Opioid epidemic hurts US businesses and leads to job automation, UNC study says

The nation’s opioid epidemic triggered a drop in the number of people able to work, hurting companies’ ability to grow and leading to an increased investment in technologies to replace those workers, a new study from UNC-Chapel Hill’s Kenan-Flagler Business School found.

The study, which hasn’t been published in an academic journal yet, says opioids “effectively make labor costlier” in some communities by shrinking the number of applicants available for jobs. That negatively affects company growth in areas heavily impacted by opioid addiction.

The study also shows that in areas with high levels of opioid abuse, companies have made more investments into technology and automation, which could cause “permanent negative effects on local labor markets.”

The effects were most significant in states with higher levels of opioid prescriptions, of which North Carolina was one.

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A map showing which states have been hit hardest by opioid addiction. Courtesy of UNC Kenan-Flagler

“The substitution away from labor to capital has implementations for communities,” said Elena Simintzi, an assistant professor of finance at Kenan-Flagler and a co-author of the study.

“Blue-collar workers who are middle-aged are more likely to get addicted, and these are the types of jobs that get subbed away with technology. That has a lasting effect in a community.”

She added that many of these employees will then need to be retrained or take jobs in the service economy, which often pays less than traditional manufacturing.

This isn’t the first study to tie opioid addition to labor participation rates.

The late Alan Krueger, a Princeton economist, wrote a paper that said opioids could account for “about 43 percent of the observed decline in men’s labor force participation.” Former Federal Reserve chairwoman Janet Yellen also suggested a link during her time at the Fed.

But UNC says this is the first study that looks at the impact on the companies that employ those workers.

In areas that had high levels of addiction, the study found a “negative and significant” relationship between opioids and the growth of companies there. In contrast, in states where levels of addiction were lower, the study didn’t find a significant relationship between opioids and firm growth.

Simintzi said this especially hurt companies that employ low-skill manufacturing workers, as low educated workers and those who are at risk for injury on the job are more likely to become addicted to opioids. These companies are often competing with other firms in countries like China or Europe that don’t have face these addiction issues, putting them at a disadvantage, she added.

The study uses a New York Times story about a Youngstown, Ohio-based boiler maker as an anecdote for this phenomenon.

That company misses out on about $200,000 worth of orders ever year because of a lack of labor to fill the orders. Many of its potential employees fail drug tests and can’t work the heavy machinery. A German company is the beneficiary of the firm’s inability to fill all of its orders, the company’s CEO told the Times.

The UNC study measured the relationship between opioid prescriptions and company growth by looking at sales and employment, using a proprietary Compustat sample of publicly traded firms and other data covering public and private companies.

A bright spot

However, there was a bright spot in the study.

In states that have passed laws and regulations around the dissemination of opioids, the study found a link between the passage of laws and stock price increases for the public companies based there.

The study notes that as of last October, 25 states have passed laws meant to limit prescription rates for opioids. North Carolina is one of those states, passing the NC STOP Act in 2017.

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A map showing which states have passed legislation to limit the prescription of opioids. Courtesy of UNC Kenan-Flagler

The Strengthen Opioid Misuse Prevention or STOP Act limits doctors to prescribing no more than a five-day supply of opioids such as Percocet during an initial visit to treat a patient’s pain issue, The News & Observer reported. Two years ago, the state also implemented an Opioid Action Plan to expand treatment in the state and reduce the oversupply of prescriptions.

From 1999 to 2016, the opioid epidemic claimed 12,590 lives in North Carolina, The N&O reported. But the state reported it made some progress in fighting the epidemic earlier this week at the 2019 Opioid Misuse and Overdose Prevention Summit.

Since the state implemented an Opioid Action Plan two years ago:

Opioid dispensing has decreased by 24%.

The use of addiction treatment drugs has increased by 15%.

Opioid-related emergency room visits dropped in 2018, the first such decline in over a decade.

“We are making headway,” Gov. Roy Cooper said at the summit.

“The numbers show progress, but it’s the stories that paint a picture,” he continued. “Behind those numbers are lives saved, families kept whole. But we haven’t won yet, far from it. We have not yet stopped this disease in our state.”

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Zachery Eanes is the Innovate Raleigh reporter for The News & Observer and The Herald-Sun. He covers technology, startups and main street businesses, biotechnology, and education issues related to those areas.