Can of beer wrapped in a $100 bill

In the 1980s, states decided to raise their drinking age to 21. Surprisingly, it wasn’t because of safety, public pressure, or even their own emotions. The main reason states raised the drinking age was because they risked losing 10% of their federal highway funds to the National Minimum Drinking Age Act (NMDAA). The Supreme Court called this a “relatively small” amount of money.

What would a lower drinking age cost society?

Losing highway funds might affect state governments, but it wouldn’t be a true “loss” to our society. It would just be money that belonged to the federal government instead of the state governments. The actual net loss for society would be 0. The better question is, what would be the real financial cost if all states lowered their drinking ages to 18? As far as I can tell, no one has seriously examined this question. We have some data, but we’re going to need a lot of guesswork.

Financial Losses from Lowering the Drinking Age to 18
Revenue from fines would decrease. In the US, there were about 292,378 liquor law violations in 2015. We can guesstimate that about 3/4 of these arrests (220,000) resulted from under-21 drinking and its related crimes. Let’s say each arrest resulted in an average fine of around $500. 220,000 x $500 = $110 million in fines. The next question is, how much of this money would be lost by lowering the drinking age? Well, the population aged 18-21 (just under half the arrests) is about equal to the population that would no longer be arrested with a lower drinking age. That would decrease revenue by about $49.5 million. -$49.5 million
Greater social cost. One study claims that under-21 drinking costs the country $61.9 billion a year. This comes from healthcare bills, lost quality of life, lost labor, crime, etc. So how might lowering the drinking age affect this number? There is no real way to know—you’d have to be God. But to get an idea, let’s try using traffic fatality trends as a representative sample of all social costs. Critics of Legal 18 argue that raising the drinking age reduced traffic fatalities (and presumably, associated costs) among drivers aged 18-21 by 13%. Unfortunately, it also raised fatalities among drivers aged 21-24. Taking this into account, one study actually estimates that lowering the drinking age would reduce overall traffic fatalities among all drivers aged 18-24 by about 2.7%. Other studies have found no significant change from the federal act. But since supporters of Legal 21 seem so sure, I’ll make a gesture of good faith. Let’s say that lowering the drinking age would increase all social costs of under-21 drinking by, say, 5%. This is a number I’ve conjured out of thin air. But it seems just as good as any other. $61.9 billion x 5% = $3.1 billion. -$3.1 billion
Total -$3.149 billion

 

Financial Gains from Lowering the Drinking Age to 18
Spending on enforcement and prevention would decrease. I’ve done my best to estimate our country’s current spending on enforcing and preventing underage drinking:

  • Federal spending: $70 million in grant money. We can guess that at least another $70 million goes to implicit costs, such as administrative time, and extra attention from federal agencies (CDC, SAMHSA, NIAAA, etc.)
  • State spending: $500 million, from complicated guesswork based on a report by the US Department of Health and Human Services. We can reasonably add another $500 million for implicit costs such as administrative time, regular police time, regular school time, and attention from state agencies.
  • Local spending: Information on local spending is especially hard to find. Numbers can run from $46,000 to $75,000. However, these numbers do not include implicit costs, such as regular police time, which represent far greater costs. We can conservatively guess that the average US city/town/village actually spends on average $100,000 (explicit and implicit costs) on enforcement. As for prevention, let’s say that on average each city/town/village in the US spends an amount equal to the salary of a single substance abuse counselor (about $50,000). This means that on average, each city/town/village spends $150,000 per year on enforcement and prevention. There are about 20,000 cities/towns/villages in the US. Together, these add up to around $3 billion.
  • Total: Conservatively, $4.14 billion in explicit and implicit costs. Based on arrest numbers, just under half of this money ($1.863 billion) aims at illegal drinking by people aged 18-21.
+$1.863 billion
Spending on incarceration would decrease. It costs about $25,000 to keep one person in state or local jail for one year. As we estimated above, the US arrests about 220,000 people a year for crimes related to underage drinking. Just under half of these (99,000) are people aged 18-21. We can imagine that this is roughly the size of the population that would go free if the drinking age fell to 18. We can also guesstimate that on average, for every 25 underage drinking arrests, police sentence 1 year of jail time. 1 yr jail time/25 arrests x 99,000 arrests x $25,000/yr jail time = $99 million. +$99 million
Police could address other crimes. Lowering the drinking age would free up a significant amount of police time, since underage drinking would no longer be a “top priority” for law enforcement. Presumably, this would increase the ability to address and prevent other costly crimes. For example, each robbery costs society $21,400. If lowering the drinking age freed up enough resources to prevent, on average, a single robbery in each city/town/village, this alone would save society $428 million. In all, new police priorities could save the country somewhere in the range of $1 billion. +$1 billion
Revenue from taxes on the alcohol industry would increase. State and local governments collect $50 billion from the alcohol industry, half of which comes from indirect taxes, such as corporate, personal income, property, and other taxes. Meanwhile, the federal government collects $9.7 billion in excise taxes. Presumably, it also collects roughly another $9.7 billion in other taxes on the alcohol industry. About 10% ($7 billion) of the combined total comes from under-21 drinking. If lowering the drinking age increased social costs by 5%, as we guessed above, it would also probably increase consumption by at least 5%. 5% of $7 billion is $350 million. +$350 million
Total +$3.312 billion

Lowering the drinking age might even be cost effective for states.

Federal highway funds represent so little money, they wouldn’t make much of a difference, compared to some of the other costs and savings we’ve looked at. To prove this point, let’s look at the case of North Carolina:

  • My extremely rough estimate puts the country ahead by $162 million if every state lowered its drinking age to 18. By population, North Carolina would account for $5.4 million of this. Bear in mind that it’s not the exact number that matters here, but the order of magnitude.
  • North Carolina’s total highway budget is $4.7 billion, 20% of which ($940 million) comes from the federal government. Since 2012, the percent congress threatens to withhold in the NMDAA decreased from 10% to 8% of federal highway funds. 8% of $940 million is $75 million.
  • By lowering its drinking age, North Carolina would run a deficit of around $69.6 million. This is only 0.16% of North Carolina’s budget, or 11.6% of its ordinary spending increase between 2015 and 2016.

The finances could easily work.

There are a lot of reasons to want to lower the drinking age. Finances could easily be one of them. Although the numbers I’ve presented here are highly speculative, I hope I’ve at least shown that lowering the drinking age could be cost-effective, even if states lost their federal highway funds. Even if most of these numbers turn out to be way off, I doubt the end result would be much different. Society could recover even a relatively large net loss by increasing alcohol taxes or DUI fines.