Is moderate alcohol use related to wages? Evidence from four worksites

Moderate alcohol users (approximately two drinks per day on average) have recently been shown to have a lower risk of coronary heart disease relative to abstainers and heavy drinkers. Conversely, a few studies have found that alcoholism is associated with greater unemployment and lower earnings. But, little research has examined the differential effects of drinking levels on job compensation. We utilize a newly created database on employees at four worksites to test for a nonlinear relationship between alcohol use and wages. We also examine whether alcohol use affects wages indirectly through educational achievement, marital status, and poor health. Our findings suggest an inverse U-shaped relationship between alcohol consumption and wages with a peak at approximately 1.5 to 2.5 drinks per day on average. Thus, controlling for other variables and conditional on working, moderate alcohol users have higher wages than abstainers and heavy drinkers at these worksites. We also find evidence that alcohol use is related to wages through human capital variables.