BPEA | Fall 2017

Where have all the workers gone? An inquiry into the decline of the U.S. labor force participation rate

Editor's note:

This paper is part of the Fall 2017 edition of the Brookings Papers on Economic Activity, the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Research findings are presented in a clear and accessible style to maximize their impact on economic understanding and policymaking. The editors are Brookings Nonresident Senior Fellow and Northwestern University Economics Professor Janice Eberly and James Stock, Brookings Nonresident Senior Fellow and Harvard University economics professor. Read the rest of the articles here.

The increase in opioid prescriptions from 1999 to 2015 could account for about 43 percent of the observed decline in men’s labor force participation (LFP) during that same period.

In “Where have all the workers gone? An inquiry into the decline of the U.S. labor force participation rate” (PDF), Princeton University’s Alan Krueger examines the labor force implications of the opioid epidemic on a local and national level. 

Among other findings, the research suggests that:

  • Regional variation in opioid prescription rates across the U.S. is due in large part to differences in medical practices, rather than varying health conditions. Pain medication is more widely used in counties where health care professionals prescribe greater quantities of opioid medication, with a 10 percent increase in opioid prescriptions per capita is associated with a 2 percent increase in the share of individuals who report taking a pain medication on any given day. When accounting for individuals’ disability status, self-reported health, and demographic characteristics, the effect is cut roughly in half, but remains statistically significant.
  • Over the last 15 years, LFP fell more in counties where more opioids were prescribed. Krueger reaches this conclusion by linking 2015 county-level opioid prescription rates to individual level labor force data in 1999-2001 and 2014-16. For more on the relationship between prescription rates and labor force participation rate on the county-level, visit these maps.

In earlier research presented at the Boston Fed in 2016, Krueger found that nearly half of prime age men who are not in the labor force take pain medication on a daily basis, and that two-thirds of those men—or about 2 million—take prescription pain medication on a daily basis. In a 2017 follow-up survey to a subset of previous respondents, Krueger found that two-thirds of men not in the labor force and taking pain medication used Medicaid, Medicare, or Veterans Affairs health insurance to purchase prescription pain medication, with the largest group relying on Medicaid.

The LFP rate in the U.S. peaked at 67.3 percent in early 2000, and has declined at a more or less continuous pace since then, reaching a near 40-year low of 62.4 percent in September 2015. In recent years, the LFP rate among prime-age men has been notably low. In 2015, Italy was the only O.E.C.D. country that had a lower LFP rate of prime age men than the U.S.

Workers age 55 and older are the only age group that has shown a notable rise in participation over the last two decades. The rise in LFP of women drove the post-World War II increase in U.S. labor force, but there’s evidence to suggest generational shifts, which drew increasing numbers of women into the workforce, have come to an end.

Krueger’s analysis reinforces past research in finding that the overall decline in LFP since 2007 is primarily due to an aging population and ongoing trends that preceded the recession, for example increased school enrollment of young workers. However, the high rate of LFP decline related to opioid use suggests addressing the opioid crisis could help support efforts to raise labor force participation and prevent it from falling further.

Correction: This post was updated on January 9, 2019  to correct an error with the author’s calculations which inaccurately attributed 20 percent of the decline in US male labor force participation from 1999 to 2015 to the increase in opioid prescriptions. The rise in opioid prescriptions could account for as much as 43 percent in the decline in male labor force participation during this time period.

The author received financial support for this work from the Federal Reserve Bank of Boston and the National Institute on Aging. With the exception of the aforementioned, the author did not receive financial support from any firm or person for this paper or from any firm or person with a financial or political interest in this paper. He is currently not an officer, director, or board member of any organization with an interest in this paper. No outside party had the right to review this paper prior to circulation.