Alcoholism and Debt - Case Study Example

ALCOHOLISM AND DEBT: AN EXAMINATION OF ALCOHOLISM ON EARNINGS, INCOME, AND WEALTH ACCUMULATION Table of Contents '''''''''''''''''''''.'32. Introduction'''''''''''''''''''''..4 3. Literature Review'''''''''''''''''...'..4 4. Results and Analysis'''''..''''''''''''..10 5. Bibliography'''''''''''''''''''''.12 "Alcoholism is a prevalent disorder in the United States, affecting about one in 20 individuals at any one time, and one in 10 individuals at some point during their lives. Males are three times more likely than females to suffer from alcoholism. A prevailing view on alcoholism is that is has depressant effects on earnings, income, and wages" -Mullehey & Sidelar, Alcoholism, Work, and Income. ABSTRACT Alcoholism has long been recognized as a prevalent social problem, both in the United States and abroad. While its negative effects are varied and significant, the research below specifically examines the disorder of alcoholism as it relates to earning, income, socioeconomic status, and debt. Though it has not been conclusively proved that alcoholism is a causal factor in an individual's accumulation of debt, the data shows unequivocally that alcoholism is indeed a depressant of wages and income. If we make the theoretical connections between lower socioeconomic status and debt, we see that alcoholism is a factor in an individual's indebtedness, however, conclusive evidence on the direct connection is still lacking in the academic community. Introduction Alcoholism has long been recognized as a prevalent social problem, both in the United States and abroad. While its negative effects are varied and significant, the research below specifically examines the disorder of alcoholism as it relates to earning, income, socioeconomic status, and debt. Prevalent alcoholism comes at a great cost to society and to the health of its members. The purpose of this paper is to review existing literature and research on alcoholism and its relation to indebtedness. We hypothesize that alcoholism, if not a directly causal factor in indebtedness, is certainly related to income and financial stability based on issues of management, control, and educational capacity. The work of seven researchers is examined below, and their studies on the relationship of alcoholism to debt and financial wellbeing analyzed. Though it has not been conclusively proved that alcoholism is a causal factor in an individual's accumulation of debt, the data shows unequivocally that alcoholism is indeed a depressant of wages and income. If we make the theoretical connections between lower socioeconomic status and debt, we see that alcoholism is a factor in an individual's indebtedness, however, conclusive evidence on the direct connection is still lacking in the academic community. Although much about the disorder remains unknown, many academics agree that alcoholics typically share some common characteristics. Alcoholics occupy all demographic, socioeconomic, and occupational positions on the spectrum. In the United States, approximately ten percent of men and three percent of women are actively alcoholic at any time; "'in addition, it is commonly observed that alcoholism tends to run in families, with the prevalent current wisdom being that there is a strong genetic dimension to such tendencies (Mullehey & Sidelar 1993, 496). Literature Review Earning capacity, as related to indebtedness, is a decisive factor in an individual's wellbeing. Alcoholism affects many factors which in turn affect earning capacity and income, the most critical of which are educational achievement and marital status. Mullehey and Sidelar are particularly interested in the secondary effects of alcoholism on an individual's earning capacity, aside from the direct health effects so often cited. They write, "it is the effect of alcoholism on these other factors that may have the greatest negative effect on an individual's income. That is, had an individual not become an alcoholic, he or she might have been financially successful; instead, the person lives modestly, sometimes in debt, because his or her alcoholism has interfered wit educational attainment, establishment of a successful marriage, and other factors that would have increased the likelihood of success (Mullehey & Sidelar 1994, 359)." Earnings are strongly correlated to both marital status and educational achievement, and alcoholism has been definitively shown to have a negative effect on both. The authors continue, "The negative indirect effects of alcoholism on income are attributable to the reduced educational attainment and increased marital disruption associated with this disorder'given the central role of education found in many labor market studies, the depressant effect of alcoholism on education is an important finding. Even if the early alcoholic recovers, there are likely to be lifetime adverse effects on labor market success that operate through reduced educational attainment (Mullehey & Sidelar 1994, 373)." Marital status has been strongly linked to income, earning power, and financial wellbeing by a number of sources. Interestingly, alcoholism has been shown to increase an individual's chances of ever marrying, but to correspondingly increase that individual's chances of subsequently divorcing (Mullehey & Sidelar 1994, 372). Possible causes for this could be the fact that alcoholics have dependent personalities, responsible for their alcoholism in the first place, which induce them to seek the perceived stability of a marriage partner. However, alcoholics typically do not make good marriage partners. Mullehey and Sidelar continue, "The disruptive effect of current alcoholism on marriage is consistent with the extant literature. As marital status is often found to have important'effects on earning power and labor market decisions, our results indicate the potential role for significant indirect effects of alcoholism on income as well. We find that early onset of alcoholism not only increases the chance of marrying significantly, but also significantly enhances the likelihood of marital disruption'The net effect of early onset of alcoholism, however, appears to be reduction of earning power (1994;372)." Those who experience early-onset alcoholism are less likely to advance in their studies, which eventually may have an adverse effect on their earning powers, and therefore on their likelihood to incur debt at some point in their lives. Data is inconclusive on this front, though experts hypothesize: For the youngest group, alcoholism may tend to increase labor market participation and thus increase earnings. One mechanism consistent with such a finding would be that those with alcohol problems would be more likely to have trouble in school and either drop out of school or work more hours even while attending school part time. They would thus be working more hours and accumulating more labor market experience increases in both hours and wage rates would thus tend to result in greater earnings. At some point, however, the effects of non-alcoholics' greater educational attainment would overtake the experience advantages of the young alcoholics. The oldest age group could also exhibit seemingly inconsistent working and earning profiles. Over their lives, alcoholics may accumulate less financial capital (pensions, savings, etc) than would non-alcoholics so that early retirement may not be a reasonable option. Instead, these aging alcoholics may continue employment later in life so that they may have higher contemporaneous labor market participation and income (but not necessarily wealth) as compared to their nonalcoholic counterparts who have begun to retire (Mullehey & Sidelar 1993, 502)." Sociological and economic literature has documented the socioeconomic differences between minorities and whites in the United States, and has documented nearly parallel health differences in the same populations. Williams and Collins suggest that these two factors may be strongly linked. They write, "much of the widening disparity in health status reflects more gains in health status for high SES [socioeconomic status] than for low SES groups, but for some health indicators, evidence suggests a worsening health status at the low end of the socioeconomic spectrum'Differences between SES groups in accessibility, utilization, and quality of care, or differences in the benefits derived from medical care, are contributing factors to the widening inequality (Williams & Collins 1995, 352)." This trend can be traced to several phenomena. Williams and Collins continue, "With the great migration and urbanization of black Americans came a dramatic rise in their use of alcohol'and a reversal in the racial distribution of alcohol and tobacco use'during the first half of this century, the prevalence of cigarette smoking and alcohol abuse was higher for whites than for blacks. The great migration shifted a considerable portion of the black population from the''dry' rural South'to the 'wet' areas of the urban north, where taverns and associated alcohol were an integral part of social life'Moreover, by producing feelings of alienation, powerlessness, and helplessness, life in urban settings created the need for individuals to mask these feelings or obtain temporary relief from them by consuming'alcohol. African Americans have been special targets of the advertising of both the tobacco and the alcohol industries'targeting that dates back to the 1950s (1995; 363)." Alcoholism is also related to various factors of socioeconomic status. Residential areas that experience high rates of transiency, high incidences of substandard housing, low income, and higher percentages of female-headed households have a higher prevalence of alcoholism (Kling & Campbell 1984, 1038). Though previously cited data notes that women have lower rates of alcoholism than do men, their presence as heads-of-household is an indicator of socioeconomic status, which in turn, is an indicator of health status. Alcoholism typically accompanies other problems, or manifests itself as a direct result of other problems, personal, professional, or economic. Brenner (1995) reviewed the evidence linking changes in the economy to health status, finding that suicide and admissions to psychiatric hospitals go up during economic recessions. "Cirrhosis mortality increases substantially one or two years after a national economic recession. Instructively, it is the consumption of distilled spirits, rather than wine or beer, that is a significant factor in the increase in the cirrhosis mortality. Blacks are estimated to purchase half of all the rum sold in the United States, 41 % of the gin, 50% of the scotch whiskeys, and 77% of the Canadian whiskeys (Williams & Collins 1995, 375)." This data links both race and economic status as factors in the development of alcoholism and alcohol-related diseases, suggesting that the economic wellbeing of the country has a profound impact on rates of alcoholism. Mullehey and Sidelar write extensively on the social and economic costs of alcoholism. "[we have] provided some empirical insight into the role of alcoholism as a costly health problem, suggesting that en evaluation of its welfare costs in terms of productivity differentials alone may significantly understate such costs (1995; 456)." They focus on indirect effects of alcoholism, making connections between its presence and earning issues that would persist even were active alcoholism to be cured or dealt with. They write, "the focus on indirect effects is important because a finding that they are significant in reducing income would imply that even if alcoholism itself could be 'cured', negative effects on earnings that stem, for example, from reduced educational attainment, would still persist. This in turn would buttress arguments in support of more early intervention and focus attention not only on the adverse effects of current symptoms, but also on the mechanism by which the indirect effects occur. When only the direct effects of alcoholism are examined, the full impact of the condition on earnings is underestimated, which in turn, understates the 'costs' of alcoholism (1004; 360)." Health status, in turn, is inextricably linked to socioeconomic status, suggesting that there is a conclusive relationship between health status and debt or wealth. Williams and Collins summarize, "the evidence'indicates that large-scale societal factors are the primary determinants of health status. They determine not only the social categories to which people are assigned but their exposure to risk factors and resources (1995; 380)." Medicine and prevenative measures in healthcare are typically more accessible to the wealthy, and lack thereof is typically viewed as an important determinant and deterrant of adequate health among minorities (372). Results and Analysis What, then, is the relationship between poverty and debt' The National Institute of Economic and Social Research finds that people in poverty in 2000 tended to have debts relative to their incomes 20 to 25 per cent higher than those of the population as a whole (ES 1)". The report continues: The very uneven distribution of wealth results from specific factors as well as the overall inequalities that exist within society. Three particular factors promote wealth inequality: 1. People save as they age, so that old people have considerably more wealth than young people. 2. The state benefit system is more important for poor people than for high earners, so people on low incomes have less incentive to save. Additionally, means-testing of state benefits helps widen wealth inequalities. 3. Home-ownership is a very important determinant of overall wealth levels and much more so than simply whether households have low incomes in a particular year' This pattern was observed at all age groups in the survey and does not simply reflect the fact that old people are more likely to own houses than young people. Income poverty and asset poverty are very different things. Young people in the survey tended to have higher levels of mortgage and non-mortgage debt, relative to their incomes, than older people. People in poverty tended to have levels of overall debt, relative to their incomes, 20 to 25 per cent higher than those of the population as a whole. Fewer than half of the households in the sample reported unsecured debt. These households had, on average, incomes slightly above those of the rest of the population. However, they had considerably larger debts and lower levels of overall wealth. The differences with the rest of the population became more pronounced with age (ES 1). The effects of alcoholism on income are negative and statistically significant, as indicated by all researchers cited above. Though in this paper we are using income as a relative indicator of indebtedness, the literature remains inconclusive as to whether or not alcoholism has a direct impact on debt, as opposed to income and financial wellbeing. What is strikingly clear is that alcoholism is directly related to more general health statistics, to wages, and to both race and socioeconomic status. As race and socioeconomic status are statistically related to debt, the conclusion can be drawn that alcoholism is a possible factor in indebtedness. However, as literature is lacking on that specific relationship, one can only hypothesize that because alcoholism leads to lower degrees of financial wellbeing, it could lead higher degrees of debt. Bibliography: Brenner, MH. Economy, society, and Health: Theoretical Links and Emperical Relations. Society and Health: Foundation for a Nation. Copyright 1995 New York, Oxford University Press. Kling, Sandra Schoenberg, and Mary Ann Campbell. Sources of Referral to Alcoholism Treatment from Two Low-Income Areas in a Core City. Medical Care, Vol. 22, No 11 (1984), pp.1038-1044, Lippincott Williams & amp: Wilkins. Mullahy, John, and Jody L. Sindelar. Alcoholism and Income: The Role of Indirect Effects. The Milbank Quarterly, Vol. 72, No 2, 1994, pp.359-375, Milbank Memorial Fund. Mullahy, John, and Jody L. Sindelar. Alcoholism, Work , and Income. Journal of Labor Economics, Vol. 11, No 3, July 1993, pp. 494-520, University of Chicago Press. Mullahy, John, and Jody L. Sindelar. Health, Income, and Risk Aversions: Assessing Some Welfare Costs of Alcoholism and Poor Health. The Journal of Human Resources, Vol. 30, No 3, 1995, pp.439-459, University of Wisconsin Press. Williams, David R., and Chiquita Collins. US Socioeconomic and Racial Differences in Health: Patterns and Explanations. Annual Review of Sociology, Vol. 21 (1995), pp.349-386), Annual Reviews. Electronic Resources: 1. The National Institute of Economic and Social Research: http://www.jrf.org.uk/knowledge/findings/socialpolicy/0635.asp Read More