Do Drinking And Smoking Make You Wealthier?

Drinkers make more money:

A number of theorists assume that drinking has harmful economic effects, but data show that drinking and earnings are positively correlated. We hypothesize that drinking leads to higher earnings by increasing social capital. If drinkers have larger social networks, their earnings should increase. Examining the General Social Survey, we find that self-reported drinkers earn 10-14 percent more than abstainers, which replicates results from other data sets. We then attempt to differentiate between social and nonsocial drinking by comparing the earnings of those who frequent bars at least once per month and those who do not. We find that males who frequent bars at least once per month earn an additional 7 percent on top of the 10 percent drinkers’ premium. These results suggest that social drinking leads to increased social capital. 

Source: “No Booze? You May Lose: Why Drinkers Earn More Money Than Nondrinkers” from Reason Policy Brief #44, September 2006

Smokers don’t:

Objective: To investigate the impact of smoking on the wealth of US young baby boomers.

Methodology: The research analyses self reported responses of both smoking habits and wealth holdings from a nationally representative sample of US individuals born between 1957 to 1964 (n  =  8908). Data are from four waves (1984, 1992, 1994, 1998) of the National Longitudinal Survey of Youth 1979 cohort, a random survey of individuals conducted by the US Department of Labor using a stratified multistage area sample design.

Results: Regression results show lower net worth is associated with smoking, after holding constant a variety of demographic factors. Respondents who were ever heavy smokers are associated with a reduction in net worth of over $8300 while light smokers are $2000 poorer compared to non-smokers. Beyond this reduction, each adult year of smoking is associated with a decrease in net worth of $410 or almost 4%.

Conclusions: While a causal relation cannot be proven, smokers appear to pay for tobacco expenditures out of income that is saved by non-smokers. Hence, reductions in smoking will boost wealth, especially among the poor.

Source: “The wealth effects of smoking” from Tob Control 2004;13:370-374

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