The Economic Impact of Drug Use

Many readers will have noticed that, practically everywhere you go, you see “Help Wanted” signs.  I’m in my seventies, and at no point have I seen as many as I see now.  What’s behind this?

One big answer is tanking labor force participation:  More and more people of working age are simply opting not to get a job.  This is a curious phenomenon.  Although my family was well off, when I reached working age, not getting a job was never even considered an option.  The economic analysts at Axios, which has a generally liberal bent, provide one answer about what’s different now.  I quote part of its newsletter below.

Driving the news::  Between 9% and 26% of the decline in workforce participation between February 2020 and January 2022, among people aged 25 to 34, is probably due to a rise in dependency on substances like opioids and methamphetamines. That’s according to findings in a paper released this week by the National Bureau of Economic Research.

In recent months, labor force participation increased — it’s now a half-percentage point lower than pre-pandemic. And 18% to 52% of that remaining shortfall could be from those struggling with substance abuse, says Karen Kopecky, an economist at the Atlanta Fed and co-author of the paper.

Specific data on how many more people turned to these substances during the pandemic is not yet available. So, to arrive at this conclusion, the researchers backed into it.

They had a rough sense of how substance abuse pushes down workforce participation: Prior research shows that opioid users’ labor force participation rate is 13 percentage points lower than the rate for nonusers, and for methamphetamine users, it’s 16 points lower, they noted.

And, the researchers found 17,522 more deaths in the U.S. attributable to opioid and meth use than were expected between April 2020 and June 2021.

Those numbers likely reflect an increase in abuse of these drugs, Kopecky says. (Some could be due to a decline in available medical care or a shift in opioid consumption toward more deadly fentanyl.)

Using the additional death numbers, the study estimates that the number of substance abusers increased by about 2.8 million during the time period.

The increase in drug abuse is related to a broader problem: The mental and physical health issues also driving the labor shortage, as Axios’ Felix Salmon wrote about last year.

Long COVID could be keeping 1.6 million out of the labor market as well, according to one recent estimate.

Flashback: A surge in opioid abuse dating back to the early 2000s was already keeping an increasing number of prime-age workers out of the labor force. The pandemic worsened the situation.

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CJLF takes no position on the legalization of marijuana.  But hard drugs are a different matter, and the economic data show that the damage they cause spreads far beyond “merely” the tens of thousands of overdose deaths.