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In 2001, the University of Michigan's Panel Study of Income Dynamics found that people who drink regularly, i.e. had one or two drinks a day, have an average income of $49,000. The average income amongst people who do not drink, the study found, was $36,000. That’s a significant difference of $13,000. That’s approximately the entire annual take-home pay of a minimum wage worker in the United States, after taxes.
Other studies also show there is a so-called Drinker’s Premium; a phenomenon that people who have one or two alcoholic beverages daily, and in a social environment, earn more and are more educated than those who do not. In fact, even asking someone if they’ve had a drink within the last day is a surprisingly accurate predictor of what their annual household income is. In this scenario, If someone tells you they have had a drink within the past 24 hours, there’s a 57% chance that person’s household earns more than $75,000 per year, according to one GALLUP poll. In addition, of all those who earn $75,000 per year or more, 78% of them drink alcohol.
Studies and data show the inverse is also true. Not only do only 23% of non-drinkers earn more than $75,000 annually, that same GALLUP poll showed that a majority of people earning less than $30,000 are abstainers, suggesting a correlation between alcohol abstinence and lower earnings.
This phenomenon is so accurate, it may even be a better predictor of education and earnings than other, more traditional data — such as race and gender. By simply asking a group of people which of them drink, and if they’d had a drink within the past day, you could ostensibly tell on average which of them had the highest income and were the most educated. When it comes to earnings and education, it’s clear there is a benefit to being a drinker.
So if social drinking is in fact correlated to higher earnings, why could it be that people who drink alcohol make more money? Silicon Valley may have helped find an answer. In his groundbreaking, best-selling book Bowling Alone, Harvard University researcher and professor Robert D. Putnam analyzed data surrounding the successes of many Silicon Valley startups and their incredible growth. Putnam concludes that the success of Silicon Valley companies and executives can be explained by social drinking: "Although nominally competitors, these companies' leaders shared information, problem-solving techniques, and perhaps just as important, beers after work.”
This is a specific example of how alcohol brings people together to create value for the group as a whole. Even the executives of hyper-competitive Silicon Valley companies are brought together with and by drinks. Not only that, through the act of drinking, they help each other solve problems, and because of their growth and problem solving, they earn more for their companies and for themselves.
Putnam’s research doesn’t reveal merely an isolated incident. Collaboration over a drink or two is even part of the history of the founding of the United States. In high stakes, high stress environments, it turns out that some of the most important progress made in a great undertaking is made over drinks. The award-winning journalist and author Kevin Bleyer reported that social drinking was not only integral to the writing of the United States Constitution in 1787, but that drinking was also integral to the long-lasting relationships of the Founding Fathers — before the convention, during, and after.
The drafting of the United States constitution is often referred to as “The Great Compromise.” Compromise can be difficult, sometimes even seemingly impossible. It was the added benefits of drinking, and the fraternity of social drinking, that allowed the Framers of the constitution to look past their differences and find the common ground between them to kick-start what would become the greatest economic power in the world today. Two heads are better than one, and now it’s also clear that two drinks are better than none.
There are many qualitative and quantitative resources beyond those included here, and a significant majority of those resources indicate that positive, social drinking leads to higher earnings, not that higher earnings lead to more drinking. If nothing else, drinking alcohol clearly doesn't hurt your earning potential.
That being said, there’s a benefit to examining the other side of the argument and unpacking the critical notion that the Drinker’s Premium is just a correlation. Is there truly a great financial benefit to drinking itself, as studies show? The only opposing position is that higher earners can afford to drink more in social settings, like bars and clubs, making the Drinker’s Premium only a correlation and nothing more. The Journal of Labor Research released a study in 2006 linking regular, positive drinking to higher incomes. The study concluded that people who have one or two drinks a day earn about 20% more than their abstaining counterparts. That 2006 study prompted speculation that higher earners can afford to drink more, so they drink more as a result of their incomes, not that their drinking had led to higher incomes. While it could be said that those who earn more, drink more, that train of thought implies, incorrectly, social drinking is cost-prohibitive to earners in lower income categories.
Drinking, and drinking in social settings, is accessible to virtually everyone, at every income level, everywhere in the United States. When it comes to spirits, wine, and beer, there is an incredible variety available, in all manner of shapes, sizes, and costs. For instance, in the legendary bar, The Cottonmouth Club, founded by celebrity bartenders from New York City and Los Angeles, you can get a $150 Old Fashioned made with the elusive, exclusive “Ghosted and Rare” Johnny Walker Blue scotch. You can also get a $3 beer. In fact, most bars or restaurants tend to have one or two drink items that are relatively inexpensive for the venue.
The line of thought that higher incomes allow for more drinking, causing the correlation, is also close to proposing that more money causes more drinking in general, which is not the case either. All the studies clearly show that the top earners aren’t drinking a lot, just that they are, in fact, drinking. And there is no evidence to suggest that they are drinking expensive beverages, either.
It’s clear that positive and social drinking is a catalyst for problem solving and camaraderie, as illustrated by modern studies and past history alike, but why? Why, specifically, does drinking alcohol lead to greater financial gains?
Drinking brings people together physically and physiologically. Not only does the physical community of drinking provide a space for collaboration, but there is also a chemical edge to the Drinker’s Premium. As a drug, alcohol makes you more social, giving you a boost to operating in social situations.
When people drink, they become happier. And of course, when people are happy, they get along better. When you and the people around you are drinking, you have a natural advantage to meaningful connection. Whether the connections you make are professional, friendly, or — as in the case of the aforementioned Silicon Valley executives — both, you have a greater opportunity to take those connections further than you would if you were not drinking.
This at the heart of the Drinker’s Premium — the cheerful, person to person networking and bonds that come with positive drinking. There are different forms of capital, and the relationships you have with others is a form of capital in and of itself. It’s called social capital, and it is a concept that you may not even know you already know a lot about.
Social capital is best summed up in this popular expression: “It’s not what you know, it’s who you know.” In a world where devices, social media, and the internet are making tangible, in-person connections rarer, relationships formed over social drinking gives an invaluable and memorable edge.
Opportunity is a door, and in many cases alcohol is a key. Across nearly all cultures, languages, and nations, drinking is a way to build life-changing relationships. The top 20 most spoken languages in the world all have a word for “cheers!” — they each have a word honoring the bond that comes with sharing a drink. No other drug, drink, or food has that distinction. No matter who you are, where you are, or what languages you speak, you can connect with someone else over a drink.
While it is true you can build substantial social capital without drinking, by proactively networking and building a community, the beauty of the Drinker’s Premium is that it builds your social capital organically, while you are at one of your favorite places. And you’ll probably have more fun, too.
Drinking is one of the oldest traditions in the world. Nearly all special occasions are celebrated with a toast, and sharing a drink with another person is considered sacred in many cultures. When it comes to truly building a network that works for you, the depth of your connections is as important as the number of your connections.
What better way is there to form long-lasting, strong, and fulfilling connections, than over a drink? That is the true magic of the Drinker’s Premium — connecting the worlds of business and pleasure in a way that leads to more of both.
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