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