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UT Study: Opioids adversely affecting labor markets

Zach Vance • Feb 3, 2019 at 6:49 PM

A first-of-its-kind study written by four University of Tennessee economists has effectively validated what many Tri-Cities business leaders have long suspected: Opioid addiction is negatively influencing the labor market.

In “Prescription Opioids and Labor Market Pains,” authors Matt Harris, Larry Kessler, Matt Murray and Beth Glenn analyzed county-level data from across the United States and found a 10-percent increase in opioid prescriptions per capita led to a 0.6-percentage-point drop in labor force participation rates and a 0.1-percentage-point increase in county unemployment rates.

“We found that opioids have this strong adverse effect on labor force participation but only a marginally significant effect on the unemployment rate, which leads us to believe that opioids are leading individuals to exit the labor force entirely,” Kessler said.

Harris said the study took a couple of years to complete, but it’s considered the first to analyze casual effects of opioids on the labor force to be published in a peer-reviewed journal.

“The effects are really large,” Harris said in a press release accompanying the study. “Prescription opioids may explain up to half of the decline in labor force participation since 2000.”

He noted that “both of those numbers and the result of the paper may seem small, but both labor force participation and unemployment rates typically orbit in a relatively small range.”

The study was initiated after one of Harris’ senior colleagues had talked to local Chambers of Commerce and business leaders.

“People were saying they had jobs available, (and) they knew people needed jobs, but people weren’t applying,” Harris said. “They were hearing more and more about opioids in their community and wondered if there was a connection there. So we decided to take a look at that.”

The researchers began by identifying heavy opioid prescribers in each county, a variable correlated with prescription opioids per capita but not correlated with the unobservable factors driving the labor market, such as population or age.

“The thought experiment behind it is, if you were to subtract one of these heavy prescribers from a county, are opioids prescribed per capita going to go down? Yes. Are the unobservable factors that affect the labor market going to change? No,” Harris said.

From there, Harris said researchers used regression analysis models to compare the labor market with and without the heavy opioid prescribers.

“The results suggest that in Tennessee, you could effectively boost income among residents by $800 million per year if you reduce opioid usage 10 percent,” Harris said.

However, while the high volume of opioid prescriptions currently being dispensed was found to have a negative labor market effect, Harris said the solution is not a simple one, considering some people with chronic pain rely on opioids to work.

“For people with medically necessary chronic pain conditions, these things are valuable for them, and for some people ... there is potential for a positive effect, too. So for some people, if they have a well-managed protocol of which opioids are a part, then there is the potential for these to be helping people get back to work,” Harris told the Johnson City Press.

“There is some optimal number of opioids prescribed, right? And that number is not zero. It is probably a lot less than where we are now, but we don’t know what that optimal number is. Part of the reason we categorize our findings in these ‘10 percent reduction’ terms is that, ideally, if we were able to reduce opioid prescribing and usage by 10 percent, then you’d want that to be the non-medically necessary 10 percent. It’s hard to think about a counterfactual of a world without these things altogether, just because they’ve been baked into the system for 20 years.”

The county-level data used in the study came from 10 states, including Tennessee, but during the revision process, the researchers were challenged to replicate their findings using regional-level opioid prescription data from the Drug Enforcement Administration’s Automated Reports and Consolidated Orders System.

“We replicated our results on that, and found it worked,” Harris said. “No matter what data set we used, we got the same findings.”

Dr. Jon Smith, director of East Tennessee State University’s Bureau of Business and Economic Research, said the results of this paper should catch everyone’s attention.

“We frequently think about this opioid epidemic in terms of lives shattered, which is, of course, the most important thing. But, the impact this has on communities, especially rural communities like ours, it’s just horrific,” Smith said. “It not only affects the people who are condemned by addiction, but it has a serious impact on the ability of our economy to produce wealth and make lives better.”

Harris said they included a chapter based on this study in the economic report to Gov. Bill Haslam last year, prompting the administration to allocate $30 million to explore and fund opioid treatment programs.

“These results helped influence that decision to help get funds released to try to provide treatment and rehab,” he said. “That’s the main thing we’re proud of with this paper.”

Other key findings include:

•  The detrimental effect of prescription opioids on labor markets holds true for both rural and nonrural counties.

•  Prescription opioids have the strongest adverse effects in counties with higher labor force participation rates and lower unemployment rates, perhaps suggesting that opioid-related damage has already been done in areas with low labor force participation.

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