Do Minimum Wages Really Increase Drunk Driving?

Adams, Blackburn, and Cotti (Review of Economics and Statistics, 2012), hereinafter ABC, find that minimum wage increases are associated with increases in drunk-driving-related traffic fatalities for those ages 16-to-20. These authors estimate a large drunk-driving fatality elasticity with respect to the minimum wage of 0.78, which suggests that a 10 percent increase in the minimum wage would lead to an additional 125 deaths per year. To bolster the case for a causal interpretation of their finding, the authors show that minimum wage increases are unrelated to (i) drunk-driving-related traffic fatalities among those ages 26 and older, a population less likely to be affected by the minimum wage, and (ii) non-alcohol related traffic fatalities. However, ABC do not empirically explore the channels through which a causal link between minimum wages and drunk driving might exist.

ABC argue that minimum wage hikes increase the earnings of some young individuals and, because alcohol is a normal good (Hu and Stowe 2013; Nelson 2013 and Gallet 2007), these earnings gains result in increased alcohol consumption and drunk driving. This mechanism is plausible, but ignores other possible offsetting effects. If some workers lose their jobs after minimum wage hikes (Neumark, Salas, and Wascher 2014; Sabia 2014a; Neumark and Wascher 2008), or if retained workers have their hours reduced (Burkhauser, Couch, and Wittenberg 2000), the net effect of minimum wage increases on youth earnings is ambiguous, and their effects on drinking and driving will be dependent on how these effects impact the distribution of income. Moreover, it is also possible that minimum wage-induced employment effects could affect teen drinking probabilities through substitution of time between labor market work and social activities (Argys, Pitts, and Sen 2014).

The goal of this research is to empirically examine the pathways posited by ABC to explain a causal link between minimum wage increases and drunk driving-related traffic fatalities. Using an identification strategy identical to ABC and data drawn from the Current Population Survey (CPS), the Youth Risk Behavior Survey (YRBS), and the Behavior Risk Factor Surveillance Survey (BRFSS) from 1991-2011, we estimate the effect of minimum wage increases on youth earnings, alcohol consumption, binge driving, and drunk driving. The results from these analyses provide no evidence that increases in the minimum wage increase net earnings of all 16-to-20 year-olds due, in part, to adverse labor demand effects. We find little evidence that increases in the minimum wage are associated with increases in the probability of alcohol consumption, binge drinking, or drunk driving among all, employed, or non-working teens. In addition, we find little evidence that minimum wage increases affect alcohol consumption on the intensive margin. Rather, these results suggest that minimum wage hikes reduce alcohol consumption, even among employed teenagers, particularly during the period examined by ABC. Taken together, the findings of this study shrink the set of plausible channels through which minimum wages could increase drunk-driving-related traffic fatalities.