Friday, August 12, 2011

Richer people spend more money on alcohol, but why is that interesting?

I saw this posted on the Daily Dish:

and I wanted to put in my tuppence: If you divide the amount spent on booze for each group by the groups median annual income, you’ll get a slightly more informative number:

  • Less than HS: 0.88% of median annual income. 
  • High School: 0.95% 
  • Some College: 1.02% 
  • Associates Degree: 1.03% 
  • Bachelor Degree: 1.33% 
  • Advanced Degree: 0.90%* 
Still, this doesn’t provide any information about the amount of alcohol drunk by the groups, the cost of the alcohol, nor the purpose of the purchases. However, it does add the wrinkle that advanced degree holders may* be acting differently than the rest of the trend.

There has been analysis on the alcohol drinking trends of various income groups before. To summarize (via Kevin Drum):

  • Expenditures on beer double between the lowest and highest income quintiles. 
  • Expenditures on wine quintuple. 
  • Expenditures on "other" (mostly mixed drinks, I assume) also quintuple. 
  • Expenditures on alcohol consumed at home go up 170% while expenditures on alcohol consumed elsewhere go up 600%.
Also, via James Joyner:
Increasing levels of education correlates with increased income and, presumably, more disposable income. As people attain more education and income, they’re likely to switch from cheap beer (Miller Lite) and cheap booze (Seagrams gin, Jim Beam bourbon) to better and more expensive beer (say, Dogfish Head 120) and booze (Bombay Sapphire gin, Macallan 12 Scotch). Also, they’ll drink wine that comes in bottles not boxes. Additionally, they’ll be more likely to drink at bars and pricey restaurants, thinking nothing of paying $6 for a pint of beer, $9 for a glass of wine, or $12 for a cocktail.
I personally feel that the initial graph provides an answer to the wrong question, because (as Kevin and James point out), there are several other things going on here; the graph doesn't show useful information from which we can draw useful (and predictive) conclusions about the behavior of any one group (other than  richer people spend more money on booze than poorer people). Looking at the percent of annual income is being spent on booze is a better way of starting to look at a meaningful analysis, and -- if we believe the numbers -- people who have a bachelor degree spend the most of the group (as a part of their annual pay), while people with less than a high school degree, and people with advanced degrees spend the least. Furthermore, while the actual amount of money spent by people with less than a high school degree is about  1/3 that of advanced degree holders, the fact that these two groups spend almost the same amount of money out of their paychecks on booze is interesting, and merely underscores (to me at least) the important recognition was summarized by Kevin: that what and where people drink is heavily related to their level of income.

* For the category of advanced degree, I took the average of the values listed for masters, doctorate, and professional.

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