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Drink to success?

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.

Unintended consequences?

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.

14 Comments

  1. A question: which direction is the causality? Are high income people more likely to drink, or does drinking cause higher paychecks? If drinking caused higher paychecks, you'd expect to see even higher paychecks among heavy drinkers – which I doubt. If higher paychecks created drinkers, then you'd expect more drinks consumed by weathier people – sounds more likely.

    However, I had a separate idea. You worry about becoming an old saw with your graphical display of data. Why don't you coordinate some students to regraph published data from the interesting reports that you cover, rather than just comlaining? It would be especially an instructive exercise if it (1) makes the original points more clearly or better yet (2) uncovers even more interesting/important points.

    There's so much rich material for graphical reinterpretation – I'd love to see what you and your colleagues can come up with regularly!

    (Now, I know that it can hard work. That's why you hope that others will pick up the mantle based on the example that you linked to. However, I think that taking on a slighter larger scale project would make you think about how to automate the process, and you could create and disseminate some tools, etc. Cool, no?)

  2. brent says:

    I had the same concern about causality: high income causes stress causes drinking, and low income causes budgeting causes absinance. I assume the authors address that? Interesting find. Thanks.

  3. Koray says:

    The report suggests that drinking in public creates more social interactions, which result in more earnings for the person. It is as if the people are still working while having fun, exchanging ideas, getting to know people and their ideas, etc. So the report is actually more about reclusion vs gatherings with one's peers & even competitors.

  4. Lisa says:

    One cause neither the report nor people here have mentioned yet is workplace culture. Bankers and lawyers make a lot of money, and I believe they are also expected to go out and drink with co-workers (and possibly clients) as part of the norms of their social world. (Wealthy computer nerds, less so.)

  5. Did they control for health problems? Perhaps the sick both drink and earn less?

  6. Douglas Knight says:

    I've come here from Marginal Revolution which cited another study comparing adolescent drinking to young adult wages, so the causality is not from wealth to drinking. (It claims to control for backround, which I assume means that parents' wealth is not causing both, either.)

  7. Seth Roberts says:

    "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."

    What follows this remark are many interesting comments. Almost all of them might be called "negative" in the sense that they are about limitations of the data, for example "We have some questions on the 2006 General Social Survey to estimate network size."

    What are the effects of a "negative" bias in comments? As far as evaluation goes, it's pretty obvious: The paper is under-appreciated. But negative comments could be justified as suggestions for further work. That's fine, but I wonder if that too is a biassed look at things. You could justify positive comments as suggestions for further work as well — suggesting similar work on similar data sets.

    Years ago I attended a weekly journal club on animal behavior where the bias toward criticism was a serious problem: The graduate students appeared to be capable of nothing else.

  8. Andrew says:

    Seth,

    I don't know if statisticians have a bias toward criticism but we did discuss this issue a bit here (in the context of my comments on Kanazawa's papers).

    For the paper on drinking and earnings, I didn't think I was so critical of the methodology but I did express skepticism about the authors' policy recommendations. For some harsher criticism, see Tony Vallencourt's comments here (link from Tyler Cowen's comments).

    Your comment about data limitations is interesting as part of a more general point. Rubin used to ask, "What would you do if you had all the data?" (in this case, an exact measure of each person's social network size). By focusing on data limitations and data collection, we can be distracted from the larger goals. (Rubin was making this point in the context of methods in biostatistics that focused on data problems such as censoring, without concern for an appropriate underlying model, but I think his point is relevant here too.)

  9. Robert says:

    Drinking alcohol is a marker for physical health. When I have a bad cold or flu, I know I'm recovering when I want a drink again. This effect may also explain why men who eat huge portions are considered to be more "real men" than those who pick, birdlike, at their tofu. For millennia, fatness was a much-desired state of being.

  10. Intervention says:

    Drinking is not a bad thing to do but drinking too much is. And sometimes people who started to drink are the ones most likely to become addicted and abuse alcohol. It is very important to keep in mind that drinking should be in moderation. We should set a limit for ourselves on what is enough and what is too much to drink. With this we can truly say that drinking can bring us success.

  11. Megan Pledger says:

    Two points I'd like to make
    1) There are two types of abstainers, those who choose to abstain and those that have to abstain. Possible reasons for having to abstain being poor health (alcohol interferes with medication), being pregnant and being a recovering alcoholic. And those things generally interfere with income – a sick person may need time off/can't work late, a pregnant women can't work from the labour ward and a recovering alcoholic is going to have a spotty work history meaning jobs are harder to come by.
    2) The other thing is that there are strong sex*age interactions in both income and drinking behaviour. If you are an older women then you are more likely to earn less than an older man (social pressure to be a stay at home mum, not gone to college, don't work or work part time) whereas the wage difference isn't so marked in the young (fresh from college, more child care options, social pressure to *not* be a stay at home mum). By the same degree, older women are much more likely to be abstainers compared to older men (women who drank were "fast") but younger women are nearly as likely to be drinkers as younger men.

    The r code below shows, that given some reasonable guesses about income and probability of abstaining, accounting for the age*sex interaction can knock out the effect of drinking on income.

    set.seed(10)

    #abstaining
    x1

  12. Megan Pledger says:

    The html parser ripped that R code to pieces. Hopefully this will work.

    <pre>
    set.seed(10)

    #abstaining
    x1
    </pre>

  13. Corey says:

    You need to use "&lt;", which will show up as "<". Or you could just use "=" for assignment just so the code shows up right. (Also, use "&amp;" for "&" if your code has any. I'm not sure if it's necessary, but to be safe you can also use "&gt;" if your code has any ">".) If you have a text editor with find-and-replace it should be a snap.

  14. NCPLH says:

    Europe is moving towards integration of alcohol licences. This will be like a dream come true for responsible drinking!