Do longer, healthier lives have a positive overall effect on the economy?
KEY MESSAGE: Tobacco-free initiatives help people to live longer and more healthily, which in turn has a positive economic impact. The financial benefits gained from investing in a more productive, healthy society far outweigh the costs, and there is plenty of evidence from various countries to support this.
What is the issue?
Tobacco-related diseases place massive economic burdens on healthcare systems and reduce work productivity, which has net negative impacts on economies even when all the economic ‘benefits’ of growing, manufacturing, or selling tobacco are taken into account.
What is the evidence for concern?
- Most smoking-related diseases are chronic and expensive to treat. In 2012, smoking accounted for 6.5% of all health expenditures in the European Region, and cost the total global economy $1.4 trillion (USD), or 1.8% of the world’s annual GDP . Smoking is estimated to cost countries 2-7% of the national health system expenditure and 0.2-0.9% of a country’s gross domestic product .
- In terms of smoking-related healthcare costs, it is estimated that the annual cost of smoking on healthcare systems was $422 billion (USD) worldwide. For individual countries in the European Region, studies have estimated the direct healthcare burden of smoking at $144 million (USD) in the Czech Republic (2002), $13.7 million (USD) in Estonia (1998), $17.3 million (USD) in Uzbekistan (2005) , €16.6 billion in Germany (1996) , and $482 million (USD) in Israel (2014) . In other countries, recent economic burdens were estimated to be $170 billion (USD) in the USA (2010)  and $21.3 billion (CAD) in Canada (2012) .
- Losses in work productivity as a result of smoking also carry a substantial economic burden . A recent study in the USA estimated that smoking costs employers, on average, an extra $5816 (USD) annually for each employee who smokes . In Israel in 2014, the estimated annual cost of smoking-related losses in work productivity was $548 million (USD) . In Sweden, the cost of smoking, calculated based on healthcare expenditure and loss in worker productivity, was $804 million (USD) in 2001 .
- In low-income countries, the costs of treating tobacco-related diseases contribute to poverty. Tanzania, for example, is the world’s 8th largest producer of tobacco, but tobacco-related cancers alone cost Tanzania 80% of its earnings from tobacco production . Another issue is that, in some low-income countries, the poorest households spends 10-15% of the household income on tobacco which means they end up foregoing essentials such as medicines and food .
- Smoking is also responsible for an estimated 10% of global fire death costs. It was estimated that the global financial burden of fire-related deaths and injuries was $27.2 billion in 1998 alone .
What is the reality?
- With fewer smokers, more people survive to retirement age and pay taxes. With higher rates of survival, there are fewer survivor benefits paid out to the families of those who would otherwise have died from tobacco-related diseases. A healthy, more productive workforce also earns more, retires later, and claims fewer benefits for sickness or disability .
- Though tobacco control measures require some financial investment, they have been consistently cost-effective .
- Tobacco taxation is the least costly to implement, and is a fast, effective way to generate revenue while reducing tobacco consumption . Smokefree laws are another highly effective intervention, which save on tobacco-related costs and do not harm the hospitality industry .
- Media and awareness campaigns are also cost-effective. In Scotland, estimates of the cost per life-year saved as a result of a mass media campaign are in the range of £304-£656. This campaign included mass media advertising on television, radio, outdoor posters and press, a telephone quitline, and booklets to provide advice on smoking cessation .
- Large, pictorial health warnings are also effective at discouraging smoking particularly among youth, and were predicted to have a net benefit of over $2 billion AUD in Australia which corresponds to a benefit:cost ratio of over 2:1 .
- If taxes were increased enough to raise retail prices by around 30%, long-term total health expenditures on tobacco-related diseases would decline by $53 million (USD) in Kazakhstan, Russia and Ukraine .
- A 30% price increase would save $2.2 billion (USD) in Russia, and $180 million (USD) in Ukraine on public and private health care costs. In Kazakhstan, long-term public health expenditures on the treatment of tobacco-related diseases would decrease by $31 million (USD) and total health expenditures would decrease by $53 million (USD). In all three countries, savings in healthcare costs would be highest for the poorest 40% .
- A US study estimated that, if all smokers in the USA were to quit smoking (compared to the current scenario), there would be little net change in Social Security outlays .
- The tobacco industry has argued that, in the Czech Republic, smoking benefits the economy because many smokers die before they reach retirement age . This argument is incorrect. In the Czech Republic, the costs of smoking were shown to outweigh any savings in healthcare costs by 13 times: thus the net economic burden of smoking in the Czech Republic is $372 million (USD), all economic ‘benefits’ considered .
Tobacco control interventions are good economic investments, all costs and benefits considered. Effective tobacco control is achieved by implementing all measures under the WHO Framework Convention on Tobacco Control, such as smokefree legislations, price and tax measures, and pictorial warning labels.
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