Too many would-be workers are busy battling opioid addictions

Too many would-be workers are busy battling opioid addictions
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The March employment report touted a "rebound" in jobs creation after a dismal February. The headline increase, however, fails to tell the whole story of the U.S. labor market. 

As the country continues to put Americans back to work on a month-to-month basis, other indications suggest many are being left behind. The labor-force participation rate, for example, which measures labor progress, remains at a four-decade low, plagued by a number of negative forces. 

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An aging population, ballooning child-care costs and rising rates of disability, as well as increased higher education enrollment rates all play a role in restraining participation.

Most alarming, however, is the growing opioid epidemic impacting millions of Americans. Deemed a “terrible human tragedy” by fiscal and monetary policy leaders alike, the growing rates of opioid addiction is rapidly becoming a leader in driving potential workers from the labor force.  

An aging population. As baby boomers age, the bracket of older Americans is rapidly expanding.

According to the Census Bureau, the number of Americans ages 65 and older is projected to more than double from around 50 million today to over 94 million by 2060, and the 65-and-older age group’s share of the total population is projected to rise from 15 percent to nearly a quarter of the country’s entire population.

At this point, 10,000 baby boomers reach retirement age each day. Of course, reaching retirement age doesn’t necessarily imply retirement. In fact, many of the most senior Americans are approaching the end of their working careers with a disappointing level of savings and minimal accumulated wealth. 

As a result, many in the more-advanced age cohorts are opting to stay in the labor force longer or re-enter the labor force after being absent for years in order to accumulate additional wealth with which to retire.  

Rising rate of disability. According to the Bureau of Labor Statistics, the proportion of working-age adults who say they’re not in the labor force because of a disability rose from 4.2 percent in 1995 to 6.1 percent last year with nearly 25 million Americans in total self-identifying as disabled. 

According to the Economic Policy Institute (EPI), one of the leading reasons for sizable spikes in disability claims is the job market or, more specifically, the lack of opportunity in the current job market. During 2008 and 2009, for example, disability benefit applications rose nearly 21 percent, according to the Urban Institute.

Thus, when finding a job is more difficult or openings are perceived as less desirable, more individuals seek financial assistance through some type of medical disability. 

A decline in working women. The labor-force participation rate for men has been declining, albeit modestly, since the 1950s. Up until 2000, a rapid rise in working women helped to offset that male-led dip. 

Since the turn of the century, however, the female participation rate has reversed course, save for a brief period during the most recent recession. With most of the jobs lost during the financial crisis held by men, women helped to stabilize market and household conditions. 

Since 2009, however, the participation rate of women has once again begun to descend with that downward trend accelerating more recently.

One reason behind the recent decline is rising child-care costs. According to Care.com, a third of families spend at least 20 percent of their household income on child care. 

Because of the “exorbitant” increase, child-care costs can impact parents’ (particularly women’s) decisions to leave the workforce altogether.

Rising rates of higher education. According to the Bureau of Labor Statistics, college enrollment is on the rise, which, on the surface, is a seemingly positive trend, particularly as many jobs require advanced degrees or specific skills. In the near-term, however, the participation rate will suffer. 

Once out of academia, the youngest Americans are anticipated to enter the labor force, but a college education does not imply immediate employment; although, in many cases, it offers the best chance of finding a job. 

Still many sources report a “chronic oversupply” of college graduates without the needed skills for employment, meaning the available applicants fail to have the required skills — particularly computer science, math and engineering skills. 

The opioid epidemic. Policymakers have indicated considerable interest in understanding how the opioid crisis is related to the decline in labor-force participation as it has become increasingly apparent that areas with higher opioid prescription rates have lower labor-force participation. 

Still, the degree to which opioid addiction rates in an area impact labor performance is not fully understood given the lack of historical context, not to mention meaningful geographically-linked data available.

According to a 2016 study by Princeton economist Alan Krueger, nearly half of prime-age men ages 25 to 54 who are not in the labor force take pain medication on a daily basis, and two-thirds of those men — roughly 2 million people — take prescription pain medication on a daily basis. 

The study goes on to suppose that the increase in opioid prescriptions from 1999 to 2015 could account for roughly 43 percent of the decline in men’s labor-force participation during that same period and 25 percent of the decline in women’s labor-force participation.  

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More recently, the Federal Reserve Bank of Cleveland released a working paper studying the relationship between local opioid prescription rates and labor-market outcomes and found that opioid addiction could account for an even more significant proportion of the decline in men's labor-force participation. 

According to the findings, prescription opioids can account for roughly 44 percent of the realized national decrease in men’s labor-force participation between 2001 and 2015 and 17 percent of the decline for women. 

Over the 14-year period examined, those counted as not in the labor force swelled from 71.36 million to 93.67 million, a more than 30-percent increase, which means, according to the Cleveland Fed, prescription drug and opioid addiction could account for the loss of roughly 26 million American men and women from the labor force. 

Lindsey Piegza is the chief economist for Stifel Fixed Income. Follow her on Twitter: @LindseyPiegza.