The Drinkers’ Bonus: Alcohol Intake and Increased Earnings

Drink­ing alco­hol – and the increased social cap­it­al that it leads to – may not just be respons­ible for a pos­sible increase in life span; it may increase your earn­ings, too.

In an ana­lys­is of both the Gen­er­al Social Sur­vey and the pub­lished lit­er­at­ure, research­ers for the Reas­on Found­a­tion show that alco­hol drink­ers earn, on aver­age, 10% more than abstain­ers (pdf). This is known as the drink­ers’ bonus.

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. […]

Drink­ers typ­ic­ally tend to be more social than abstain­ers. As Cook (1991) explained, drink­ing is a social activ­ity, and one reas­on people drink is to be soci­able. In the med­ic­al lit­er­at­ure, Skog (1980) showed that mod­er­ate drink­ers have the strongest social networks. Fur­ther­more, Lei­f­man et al. (1995) doc­u­mented a neg­at­ive rela­tion­ship between social integ­ra­tion and abstin­ence. Wheth­er abstain­ers choose not to be as social or wheth­er organ­izers of social occa­sions involving drink­ing exclude abstain­ers is unclear. Abstain­ers may prefer to inter­act with oth­er abstain­ers or less social people. Altern­ately, abstain­ers might not be invited to social gath­er­ings, work-related or otherwise, because drink­ers con­sider abstain­ers dull.

Corcor­an et al. (1980), Mont­gomery (1991), and Put­nam (2000) each made con­vin­cing cases that social net­works are import­ant for find­ing jobs and earn­ing pro­mo­tions. Mont­gomery (1991) explained that com­pan­ies prefer acquaint­ances of employ­ees because employ­ees screen poten­tial can­did­ates and thereby reduce the cost of search. Approx­im­ately half the work­ers sur­veyed in the Pan­el Study of Income Dynam­ics found their job through friends or rel­at­ives, and one-third repor­ted help from acquaint­ances in obtain­ing their job (Corcor­an et al., 1980). There­fore, a per­son with more con­tacts will have more labor mar­ket options (Burt, 1997). Gran­ovet­ter (1995) sug­ges­ted that a large quant­ity of weak ties or friends-of-friends may be most import­ant to gar­ner­ing the best job offers.

Thus, if social drink­ing enables great­er social net­works, it will also increase earn­ings. In terms of search the­ory: the more one drinks, the more people one knows, and the more people one knows, the lower the mar­gin­al costs of search.

The study is packed full of excel­lent ref­er­ences to pub­lished stud­ies (as you can tell from the above excerpt), so I sug­gest read­ing the access­ible (and very short!) report. It’s also worth not­ing foot­notes four and five, describ­ing how this is just like all invest­ments in cap­it­al, in that an optim­al level exists: “you must drink more than 21 drinks per week to earn as little as a non-drink­er”.

via @phila_lawyer