Thursday, March 30, 2017

Explaining Dropping Labor Force Participation – Opioid Abuse

Got an email from former student SF yesterday. He’s still reading this blog from the Bay area.

The post about whether the number of ex-felons in the population is affecting labor force participation had caught his eye. I mentioned that I had saved some links to a related issue, so here it is.



Let me step out of my professor role, and note that on a personal level I am not a prude or scold about recreational drug use.

But, professionally, there’s an awful lot of data showing that this time it’s different.

And, it’s Utah in 2017, so personally I have a lot of experience with adults/parents/neighbors who should know better popping these things like candy.


Labor force participation is down in the U.S. It’s been declining for decades, so there are definitely some long-run things going on. And, the baby boomers are starting to retire, so there’s more people dropping out now than, say, a generation ago. And we had women enter the labor force in large numbers (although that seems to have stabilized about a generation back). And we’re having trouble employing people with less education. And, and, and …

The bottom line is that we’ve looked at a lot of explanations, and the problem seems to be a combination of all of them.

But, even so, there’s still a residual of unexplained dropouts that economists are working on explaining. The acronym for this is NLF, short for Not in the Labor Force. There are lots of reasons to be an NLF. Heck, most of you students are probably NLF’s. What we’re really worried about is men in their prime working years, from ages 25-54, that are NLF.

One think we’re working on is opioid abuse (mostly oxycodones, and hydrocodones, but increasingly fentanyl) affecting both ability and willingness to work, but also likelihood of passing a drug test (if one is required).†

Alan Krueger, one of the best labor economists (and former Obama advisor) notes that half of prime-age male NLFs are taking pain medication daily, and 2/3 of those are taking an opioid (this is a full length academic paper that is not required reading).

Let me put some perspective on that: roughly 1 out of every 50 adult men is both not working and taking an opioid. Quinones reported that in Ohio 1 in 9 people has an opiate prescription (not required). My guess is that, to make the numbers match, a good portion of those 1 in 9 are not taking the pills themselves.

Some of those people have good reasons for not working. And some of the prescriptions are legitimate. But we all know from the accidental overdose data that many of them can’t be.

Even so it’s not unreasonable to make a ballpark estimate that this contributes to a couple of percentage points of the 4% or so drop of the labor force participation rate.

The article that everyone is talking about this past winter is “Our Miserable 21st Century” by Nick Eberstadt. He’s a conservative, and it’s in the pop conservative magazine Commentary, so it’s not unbiased. Even so, Eberstadt has been around for a long time, and most people take him seriously. He makes the point that the election of Trump surprised many people because they are in denial about how lousy life is in much of America. He’s also sympathetic to Trump’s position that “true” unemployment is much higher than what is announced.

BTW: Eberstadt’s Figure 1 does not use logged data for net worth, and his Figure 2 uses a linear deterministic trend (Case 1 from the handbook). I would label those “wrong” if it were me (or you) trying to produce some neutral analysis, but Eberstadt is making a political point so I think it’s tolerable. You should just have a mental filter that adjusts for that.

Note that Eberstadt also discusses the huge number of ex-felons mentioned in Monday’s post: roughly 23 million, or 1 in 8 adults. He adds the interesting point that the federal government doesn’t seem very interested in collecting data on the life outcomes and well-being of these people (former students may note that I mention the avoidance of data collection in the Why Is Macro So Hard? lecture I do in principles classes).

A related article from last winter that people are still talking about is Case and (and 2015 Nobel prize winner) Deaton’s “Rising Morbidity and Mortality In Midlife Among White Non-Hispanic American In the 21st Century” (again, not required). They note that there’s been an unprecedented increase in death rates for middle-aged white Americans. They attribute most of this to opioid abuse:

The CDC estimates that for each prescription painkiller death in 2008, there were 10 treatment admissions for abuse, 32 emergency department visits for misuse or abuse, 130 people who were abusers or dependent, and 825 nonmedical users …

If you tie Krueger, Quinones, Eberstadt and Case and Deaton together, you get a picture of a very unhealthy labor market for a small but sizable fraction of the population.

Half of all job applicants in the U.S. are now drug tested. Interestingly, drug testing benefits African-Americans the most. This is consistent with ex ante discrimination. In this case, ex ante means after entering the job market but before you have a job (that’s ex post). The interpretation is that potential employers are extrapolating from drug problems being more common among African-Americans to African-Americans should be rejected because they’re likely to have a drug problem. That’s a non sequitar, since it’s a small fraction of any population that has drug problems, and thus discrimination (again, it’s a full article from The Review of Economics and Statistics, and is not required).

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