Sunday, November 05, 2006

Social Drinkers Earn More Money

Somewhat disturbing, but ringing true in a bunch of dimensions... This study shows that social drinkers earn more money than non-drinkers, and claims it's because of the increase in social capital gained by knocking one back with colleagues.
Although there is a united campaign to restrict alcohol, labor market data may surprise noneconomists: recent studies indicate that drinking and individual earnings are positively correlated. Instead of earning less money than nondrinkers, drinkers earn more. One explanation is that drinking improves physical health, which in turn affects earnings (Hamilton and Hamilton, 1997). We contend that there is an economic explanation. We hypothesize that drinking enhances social capital, which leads to superior market outcomes. Glaeser et al. (2000: 4) describe social capital as “a person's social characteristics, including social skills, charisma, and the size of his Rolodex, which enable him to reap market and nonmarket returns from interactions with others.” Some aspects of social capital might be innate, but people can enhance others, such as Rolodex size. If social drinking increases social capital, social drinking could also increase earnings. We attempt to test whether drinking enhances social capital by differentiating between social and nonsocial drinking; we predict that those who drink in public will have higher earnings than those who drink at home. New data confirm that drinkers earn more, and we find that social drinkers earn even more.

The article is here and comes with a somewhat scary libertarian slant intro, be warned:No Booze? You May Lose:Why Drinkers Earn More Money Than Nondrinkers (pdf). Note, this obviously supports the value of conference trip networking as important for career, if money is an indicator of career success (it is to some).


steve said...

I'm not surprised, but I can only hypothesize.

But as an non-drinking, vegetarian atheist I guess I lose...

Eric Matthews said...

I read the full publication:
So now I have a few questions.

Could socialization, rather than social drinking, be a greater common factor for income?
I noticed social drinking is not compared with other forms of socialization (e.g. family, race, religion, lifestyle, and interest based socialization). There will certainly be overlap, but how does a highly social abstainer compare to a highly social drinker?

About cause and effect:
Does social drinking simply cause increased income, or does increased income sometimes allow for more social drinking?

Are total abstainers more likely to be recovered alcoholics or children of alcoholics? Wouldn't this affect their income levels?

About the survey sample:
Peters and Stringham use the General Social Survey (GSS), which gets its sample from U.S. households.
This does not account for the homeless and no-household transients who can account for over 1% of the U.S. population whose income approaches zero percent. Over one third to nearly one half of these have alcohol use problems. So even if 99.5% of drinkers can attribute a 10% greater income to alcohol, wouldn't nearly half of that benefit be lost if just half of a percent can attribute their homelessness and a 100% income loss to drinking?

Also, the GSS does not survey the dead. The average income of a person who dies from an alcohol related cause also makes 100% less than that of an abstainer.

The article might dismiss the heavy drinker from its sample of moderate drinkers, but don't all heavy drinkers start as moderate ones?

I doubt that the answer to any of these questions completely negates the findings of Peters and Stringham, but I wouldn't be surprised if all the answers combined completely washed away the supposed income benefits of alcohol consumption.