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Fed Believes Opioid Crisis Is Reason Why Men Aren’t Working

Bill Polacek runs a manufacturing company in Western Pennsylvania. Even though a glut in new construction projects has dried up work for tradesmen, Polacek said he struggled to find qualified welders a few years back when he had a large number of jobs to fill. Polacek interviewed 350 people to fill openings for 50 welders and machinists at his Johnstown, Pennsylvania-based manufacturing company. But he quickly found the number of qualified candidates dwindling to the point where the number of open jobs was higher than the applicants qualified to fill them. The reason? Too many of Polacek’s interviewees either had criminal histories, or couldn’t pass a drug test.

“'We weren’t attracting the right people,' Polacek says of the episode, which prompted him to invest in extensive outreach to local high schools to build up a pipeline of workers.”

America’s worsening opioid crisis has helped create a generation of men whose struggles with addiction are preventing them from finding, and holding, steady jobs. Indeed, the type of hard-to-hire Americans Polacek encountered pose a growing problem for many employers, as a deepening opioid crisis plagues American communities just as the jobless rate hovers near a 16-year low. Polacek’s situation is hardly unique; the Fed’s Beige Book, a collection of anecdotes about the business climate collected by the 12 regional Fed banks, has included many testimonials about the difficulty that some employers, particularly manufacturing firms, are having in finding qualified workers, like this one from a manufacturing firm in St. Louis.

“Manufacturing contacts in Louisville and Memphis reported difficulties finding experienced or qualified employees, with some citing candidates’ inability to pass drug tests,” the St. Louis Fed reported in the July 12 Beige Book, a survey of regional economic conditions. Businesses have also raised the issue as a barrier to finding workers in conversations with Philadelphia Fed President Patrick Harker.

According to Bloomberg, the Federal Reserve has stumbled on an explanation for the phenomenon that Polacek experienced when he tried to hire those welders – a question that has stumped central bankers, policy wonks and academics: Why are so many working-age men are dropping out of the labor force?

Even though this trend started 40 years ago, the Fed says the opioid crisis is now contributing to the problem of shrinking prime-age labor-force participation. The seeds of the opioid crisis were planted in the 1990s as doctors liberally prescribed dangerous painkillers like Vicodin and Oxycontin. Today, 15%, or one in seven, men between 25 and 54 are inexplicably missing from the workforce, despite the unemployment rate purportedly declining to 4.4% in June.

The opioid crisis began in earnest around the beginning of Obama’s first term in office, as deaths from drug overdoses started to climb. Now, after recording nearly 60,000 drug-related deaths last year, drugs are the biggest killer of prime-age Americans. America has more drug overdose deaths than any other developed country. Many of these deaths are caused by dangerous synthetic opioid analogues like fentanyl and carfentanil, the latter of which is 100% stronger than morphine.

And it’s not just Fed Chairwoman Janet Yellen, who was asked several questions about opioids during her testimony before the Senate Banking Committee last week, who’s trying to connect the dots between opioids and the surfeit of unemployable, shiftless young men: At the Cleveland Fed’s summit, talk about the crisis wasn’t reserved for the opioid-specific panel: it came up throughout the other sessions, according to Bloomberg.

“It’s an economic issue. It has economic implications, but it’s a whole lot more than that,” Petrus said. “It’s cross-cutting.”

Many other notable academics, including Nobel Laureate Angus Deaton, have published economic research about opioids.

The Boston Fed published research in September on the link between local economic despair and opioid use in New England. Princeton University economists Anne Case and Angus Deaton suggested in their work on rising middle-age mortality among the white working class that the breakdown of traditional economic and social structures have probably contributed to a step up in overdose, alcoholism and suicide.

During her Senate testimony, Yellen explained that opioids were one cause of the drop in prime-age labor force participation, along with increasing automation and outsourcing by manufacturers. However, Yellen says she doesn’t understand whether widespread opioid abuse is a symptom of the “long running maladies” these workers have faced, or the cause.

“There seems to be a clear indication or a clear connection between this and the ability to go to a job,” said Senator Joe Donnelly, to which Yellen agreed.

Nebraska Sen. Ben Sasse asked Yellen whether mid-career job retraining opportunities might alleviate the problem, as technological innovation forces Americans in certain industries to acquire new skills or be replaced by a machine.

“The individuals who’ve lost those jobs have found it difficult to acquire the skills necessary to re-enter the labor market and many individuals who don’t have the education are struggling to find jobs,” Yellen said, in response.

But while mid-career job retraining sounds plausible – it is a concrete, if wonkish, policy, there’s a broader problem with the labor force that narrowly applicable, resource-intensive “solutions” like these are missing. And that’s the fact that, fundamentally, the number of well-paying jobs available for everyone except the supremely well-educated is shrinking rapidly. Meanwhile, the financial circumstances for the average millennial are much more precarious. Indeed, failure to launch a career during the early years can leave a negative impact for years to come.

While it’s nice to think about, the “everybody should just learn to code” policy won’t fix any of these deeply entrenched problems in the US labor market – and it certainly won’t convince anyone to stop using drugs.