The impact of microeconomic factors (GFC) on alcohol and drug use and harms

Project Supporters:

Colonial Foundation Trust

Drug Type:
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Project Members
image - 1314146187 Chalmers Jenny 06
Conjoint Senior Lecturer
Ph 02 9385 0189
Project Main Description

The implications of the global financial crisis continue to reverberate throughout the world, even as western economies slowly emerge from recession. There are concerns that the stress of living in such an environment will be detrimental for health and well-being; one pathway being self-medication with illicit drugs. We conducted a literature review and subsequent to that, some experimental analysis using the NDSHS data.


Literature review findings

  • During times of economic decline, substance use may increase or decrease or not change. It may increase due to increases in levels of stress, greater impoverished circumstances and poor job prospects. At times of economic decline the informal economies: crime, sex work and drug dealing, are more likely to expand, resulting in greater availability of drugs.  On the other hand, economic decline may be associated with decreased substance use largely due to reductions in purchasing power – alcohol and drug consumption is sensitive to income, and per capita income falls with economic decline.
  • The strongest research evidence supports a relationship between alcohol use and economic decline: that is, economic decline is associated with lower alcohol consumption. The results for illicit drug use are less clear but appear to be in the reverse direction.


Experimental findings

  • Population wide participation in recent (within the last 12 months) use of cannabis and heroin, cocaine or methamphetamine is pro-cyclical, decreasing as the unemployment rate increases;
  • whereas for existing drug users, the frequency of use bears no relationship with unemployment rate.  
  • The population wide findings do not necessarily hold for both men and women. Young women’s participation in drug use is reduced as unemployment rises, as is teenage women’s frequency of use of heroin, cocaine and methamphetamine. However the drug use of men younger than 35 is unresponsive to changes in the unemployment rate.
  • Age impacts on these relationships. Participation in cannabis is pro-cyclical for older Australians, as is participation in heroin, cocaine and methamphetamine among men in their 30’s. However, women’s cannabis frequency is countercyclical when in their early 20s.


Implications for policy: This ‘preliminary’ research suggests that the state of the economy matters for take up and cessation of drugs. Such knowledge is useful as part of an early warning system.

Implications for research: Rigorous investigation of the importance of the various theoretical claims for the relationship between recession and illicit drug use necessitates following people over time. This would allow differentiation between the impacts of job loss, reduced income from work, reduced wealth, and increased anxiety about job loss and, for the longer term unemployed, the reduction in the opportunity to find work.

Another important area for further investigation is the consideration of underemployment alongside unemployment, where underemployment refers to insufficient hours of paid work amongst workers in part-time employment. A person is classified as employed if they work 1 hour in the reference week. Australia’s most recent economic boom, beginning in the early 1990s, saw a relatively stable underemployment rate alongside a steadily declining unemployment rate while the financial crisis induced economic slow-down has seen the underemployment rate rise more sharply than the unemployment rate.  Although not suffering the same financial privation as the unemployed, underemployed workers have less income to allocate to drug use than the average full-time worker. Underemployment is concentrated amongst young people and women working in poorly paid part-time insecure jobs. This insecurity also potentially has implications for drug use.

The age-specific findings suggest the possibility that cohort effects on drug use are inadequately accounted for by the year of survey fixed effects.  Furthermore, people’s relationship with the labour market and patterns of drug use vary by gender and stage of life-course. Further analysis is required to fully explicate these complex relationships between gender, age, cohort, stage in life-course, drug use and the state of the economy.

Project Supporters

Colonial Foundation Trust

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Date Commenced

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