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Drinking Alcoholic Beverages and Income

Women in the US who drink alcoholic beverages earn 14 percent more than nondrinkers and men who drink make 10 percent more than abstainers, according to an economic analysis published in the Journal of Labor Research. Men who drink in a bar at least once a month earn an additional 7 percent, for a total of 17 percent more than nondrinkers.

Research in several countries has found that those who drink alcohol earn more money. One explanation is that moderate drinking improves health, which in turn affects earnings (Hamilton and Hamilton, 1997).

The current study tested the idea that drinking increases social capital, which leads to greater income. Social capital refers to a person’s social characteristics, including social skills, charisma, number of friends and acquaintances, and other sociability factors that enable the person to reap both economic and non-economic returns from interactions with others.

There is strong evidence that social networks are important in finding jobs and earning promotions (Corcoran, 1980; Montgomery, 1991; Pulman, 2000). A large number of weak ties or friends-of-friends may be the most important factor in getting the best job and highest income (Granovetter, 1995).

If social drinking increases social capital, which increases income, then social drinking is a productive activity, report the researchers.

Moderate drinkers have the strongest social networks (Skog, 1980) and there is a negative relationship between social integration and abstinence (Leifman, et al). The researchers note that “Whether abstainers choose not to be as social or whether organizers of social functions involving drinking exclude abstainers in unclear. Abstainers may prefer to interact with other abstainers or less social people. Alternatively, abstainers might not be invited to social gatherings, work-related or otherwise because drinkers consider abstainers dull.”

It appears that people make more money because they drink. Research conducted by Dr. Pinka Chatterji of Harvard University and Dr. Jeffrey DeSimone of the University of South Florida demonstrates that higher income is not leading to drinking. That is, the larger proportion of higher income people who drink isn’t because they can afford to do so. Their research was funded by the National Institute on Alcohol Abuse and alcoholism (NIAAA).

Of course, there can be too much of a good thing. The economic advantage associated with drinking is eliminated when consumption exceeds 35 drinks per week.

 

Reference:

  • Adapted in part from Peters, Bethany and Stringham, Edward P. No Booze? You May Lose: Why Drinkers Earn More than Nondrinkers. Reason Foundation Policy Brief 44. Los Angeles, CA: Reason foundation, 2006 and Chatterji, Pinka and DeSimone, Jeffrey. High School Alcohol Use and Young Adult Market Outcomes. Cambridge, MA: National Bureau of Economic Research, 2006. Additional references: Auld, Christopher. Society, drinking, and income. Journal of Human Resources (forthcoming), cited by Peters & Stringham in No Booze? You May Lose (see above); Corcoran, Mary, et al. Most workers find jobs through word of mouth. Monthly Labor Review, 1980, 103, 33-35; Hamilton, Vivian and Hamilton, Barton H. Alcohol and Earnings: Does drinking yield a wage premium? Canadian Journal of Economics, 1997, 30, 135-151; Leifman, Hakan, et al. Abstainers in late adolescence: Antecedents to and covariates of sober lifestyle and its consequences. Social Science and Medicine, 1995, 41, 113-121; Montgomery, Jane D. Social networks and labor-market outcomes: Toward an economic analysis. American Economic Review, 1991, 81, 1408-1418; Putnam, Robert. Bowling Alone: The Collapse and Revival of American Community. NY: Simon and Schuster, 2000; Skog, Ole-Jorgen. Social interaction and the distribution of alcohol consumption. Journal of Drug Issues, 1980, 10, 71-92.; Garnaut, John. Who said boozers are losers? Just take a look at their paychecks. Sydney Morning Herald, October 3, 2006.

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filed under: Alcohol Economics

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