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The Social Security Cost of Smoking

29 Pages Posted: 28 Dec 2002 Last revised: 11 Aug 2010

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

Date Written: May 1987

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.

Suggested Citation

Shoven, John B. and Sundberg, Jeffrey O. and Bunker, John P., The Social Security Cost of Smoking (May 1987). NBER Working Paper No. w2234. Available at SSRN: https://ssrn.com/abstract=227498

John B. Shoven (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Stanford University - Department of Economics ( email )

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Jeffrey O. Sundberg

Lake Forest College - Department of Economics ( email )

555 N. Sheridan Road
Lake Forest, IL 60045
847-735-5139 (Phone)

HOME PAGE: http://www.lfc.edu/~jsundber/

John P. Bunker

Stanford University - Department of Health Research And Policy

Stanford, CA 94305
United States

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