Is the Opioid Epidemic Driving a Decline of the US Workforce?

Is the Opioid Epidemic Driving a Decline of the US Workforce?

In a paper last year on the disappearance of many prime-age men from the US workforce, Princeton economist Alan Krueger presented the unsettling finding that 44 percent of working-age men who were not in the labor force reported taking pain medication on a regular basis, and two-thirds of these men were taking prescription pain medication. While improvements in video game technology may be contributing to these men’s lower workforce participation by making long-term unemployment more bearable, Krueger wrote, their high rates of poor health and use of narcotic painkillers are much more disconcerting.

In the Fall 2017 edition of the Brookings Papers on Economic Activity, Krueger publishes an update of that research with new data, homing in on the impact of opioid epidemic on the labor market. That impact, he finds, is even more significant than previously thought, accounting for some 20 percent of the decrease in men’s labor force participation between 1999 and 2015, and 25 percent of the decrease among women, Brookings editor Fred Dews explains:

Krueger’s paper suggests that, though much of the decline can be attributed to an aging population and other trends that pre-date the Great Recession (for example, increased school enrollment of younger workers), an increase in opioid prescription rates might also play an important role in the decline, and undoubtedly compounds the problem as many people who are out of the labor force find it difficult to return to work because of reliance on pain medication.

Krueger’s research indicates that regional differences in medical practices affect the share of the population taking pain medication, even controlling for the population’s health and disability status. A 10 percent increase in the amount of opioids prescribed per capita in a county is associated with a 1 percent increase in the share of individuals who report taking a pain medication on any given day, holding health and other factors constant.

Looking at county data, Krueger finds that regions of the US that have been hardest hit by the opioid epidemic have also tended to experience the largest declines in participation. Overall, Preeti Varathan and Gwynn Guilford interpret at Quartz, the paper strengthens the evidence that the participation crisis in the American workforce is a matter not only of labor market economics but also one of public health:

“This suggests that opioid overdoses aren’t only due to ‘despair,’” argues Janet Currie, another Princeton economist who wasn’t involved in the study. “They also reflect and respond to the supply of prescription opioids, which in turn reflects doctor behavior.” In other words, the huge regional variation in the opioid crisis’s severity reflects differences not in underlying mental or physical health problems, but in medical practices. …

Krueger’s analysis challenges the narrative that health problems unique to hollowed-out manufacturing centers have driven opioid abuse. It also tests conventional wisdom that the slackening of America’s workforce results from stagnating wages—especially for less educated male workers—that have discouraged participation. Last year, the White House threw its weight behind this theory. In a 47-page report, the Council of Economic Advisors called for new job opportunities, training programs, increased workplace flexibility, higher wages, and much else besides.

It’s likely that both demand and supply-side factors play a role. But Krueger’s analysis suggests that expanded health care insurance, preventative care, and better pain management could help middle-aged men return to work—and, hopefully, find purpose again.