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The Economic Costs of Alcohol and Drug Abuse in the United States - 1992

Productivity Losses - Continued

5.4 Lost Earnings While Institutionalized and Hospitalized


The estimated loss of potential productivity because of long-term residential treatment and short-term hospitalization of alcohol and drug abusers was $3 billion in 1992; drug problems cost $1.5 billion, and alcohol problems, $1.5 billion.

There were an estimated 63,800 clients in long-term residential alcohol and drug abuse treatment programs on a given day in 1991 (Harwood et al. 1994). Most clients enrolled in long-term treatment programs are not allowed to hold jobs until very near the end of their treatment stay, so enrollment in treatment amounts to a temporary loss of potential employment. It was estimated in Harwood et al. (1984) that the average loss of potential productivity per person-year from long-term treatment was $24,600 after adjustments for expected rates of labor force participation, unemployment, and household productivity. Wage rates of nonmanagerial workers increased 59 percent between 1980 and 1992, yielding annual potential productivity of $39,000. This has been arbitrarily adjusted downward by about 10 percent, to $35,000, because the treatment population in 1991 was somewhat younger on average (median age of 31 years versus 34 years) and had a slightly greater proportion of females (24 percent versus 22 percent).

Total loss of potential productivity resulting from long-term residential treatment of alcohol and drug abusers was thus estimated at $2.233 billion in 1992. Losses for clients with primary drug problems were $694 million, whereas losses for clients with primary alcohol problems were $577 million and losses for clients with both drug and alcohol problems were $962 million. When the costs for the dually affected clients were prorated (among those with a single problem, about 55 percent had drug problems and 45 percent had alcohol problems), the loss attributed to drug problems was $1.222 billion (54.6 percent), versus $1.011 attributed to alcohol problems. It should be noted that in 1980 almost 80 percent of these costs were attributed to clients with primary alcohol problems (Harwood et al. 1984). Although it appears that the proportion of individuals in long-term residential alcohol and drug abuse treatment who had alcohol problems (counting primary alcohol plus combined alcohol and drug) declined from 80 percent in 1980 to almost 70 percent in 1991, it is difficult to attach broader significance to this finding. There have been major institutional changes in the organization, delivery, and financing of alcohol and drug abuse treatment as well as changes in prevalence patterns over the period of concern that obviate facile interpretation.

Patients spent almost 6.9 million days (18,800 patient-years) in hospitals in 1992 for treatment of alcohol and drug abuse and related health problems (see chapter 4 for the calculations and discussion). Again, this represents a loss of potential productive time, which can be assigned a value in the same manner applied to patients served in long-term residential substance abuse treatment facilities. For simplicity, the assumption is being made that the demographic characteristics of those in hospitals receiving treatment related to alcohol and drug problems were similar to characteristics of those served in residential specialty facilities, with an opportunity cost of their time equal to $35,000 per year. This yields estimated costs of $757 million for 1992, with $502 million for alcohol abuse and $255 million for drug abuse based on the diagnoses associated with care delivered in hospitals.


5.5 Lost Earnings Among Fetal Alcohol Syndrome Victims


Based on the assumption of a 1-in-1,000 incidence rate among these birth cohorts (see chapter 4), there were an estimated 144,000 adult survivors of FAS in 1992 (ages 22 to 65). As discussed in chapter 4, many FAS victims suffer long-term developmental disabilities, hearing loss, and other physical ailments. The estimates in this section are updates of estimates provided by Harwood et al. (1984), with adjustments only for population growth and price change between 1980 and 1992. About 2.5 percent of FAS victims are severely mentally retarded, and labor force participation among even the mildly developmentally disabled is lower than among nondisabled persons. However, the large majority of FAS victims are assumed to experience only "minimal brain dysfunction" (52.5 percent) or mild mental retardation (37.5 percent), with assumed rates of productivity impairment of 10 and 25 percent, respectively. Adjusting for wage inflation since the last study of earnings among FAS survivors (Harwood and Napolitano 1985), it is assumed that in 1992, the average FAS survivor earned $6,900 less than non-FAS victims. Totaled across the adult population with FAS, it is conservatively estimated that FAS cost society $990 million through lost earnings.


5.6 Crime-Related Productivity Losses


Losses in productivity due to crime and its effects cost society an estimated $45.6 billion in 1992, of which $6.4 billion is attributable to alcohol-related problems and $39.2 billion is attributable to drug problems. Three types of productivity-related costs of crime are estimated in this study: (1) the value of lost work time for victims of crime; (2) productivity losses for individuals incarcerated in prisons as a result of conviction for an alcohol- or drug-related crime; and (3) productivity losses for those who engage in crime as a career because of their addiction to heroin or cocaine. The value of these productivity losses has been calculated using the methodology and basic approach developed in Cruze et al. (1981) and applied in Harwood et al. (1984) and Rice et al. (1990).

These values represent losses of potential productivity to the economy. For victims of crime, it is understandable that they would often lose work days (or their primary activity) because of injuries, time for reporting crimes, inconvenience, and related reasons and that this would entail a net loss of earnings and productivity. According to the National Crime Survey (NCS; U.S. Department of Justice 1994b), there were 33.6 million victimizations in 1992, which involved loss of an average of about 2.5 "work" days each (excluding homicides, which are accounted for in section 5.2 on mortality). Separate estimates have been developed for the various types of crime tracked in the NCS. For each type of crime, the calculation multiplies the number of offenses in 1992 by the average number of work-loss days. The total number of work-loss days is multiplied by an estimated loss of (market plus nonmarket) productivity of $133 per lost work day (which is weighted for gender and age distribution). For each type of crime, attribution factors are applied for alcohol and drug abuse, respectively (these are discussed and documented in chapter 6), to estimate the value of losses from these two causes. This yields a total estimated loss of $3.1 billion ($1 billion for alcohol and $2.1 billion for illicit drugs; see detailed calculations in appendix B, table B.5).

Prisoners also represent a loss of potential productivity to society, since few prisoners can work. Moreover, there is some question about the nature and value of such losses. Prior studies have estimated the loss of potential productivity while incarcerated as equal to the average realized by the general population - that is, average rates of employment and average productivity/wage rates.

However, it is arguable that even if they were not incarcerated, many of these individuals might still have had poor success in the legitimate labor market. This is very possibly related to their problems with alcohol and drug abuse. (Note that lost productivity of alcohol and drug abusers in the general population is discussed in section 5.3 and in the text immediately following; the calculations are designed to avoid double counting of losses.) By this line of logic, the loss of potential market plus nonmarket productivity might be much less than the value for the general population because it is anticipated that they would have higher than average unemployment rates and/or lower than average wage rates.

This rationale is not adopted in the current study. The calculations are based on the assumption that in the absence of drug and alcohol abuse, prisoners' potential productivity would be equal to the productivity of the general population. This is because even without incarceration there is a loss equal to the difference in productivity for alcohol and drug abusers compared with values for the general population. This difference already constitutes a cost to society. The impact of incarceration is to simply drive productivity for such an individual even lower - that is, to zero. Thus, while the incremental productivity-related cost of incarcerating such a person is only a portion of the potential productivity for a member of the general population, to this must be added the cost representing the productivity decrement such a person experiences even when available for the labor market. This distinction is critical because the incarceration cost component does not estimate the added productivity-related cost of incarceration so much as it estimates the loss of productivity associated with those individuals who are incarcerated. Those individuals have a total loss of potential expected productivity because their current and past alcohol and drug problems reduce their expected productivity when they are available for the labor market, and even this lower productivity is lost due to incarceration.

This logic is strengthened by analyses that find that a major impact of early initiation of drinking and drug use can be to reduce educational attainment. Poor education limits success in the labor market. Most studies of offender populations have found both early onset of drinking and drug use and high dropout rates. It is plausible that these may be causally linked.

The value of reduced productivity for those incarcerated in prisons has again been calculated using the methodology developed by Cruze et al. (1981), with the application of new and updated attribution factors as discussed in chapter 6. The detailed calculations appear in appendix B. There were 1.3 million person-years spent in prisons and jails in 1992. Total person-years by type of offense (by gender) were multiplied by the appropriate attribution factor to yield an estimate of about 600,000 person-years incarcerated during 1992 due to alcohol- and drug-related offenses. The resulting total person-years were multiplied by the average expected annual productivity (market plus nonmarket) of about $40,000 per year for males and $26,000 for females (including adjustments for expected labor force participation and employment). The total value of lost productivity due to incarceration is estimated at $23.4 billion ($5.5 billion for 140,000 person-years for alcohol-related offenses and $17.9 billion for 460,000 person-years for drug-related offenses).

Drug-related crime careers represent another major avenue through which potential market productivity is lost. This cost comes from individuals largely forsaking the legitimate economy to obtain income through trafficking in drugs (a per se drug-defined activity/cost) or in order to obtain income for illicit drugs from other criminal activities, such as acquisitive crimes, consensual crimes (e.g., gambling or prostitution), and receiving and trafficking in stolen property. There are no comparable costs hypothesized for alcohol because there is very little trafficking in illicit alcohol currently and because alcohol, which is relatively inexpensive compared with illicit drugs, is affordable at legitimate wages and should not motivate a change in career to pursue income-generating crime.

The total value of lost productivity due to drug-related crime careers (men plus women) is estimated at $19.2 billion. This estimate was calculated based on the estimate that there were about 1.7 million heavy drug users in the United States in 1992 (Rhodes et al. 1995). The prior studies estimated that there were about 1.2 million heavy drug users. Following the earlier studies, it was estimated that about 600,000 of them withdrew from the labor market to pursue predatory crime and/or drug dealing (estimate derived from analysis of the Treatment Outcomes Prospective Survey [TOPS] reported in Harwood et al. [1984]). This loss is based on the models of criminal behavior that Goldstein (1985) has labeled "economic compulsive" and "systemic": The crime is committed to support one's use of expensive drugs, or one engages in the drug distribution system primarily to earn a living.

The United States is estimated to have 1.7 million heavy drug users (Rhodes et al. 1995), including:

  • About 500,000 opiate addicts (virtually identical to the estimates used in all prior U.S. cost-of-illness studies), and
  • About 1.2 million heavy or dependent users of other drugs, primarily cocaine (twice as many as in the most recent cost-of-illness studies by Rice et al. [1990] and Harwood et al. [1984]).

Studies of drug addicts enrolled in treatment have found that they generally have low levels of employment, high rates of referral from criminal justice authorities, and if asked, high levels of involvement in income-generating illegal activities. Comparably undesirable rates on these factors for drug addicts enrolled in treatment have been reported in the California Drug and Alcohol Treatment Assessment (Gerstein et al. 1994), the Treatment Entry and Discharge System (TEDS; SAMHSA 1997), and in the National Treatment Improvement Evaluation Study (NORC 1996). These rates have been generally consistent with estimates applied in Harwood et al. (1984) from TOPS (Hubbard et al. 1989). Primarily to maintain comparability with Harwood et al. (1984), this study has again used the findings from TOPS on the proportion of opiate and nonopiate addicts estimated to withdraw from the legitimate labor force (54 percent and 46 percent of males and 39 and 29 percent of females, respectively). The prior estimate of average potential productivity was adjusted for changes in wages/productivity of 59 percent.

Thus, the current estimate is a direct extrapolation from the prior study that uses virtually the same number of opiate abusers (500,000 addicts), about twice as many addicts/heavy users of other drugs (from 600,000 to 1.2 million), identical demographic distributions, and an increase in per-addict loss equivalent to the increase in nominal wages of 59 percent from 1980 to 1992.


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