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The Social Security Cost of Smoking

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  • John B. Shoven
  • Jeffrey O. Sundberg
  • John P. Bunker
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    Abstract

    Our paper is an examination of the Social Security cost of smoking from an individual point of view. It is well known that smokers have a shorter life expectancy than nonsmokers. This means that by smoking they are giving up potential Social Security benefits. We estimate this cost and consider the effects on the system as a whole. We use mortality ratios, which relate the annual death probabilities of smokers and nonsmokers, and the percentage of smokers in each age group to break down the life tables for men and women born in 1920 into the approximate life tables for smokers and nonsmokers. We then calculate expected Social Security taxes and benefits for each group, using median earnings as a base. We find that smoking costs men about $20,000 and women about $10,000 in expected net benefits. The implication of this for the system as a whole is that the prevalence of smoking has a direct effect on the financial viability of the system; every decrease in the number of smokers in society increases the system's liability. Changes in smoking behavior should be recognized as affecting the system.

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    File URL: http://www.nber.org/papers/w2234.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2234.

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    Date of creation: May 1987
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    Publication status: published as The Economics of Aging, Ed. by David Wise, University of Chicago PRess, March 1990.
    Handle: RePEc:nbr:nberwo:2234

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    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    Cited by:
    1. W. Kip Viscusi, 1995. "Cigarette Taxation and the Social Consequences of Smoking," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 51-102 National Bureau of Economic Research, Inc.
    2. Viscusi, W. Kip, 1994. "Promoting Smokers' Welfare With Responsible Taxation," National Tax Journal, National Tax Association, vol. 47(3), pages 547-58, September.
    3. Jim Davies, . "Empirical Evidence on Human Capital Externalities," Working Papers-Department of Finance Canada 2003-11, Department of Finance Canada.
    4. Bhattacharya, Jay & Lakdawalla, Darius, 2006. "Does Medicare benefit the poor?," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 277-292, January.
    5. Brian S. Armour & M. Melinda Pitts, 2007. "Smoking: taxing health and Social Security," Economic Review, Federal Reserve Bank of Atlanta, issue Q 3, pages 27-41.

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