The Social Security Cost of Smoking
John B. Shoven
Stanford University - Department of Economics; National Bureau of Economic Research (NBER)
Jeffrey O. Sundberg
Lake Forest College - Department of Economics
John P. Bunker
Stanford University - Department of Health Research And Policy
NBER Working Paper No. w2234
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.
Number of Pages in PDF File: 29working papers series
Date posted: December 28, 2002
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