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Recessions spur yet more black-market harm

Joblessness precludes an after-work pint. Photo credit: Gerhard Taatgen jr

Is the difference in changes in drug use and alcohol consumption during recessions down to the way they're regulated?

The increase in use of cannabis by young people during economic recessions could be a result of its trade being left to the black market, according to the codirector of the RAND Drug Policy Research Center, Rosalie Pacula.

At a lecture at the London School of Hygiene and Tropical Medicine last Wednesday, 19 October, Pacula explained that while total alcohol consumption drops during a recession, along with its associated harms, the use of illicit drugs among teenagers and young adults increases. She speculated that this may be partly due to its trade being carried out entirely within the underground economy.

Summarising research published in a recession-special issue of the International Journal of Drug Policy, Pacula said that while overall alcohol use tends to go down, the use of cannabis and cocaine among youth goes up – and that this may be due to increased willingness to deal in the drugs.

"During periods of high unemployment, youth are more likely to report that they’ve sold drugs: they are more willing to engage in black-market employment," she said. "And the reason why is that they have such an incredibly high unemployment rate as it is, even before recession. Even when we’re not in an economic recession the unemployment rate among young adults is substantially higher. And they are the first ones affected when employment starts to drop."

Pacula said that there are several untested hypotheses as to how and why this drives young people into taking part in black-market activity, including facilitation by social networks, lower levels of risk aversion, lower levels of law enforcement as policing budgets are cut during recessions, and and active recruitment by other dealers.

She said that there's some evidence from the US that "black-market sellers are interested in recruiting you because they see that as a very important market: if they can get people using young, they stay using for a long time. Sounds a bit like the tobacco field – works with black-market drug selling as well".

Pacula added that when taking to illegal dealing of drugs, the use of them is facilitated by exposure, by deliberate introduction to new substances by other dealers, and by the ability to pay for drugs by selling them. "Frequently they get paid with drugs – use some, sell the rest and it covers the cost," she said.

“The importance of the findings is that recessions do not affect everyone the same – some populations are certainly more vulnerable", Pacula added.

“In the case of alcohol, the fact that heavy alcohol use, on average, declines in economic recessions, and it appears, with some indicators, that illicit drug use among the older populations might also be declining, suggests that a cut in treatment resources might not be as devastating as a cut in prevention right now. Because if youth use is going up, that’s where you want to really be careful, because youth users are your addicts of tomorrow.

"Prevention is important in this period because it is youth who are particularly vulnerable, due to high unemployment, they get tight into alternative forms of employment that provide income but that also reduce the social attachment to formal education. That has really important implications, and not just for their drug use – youth being willing to engage in black-market activities as a way of subsidising their income can have tremendous social effects outside of their drug use.”

Data also suggest that the prices of illicit drugs are stable during recessions, where one might expect them to drop due a decrease in the risk premium that ought to follow with lower law-enforcement budgets.

Alcohol prices also tend to stay the same or rise with the application of 'sin taxes', and this is one of several interacting economic effects.

Those who are unemployed have lower income and those who are at risk of becoming unemployed treat their income differently. "They’re not going to go out and have that fancy dinner; they’re going to save just in case their job is next," Pacula explained. "So the perceived notion of disposable income, even if their own actual income hasn’t changed, is one of more austerity – they’re not going to spend it.

“What does that mean for alcohol consumption? Economic analysis of demand for alcohol is quite clear: alcohol is a normal good. When incomes go up, in general, people drink more; when incomes go down, they drink less."

However for people who are unemployed, leisure time is less costly since they're no longer giving anything up to get it. This is mitigated by the tendency for people with increased leisure time to use it for healthy activities.

“You don’t have to be sober to go to work tomorrow, because you don’t have to worry about tomorrow. That actually might increase one’s willingness to engage in drinking or to get high. But when people’s leisure time goes up they actually tend to engage more in healthy activities – thinks like sleep and exercise.

"Yes, they’re stressed; there’s a lot of stress associated with losing your job, but on average the behavioural response is actually to do something that’s good for yourself. That might – might, I say, because again, this is all theory; we don’t have good evidence – offset the lowered price of leisure time that you might spend getting intoxicated."

People may be tempted to drink more to deal with the stress that recessions bring but the economic effects tend to dominate. "In the case of alcohol, economic mechanisms that relate to income effects actually have played a bigger role than the psychological effects. And on average in the population, heavy drinking and alcohol-related mortality actually go down during economic recessions – not up."

Pacula added that further challenges during recessions include reduced uptake of treatment for addictions to drugs or to alcohol, and that with lowered incomes people seek to use drugs more efficiently, such as by injecting.