathematical Model:

Now that we know the hidden safety and security costs from a layoff, we can incorporate them into the financial modeling, as long as we know these three additional details:: (1) a count of workplace injuries before the event, (2) the average cost of a workplace injury, and (3) the financial loss due to insider threats (shrinkage, etc).

$\text{NPV} = \sum_{t=1}^{T} \frac{\text{Annual Savings}}{(1 + r)^t} - \text{Layoff Costs}$

With Hidden Safety and Security Costs calculated as:

$\boxed{ H = \Big[ (I_{\text{post}} \cdot C_{i,\text{post}}) - (I_0 \cdot C_i) \Big] + \Big[ S_0 \cdot (0.76 \cdot L) \Big] }$

Where:

$N$ = total employees before layoff

$L$ = layoff fraction (e.g., 10% → 0.10)

$I_0$ = baseline annual injury count

$I_post$ = post layoff annual injury count, see formula below

$C_i$ = baseline cost per injury

$C_i_post$ = post layoff cost per injury, see formula below

$S_0$ = baseline annual insider-threat security loss

$r_{\text{insider}}$ = baseline insider threat risk rate (embedded in $S_0$ )

$I_{\text{post}} = I_0 \cdot (1 - 0.006)$

$C_{i,\text{post}} = C_i \cdot \left(1 + 0.05 \cdot \frac{L}{0.02} \right)$

A Worked Example in Retail

Assume a 1,000 employee retailer was planning on reducing their workforce by 10%. Using the traditional model, this 10% layoff will appear to create a cost savings of right around 12 million dollars in a 3 year period, however, including the additional information that they had 24 injuries last year and each injury cost on average $41,000, and that they had 3.2 million in shrinkage (about 1.6&% of inventory) - of which $928,000 (29%) is suspected to be insider related, the cost savings in the first year nearly collapse. They should expect $2,853,840 in hidden safety and security costs related to that proposed workforce reduction plan over the next 36 months, with those costs to be more heavily weighted towards the first few months after the layoff event.

Obviously, 12 million dollars is more than 2.8 million, but this exercise does show that these hidden costs can be much larger than anticipated and can easily erase most of the first year's cost savings.

A Worked Example in Manufacturing

Assume a 1,000 employee manufacturer was planning on reducing their workforce by 10%. Using the traditional model, this 10% layoff will appear to create a cost savings of right around 38 million dollars in a 3 year period, however, including the additional information that they had 24 injuries last year and each injury cost on average $163,000, and that they had 1.5 million in shrinkage (about 0.5%), the cost savings in the first year nearly collapse. They should expect $2,118,000 in hidden safety and security costs related to that proposed workforce reduction plan over the next 36 months, with those costs to be more heavily weighted towards the first few months after the layoff event.

Again, this won't persuade anyone advocating for a layoff to reconsider but this is still a substantial amount of money that could easily have been unaccounted for in the traditional model.

Recommendations:

Layoff Announced?

If your organization has already announced a layoff and you are in charge of safety or security, please focus on the results from the research reports we have listed above. Make sure that you remove access - both digital and physical access to company properly when you off board employees. Make sure that you have additional security support staff on hand when employees are notified. Monitor all confidential and intellectual property. Invest in additional safety training. Read some of our other guides on process and safety monitoring. Consider using our decoders to setup a video wall for live monitoring. Invest in remote guarding solutions.

Layoff Being Investigated?

If you are calculating the benefits and drawbacks of a layoff, please take these hidden costs into consideration. Stress test our financial model for accuracy and read some of the linked research reports.

Unemployment Increasing?

If you anticipate an increase in unemployment in your community, we offer these recommendations:

For policy makers: It is important to remember that the relationship is empirically meaningful but context dependent. Targeted social supports, such as unemployment benefits, job programs, and substance abuse programs can moderate crime increases linked to labor market shocks.

For IT / Operations / Security Officers/ Community or City planners: Increase budgets for security devices and lighting during prolonged downturns.

How should you prioritize that budget? What security devices Make a Difference

There's no shortage of security companies asserting that security cameras reduce crime. For example, many, many websites repeat these same claims:

- 60% of convicted burglars surveyed stated they would avoid a target with visible security cameras.

- 83% of burglars actively look for security signs before attempting a break-in.

- Homes with security cameras are 300% less likely to be burglarized.

- 50% of burglars will abandon an in-progress break in if they realize cameras are present.

These claims are largely unsubstantiated. We could find only one of these statistics in any academic study. The "60% of convicted burglars surveyed stated they would avoid a home with visible security cameras" claim is from a UNC study entitled "Understanding Decisions to Burglarize from the Offender’s Perspective". The study "Do burglar alarms increase burglary risk? A counter-intuitive finding and possible explanations" indicates that security alarm signs actually increase the likelihood of domestic burglary for homes in the UK. Here at SCW, we no longer recommend alarms because Visual Verification Laws being passed in local jurisdictions, that instruct first responders to ignore alarm companies.

Abandoning these popular but "unfounded assertions, there are multiple sources in the Uk and US showed that crime does drop when security devices were deployed, however this drop in crime had a much larger variance in results based on what was installed and where the crime was occurring. We've tried to illustrate these studies with two charts.

Sources for these charts are from Office of Justice Programs: Public Area CCTV and Crime Prevention: An Update Systematic Review and Meta-Analysis and the follow up UK Home Office. CCTV and Crime Reduction study.

The effectiveness of security devices has a range of effectiveness based on both what you install and the type of location. We've tried to illustrate these studies with two charts.

Potential Impact in Crime Reduction

Environment	Avg. Crime Reduction
Parking Facilities	30–50%
Retail / Commercial	20–35%
Transit Systems	15–30%
Residential Areas	10–20%

Range of Impact

Security Approach	Crime Reduction Impact
Cameras Only	Moderate
Access Control Only	Moderate
Alarms Only	Low, Increases Risk for Homeowners
Cameras with Remote Guarding	High
Layered Security: Cameras, Access & Remote Guarding	Highest

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