I’ve been told recently that there is actually no good evidence that alcohol is good for your heart. But it may be good for your wallet. Gueorgi sent me this:
Drinking Alcohol Can Lead to Fatter Pay Checks, Study Says
Sept. 15 (Bloomberg) — Drinking alcohol can fatten your pay check, according to a Reason Foundation study published in the Journal of Labor Research.
Men who visit a bar at least once a month to drink socially bring home 7 percent more pay than abstainers, and women drinkers earn 14 percent more than non-drinkers, according to the study by economists Bethany Peters and Edward Stringham.
“Social drinking builds social capital,” Stringham, a professor at San Jose State University, said in a press release. “Social drinkers are out networking, building relationships, and adding contacts to their BlackBerries that result in bigger paychecks.”
The report, published in Los Angeles, questions the economic effects of anti-alcohol legislation at sports stadiums and festivals.
“Instead of fear-mongering we should step back and acknowledge the proven health and economic benefits that come with the responsible use of alcohol,” Stringham said.
Here’s the report, and here’s the link to the full article in the Journal of Labor Research. I had no ideat that drinkers (in the U.S.) make 10% more money than nondrinkers, but this is apparently a well-known fact with a literature going back nearly 20 years. 10% more is a lot! In this paper, Peters and Stringham actually find that drinkers make 20% more than nondrinkers, on average. After controlling for age, ethnicity, religion, education, marital status, parents’ education, number of siblings, and region of the country, they find a coefficient of drinking of over 10%. That would seem to more than cover the cost of the drinks themselves (for example, two $5 drinks per week comes to only 1.7% of a $30,000 (after-tax) salary).
The difference between “significant” and “not significant” is not itself statistically significant
The researchers also find that people who attend a bar at least once per month (which they perhaps misleadingly call “bar-hoppers”) to have higher earnings than other drinkers, again after controlling for the other variables. The coefficient for “bar-hopping” is higher for men than for wonen, in fact significant for men but not for women, but the difference between this coefficient for the two sexes is not statistically significant.
I don’t really want to pick on Peters and Stringham here, since this is such an extremely common mistake (which also wasn’t picked up by the referees of the paper). The comparison between men and women is also a small part of the study. It’s just funny to me to see this mistake here, where I wasn’t really looking for it. It’s one of those perception things, like if you get a dog, then all of a sudden you notice that everybody in the neighborhood seems to have dogs. I’m just super attuned to this particular statistical point, having just written a paper on it. (I’d also comment that the tables would be better displayed graphically but I fear I’ve worn out my welcome by now.)
How to think about this?
I don’t really know. Obviously lots of criticisms could be made, most notably that these social people might make more money and also drink more, but maybe they’d make more money even if they didn’t drink as much. On the other hand, the pattern appears to be there in the data. I guess I’d be more cautious about the causal interpretation, but, causal or not, it’s an interesting finding, as is the connection to social capital.
Similarly, the policy recommendations are interesting, but the research could be taken in different directions. The article says,
Our analysis leads to a number of policy implications. Most importantly, restrictions on drinking are likely to have harmful economic effects. Not only do anti-alcohol policies reduce drinkers’ fun, but they may also decrease earnings.
But, another way to say it is that drinkers are richer than nondrinkers, and so restrictions on drinking harm the relatively well-off and are thus not such an onerous social burden. In any case, the issues of public healh, individual liberty, and economic effects have to be balanced in some way in deciding about laws like this, and this paper seems relevant to the debate. I assume that economists have also done city- or country-level analyses to estimate the effects of alcohol restrictions on the local economy.
Peters and Stringham write, “One of the unintended consequences of alcohol restrictions is that they push drinking into private settings.” I’m just wondering: was that really unintended? My recollection from 8th grade history or whatever is that the temperance crusaders were no fans of saloons, and they may have actually felt that drinking behind closed doors would not be so bad.
One more thing . . .
The authors use the General Social Survey and conjecture about social networks. We have some questions on the 2006 General Social Survey to estimate network size (using the method described here). I don’t know if the 2006 GSS has any questions on drinking (or, for that matter, other aspects of drug use) but if it does, I think there’s room for a followup study making use of our social network information. As with the current study, we wouldn’t know to what extent drinking expands the social network, and to what extent already-popular people are drinking. But it would be interesting to see the data.