Why do drinkers earn more? Job characteristics as a possible link

Abstract

After some initial controversy, an inverted U‐shape relationship between the consumption of alcohol and earnings seems to be an established result, at least in North America. It has been dubbed a “drinking premium”, at least in the lower portion of the consumption curve. It is still unclear, perhaps even counter‐intuitive, why such a drinking premium exists and the literature suggests it is not causal but results rather from selection effects. We suggest here that part of the premium is linked to occupation: some occupations pay better, controlling for the usual human capital determinants, and also attract drinkers or induce workers to drink more. Using a sample of full‐time employed or self‐employed individuals aged 25–64 and not in poor health from the 2015‐16 Canadian Community Health Survey (CCHS), we confirm the existence of a drinking premium and a positive return to the quantity or frequency of drinking up to high levels of consumption. Using information on jobs held by respondents, linked to a data set of job characteristics, we find that controlling for job characteristics reduces the premium or return to drinking by approximately 30% overall, and up to 50% for female workers.