Study: Smoking cost Hoosier businesses $3B in ‘hidden tax’
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Results of a new study commissioned by the Richard M. Fairbanks Foundation find employees who smoke cost Indiana employers more than $3.1 billion annually in lower productivity and higher healthcare costs. The foundation says its study further shows that if the state cigarette tax increased by two dollars per pack, from the current 99 cents per pack, an estimated 45,000 Hoosier adults would stop smoking.
The foundation says worker absenteeism and unsanctioned smoking breaks serve as an additional “hidden tax” to businesses equaling 1.7% of total wages. Of the $3 billion estimate, Marion County businesses paid $609 million.
The foundation says smoking impacts worker productivity, increases the number of days workers are absent and drives healthcare costs higher.
“We’ve long known that smoking severely impacts Indiana – both in lives lost and in higher healthcare expenses, but smoking’s cost on businesses is lesser-known,” said Claire Fiddian-Green, president and CEO of the Richard M. Fairbanks Foundation. “Today’s report makes it clear: our state’s high smoking rate also significantly impacts employers’ bottom line.”
Fiddian-Green says the state has made progress over the last decade to reduce tobacco consumption, but Indiana still has the eighth-highest smoking rate in the U.S. at 17.3%. The national average of 14.4%.
The annual costs for these impacts include:
- $283 million for lost productivity, as Indiana smokers work between 1.9% and 4% less per year than non-smokers.
- $272 million for absenteeism, as Indiana smokers are absent from work 2.5 more days than non-smokers each year.
- $1.7 billion for smoking breaks that are separate from allocated break times.
- $757 million that self-insured Indiana employers pay due to higher healthcare costs for smoking-related illnesses such as heart disease and cancer.
The foundation says the $3.1 billion annual cost to employers it likely a low estimate.
“Smoking-related costs undermine the success of employers and threaten to hinder Indiana’s ability to attract and retain companies,” Fiddian-Green said. “In short, high smoking rates are a drag on our state’s economy.
The study was conducted by researchers at the University of Illinois at Chicago.
The report can be found on the foundation’s website.