Drug And Alcohol Abuse Slowing Labor Force Participation Rate, Fed Study Finds

Drug and alcohol abuse are starting to negatively effect the labor force participation rate, according to a new study by Federal Reserve Bank of Atlanta researcher Karen Kopecky, Jeremy Greenwood of the University of Pennsylvania and Nezih Guner of the Universitat Autonoma de Barcelona.

The study was reported last week by Bloomberg in this writeup. 

What it found was that between 9% and 26% of the decline in prime-age labor-force participation between February 2020 and June 2021 was due to “increased substance abuse”. 

Labor force participation between ages 25 and 54 has yet to full recover since March 2020’s plunge, the report says. So far, the Fed has blamed that on “issues with child care and elder care, in-person schools being closed, concerns about getting sick and extra unemployment benefits.”

The labor force participation rate remains one of the key factors that the Fed is hoping to influence as they move to raise rates throughout the year. 

The study noted: “Once started, drug and alcohol abuse is difficult to stop for many people…an increase in substance abuse during the pandemic would mean lower labor-force participation rates even after the pandemic has ended.”

The decline in participation was disproportionately helped along by Americans without a college degree, the report says. 

The news comes despite the participation rate rising to 62.4% last month, which marks a two year high. But, as Bloomberg notes, this remains 1% lower than prior to the pandemic.