Illegal drug use is a significant issue in American society today.  Not only is it known for negatively affecting people’s health, but it could potentially affect the economy.  One way of determining this is to study the relationship between illegal drug use and income levels.  Economists may find this relationship interesting because it could affect the productivity of the labor market.  If a strong negative relationship between drug use and income is established, then it is clear that the labor market is not functioning at its’ full potential.  If this is the case, the government may be willing to invest more money into substance abuse education in order to improve the labor market and, in the long-run, economic growth.  Drugs are also very common in today’s society, to the point where most people know at least one person who has done or is currently involved in using drugs.  Therefore, it is of interest to the public to know how using drugs affects one’s lifestyle, even economically.  Variations of this study have been done in the past and some of the findings are surprising.  Andrew M. Gill and Robert J. Michaels did a study using data from the National Longitudinal Survey of Youth and found that if an individual’s reasons for doing drugs in the first place is taken into account, then drug users receive higher wages than non-drug users.  Thomas C. Buchmueller and Samuel H. Zuvekas did a study on the relationship between illicit drug use and labor market success.  They focused on the effect of the intensity of use on the income of an individual; finding that accounting for the different levels of intensity actually makes a difference.  In the next section, I will go into further depth about Gill and Michaels and Buchmueller and Zuvekas’s approach to this problem; as well as describe other economists’ methods of investigating this topic.  In the third section, I will discuss the model I will be using to analyze this question from a different angle.  In the fourth section I will discuss the data collected to test my hypothesis, and in the fifth section I will use that data with my theory as evidence for my question.  Finally, I will present my conclusion on the question of how drug use affects income and suggestions on further improvements of to answer this question.

Literature Review

  • Thomas Buchmueller and Samuel H. Zuvekas utilize data from the National Institute of Mental Health’s Epidemologic Catchment Area Survey that was collected between 1980 and 1984 in five (they utilize four) different locations of the United States.  They focus their study on 30-45 year old men and put an emphasis on the importance of accounting for specific reasons for using drugs.  For young workers, they find that there is a positive relationship between using drugs and income.  But for their sample, they find that common drug use, measured by dependence, results in lower income.
  • Andrew M. Gill and Robert J. Michaels use microdata from the National Longitudinal Survey of Youth, specifically from the 1980 and 1984 waves, to answer the question of whether drug use lowers wages.  They focus on the age group of 18-27 in the year 1984.  They emphasize the importance of accounting for unobservable factors that affect the decision to use drugs and wages.  It was found that once these variables are factored into the model, drug users actually earn a higher wage than non-users.
  • Pinka Chatterji and Jeffrey DeSimone focus their study on high school alcohol use and its effect on the young adult labor market outcomes.  They study the relationship between 10th grade binge drinking in 1990 and labor market outcomes using the National Educational Longitudinal Survey, putting a specification on gender.  There is no relation between the two variables for females while, for males, there is a positive effect on wage.
  • Jeff DeSimone does another study on the relationship between employment and the use of marijuana and cocaine, specifically for males.  He utilizes the National Longitudinal Survey of Youth data for years 1984-1988.  He includes variables not used in previous studies such as the regional cocaine price and a state marijuana decriminalization indicator.  His results show that drug use, for both drugs, reduces employment.


My data come from the National Survey on Drug Use and Health (NSDUH) series of 2010, which measures the frequency of drug use in the United States and potential associated factors.  The sample size of the survey in total is 68,487 people of the age of twelve or older.  I will be focusing on the age group of 26-34 year olds.  This is a great survey to use as they include 3,112 variables, many of which are repetitive in an attempt to gain truthful answers from the respondents.  It is also very up to date, as it was only collected two years ago.  The data include an individual’s history of using drugs such as marijuana, cocaine, and heroine and their present situation with the specified drugs.  NSDUH  takes note of common individual characteristics that may influence income such as age, gender, race, ethnicity, marital status, education level.  The survey also includes information on past substance abuse treatment, reasons for going/not going, and criminal records due to a variety of factors, including drug use.


The dependent variable of my model is income level.  The independent variables that I will utilize from this survey are: age, gender, race, ethnicity, marital status, education level, job status.  I am testing how the use of different drugs (marijuana, cocaine, and heroin) affect income levels.       


Here I will describe and interpret my findings.


Here I will conclude my findings and discuss how my techniques affected my findings and how I could better improve the accuracy of my findings.


Buchmueller, Thomas C., and Samuel H. Zuvekas. “Drug Use, Drug Abuse, And Labour Market Outcomes.” The Economics of Health Behaviours. Volume 2. 468-484. n.p.: Elgar Reference Collection. International Library of Critical Writings in Economics, vol. 223. Cheltenham, U.K. and Northampton, Mass.: Elgar, 2008. EconLit. Web. 2 Oct. 2012.

Chatterji, Pinka, and Jeffrey DeSimone. “High School Alcohol Use And Young Adult Labor Market Outcomes.” (2006): EconLit. Web. 2 Oct. 2012.

DeSimone, Jeff. “Illegal Drug Use And Employment.” Journal Of Labor Economics 20.4 (2002): 952-977. EconLit. Web. 4 Oct. 2012.

Gill, Andrew M., and Robert J. Michaels. “Does Drug Use Lower Wages?.” Industrial And Labor Relations Review 45.3 (1992): 419-434. EconLit. Web. 2 Oct. 2012.

United States Department of Health and Human Services. Substance Abuse and Mental Health Services Administration. Center for Behavioral Health Statistics and Quality. National Survey on Drug Use and Health, 2010. ICPSR32722-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2011-12-05. doi:10.3886/ICPSR32722.v1



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