The Economics of Workplace Drug Testing

Abstract

Workplace drug testing is routinely criticized as irrational, unproductive, and even motivated by nefarious intent. This article analyzes the costs and benefits of workplace drug testing within the context of a complex business environment. Even in a drug-policy vacuum, workplace drug testing is shown to be rational under certain circumstances. The rationality of a drug-testing regime strengthens during a societal War on Drugs and weakens slightly as society transitions into a drug-enforcement regime that experiences legalization at the state level and enforcement at the national level. Throughout, however, the optimum level of workplace drug testing is likely never zero.

Keywords: War on Drugs, Legalization, Decriminalization, Drug-testing

JEL Classification: D21, I18, J28, J59, K20, L11, L21, M21, M59