1 November 2008
"People are drinking more, because people tend to drink more during tough times." A US Beverage analyst, 2008
"It is an article of folk wisdom that heavy drinking increases during economic downturns: when people lose their jobs, they turn to alcohol." Business Week, 2007
With the US economy leading the rest of the world into recession, Mythbusters thought it timely to check out the facts behind the widespread belief that hard times mean hard drinking.
At first glance, it seems to make sense, and research does suggest that some individuals ‘self-medicate' with alcohol in reaction to such stresses.
But does this always apply across the whole population, as Business Week implies?
There is no shortage of long-term data on the issue. In fact, economists are so interested in debating whether alcohol use is ‘pro-cyclical' (increasing in economic upturns, decreasing in downturns), they even hold regular ‘Beeronomics' conferences.
The data are clear that alcohol sales increase in economic upturns, as do drink-driving rates, alcohol-related illnesses and perhaps even alcoholrelated deaths.
When it comes to recessions, however, things get more complicated.
Long-term research from the US and Europe shows overall alcohol consumption doesn't rise much during recessions and can even decline. In the US, for example, a 1 percent increase in state unemployment corresponded to a 3 percent reduction in alcohol consumption. The decrease was even larger when unemployment went up nationally.
But just because overall consumption dips doesn't mean everyone cuts back on alcohol. Researchers using the same US dataset found a 5 percent increase in the unemployment rate corresponded to an 8 percent increase in binge drinking.
So who's most likely to cut back on alcohol, and who's most likely to binge?
Interestingly, the increase in binge drinking was concentrated among employed people rather than the unemployed. Researchers point out that, when the economy tanks, the wealthy can afford to keep drinking, while poorer consumers (despite often being stereotyped as the ones with drinking problems) are he first to cut back. It may be that, during hard times, it's the people that still have jobs that are the most stressed.
Some researchers have found that, in recessions, heavier drinkers reduce their alcohol consumption more than social or light drinkers, but there's still debate about this.
Recessions don't make people stop drinking alcohol altogether. Instead, they change how much and what kinds of alcohol they drink. In tougher times, people are less likely to eat and drink out and are more likely to stay at home - a pattern already showing up in the US economy. And there's a shift from expensive to cheaper types of alcohol - from imported to local beers, for instance, and possibly from spirits towards beers.
The last word goes to the Chief Economist for the US's Distilled Spirits Council, who went out of his way to dispel the "widely held myth" that alcohol is "recession-proof".
"We have the same ups and downs as anyone else," he said. "While liquor sales aren't nearly as cyclical as autos, homes or other big ticket items, typically in a recession, we see liquor sales go down."
Dee, T.S. (2001). Alcohol abuse and economic conditions: evidence from repeated cross-sections of individual-level data. Health Economics, 10: 257-270.
Ettner, S.L. (1997). Measuring the human cost of a weak economy: Does unemployment lead to alcohol abuse? Social Science & Medicine, 44(2), 251-260.
Farrell, C. (2001, November 12). Out of Work and in the Bar? How downturns hit alcohol intake. Business Week.
Geller, A. (2008, September 7). During downturn, people find money for booze. Associated Press story, printed in San Francisco Chronicle.
Johansson, E., Böckerman, P., Prättälä, R., & Uutela, A. (2006). Alcohol-related mortality, drinking behavior, and business cycles. Are slumps really dry seasons? European Journal of Health Economics, 7, 215-220.
Kendall, R et al. 1983. Effect of economic changes on Scottish drinking habits, 1978-82, British Journal of Addiction, vol 78(4): 365-379.
Kesmodel, D. (2008, August 1). SABMiller sales fall after prices rise. Wall Street Journal.
Krüger, N.A., & Svensson, M. (2008). Good times are drinking times: empirical evidence on business cycles and alcohol sales in Sweden 1861-2000. Working Paper No. 2, Swedish Business School at Örebro University.
Luoto, R., Poikolainen, K, & Uutela, A. (1998). Unemployment, sociodemographic background and consumption of alcohol before and during the economic recession of the 1990s in Finland. International Journal of Epidemiology, 27(4):623-9.
Mui, Y.Q. (2008, September 6). Cold comfort in hard times. beer holds up as vice that's not too pricey. Washington Post, page D01.
Nielsen. (2008, June 3). Declining economy has little impact on consumers' alcoholic beverage purchases in stores.
Ruhm, C.J., & Black, W.E. (2002). Does Drinking Really Decrease In Bad Times? Journal of Health Economics, 21(4), 659-678.
San Jose, B., Van Oers, H.A.M., Van de Mheen, H., Dike-Garretsen, H. F. L., & Mackenbach, J.P. (2000). Stressors and alcohol consumption. Alcohol and Alcoholism, 35(3), 307-312.
Weil, D. (2007, November 6). Experts see boats, booze as economic indicators. Newsmax.
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