The US Tobacco Industry - Coursework Example

The US tobacco industry was at its peak in the mid-1990s when the real prices were steadily rising. Despite publi on the evils of smoking and despite taxes levied on cigarettes at both state and federal level, the incidence of smoking kept rising. Lawsuits were filed by smokers suffering from smoke-related diseases or by the relatives of those deceased due to some related diseases; lawsuits were also filed by states against the industry to recover the lost medical costs to the state from smoke-related diseases (Gruber, 2001). It has been established that smoking lessens the life span by about 6 years. It is also a huge burden on the state and the federal government but at the same time arguments abound on the benefits that the economy reaps due to the sale of cigarettes and the revenue generated through advertising. Thus, restrictions on smoking can reduce cigarette consumption which translates into lost tobacco industry revenue while providing health benefits to the people. However, this paper will argue that with added restriction on the advertising, selling and smoking of tobacco the economy and general public health will increase and prosper. The government has tried to regulate smoking through three ways – increase on the taxes per pack of cigarette, limiting smoking in public places and involving restrictions on youth access to tobacco products. The tobacco industry made claims that any restriction on smoking would hurt businesses that restricted smoking (Dearlove, Bialous & Glantz, 2002). The health advocates present studies which indicate that no such adverse affect has occurred die to restrictions and legislation against smoking. Bartosch and Pope (2002) conducted a study to determine if the restaurant business declines or improves after the implementation of the restrictive restaurant smoking policies. Contrary to the claims made by the hospitality and the tobacco industry, survey data revealed that people would continue to dine in establishments once they are smoke-free and many would even frequent more often when restrictions on smoking are imposed. An analysis of taxable sales receipts provided by the Department of Taxation and Finance and restaurant employment data from the Department of Labor revealed that the New York City Smoke-Free Air Act did not adversely affect the citys restaurant or hotel industries. Hotel meal sales in fact increased by 36.9 percent in New York City after the law took effect while they remained nearly constant in the rest of New York State (Rwjf, 2003). Even though one quarter of smokers reported dining out less frequently, 11 percent of the non-smokers reported dining out more frequently. Majority of the consumers reported that the law had not affected them while only 15% opposed the law. Various studies have demonstrated that smoke-free laws have no or positive effect restaurant and bar revenues, tourism and employment. Alamar and Glantz (2004) contend that even if smoke-free policies do not affect revenues, they may reduce costs. Labor costs decrease because smoking is linked to number of days lost due to illness of workers. It also increases employee productivity as they too are discouraged from smoking and overall capital costs decrease. Thus restaurants in places that prohibit smoking are more profitable than those in smoke-free jurisdictions. This research has shown that far from hurting restaurant owners, smoke-free ordinances add value to their establishments. There were claims that restrictions imposed by the government eventually turn to losses for the tobacco industry. The tobacco industry has used its allies in the hospitality and the gaming industry in the fight against smoke-free places. Research suggests that smoke-free ordinances have no effect or positive effect on restaurant, bar revenues, restaurant values and even the gaming industry. The opponents of smoke-free workplaces claimed that the gaming industry was adversely affected. There were claims that in Delaware and New Jersey the video slot machines and horse racing both experienced 25% drop in revenue and they had to reduce staff. Regression analysis done to test the effect on the gaming industry found that smoke-free law did not cause a drop in revenue (Mandel, Alamar & Glantz, 2005). Various studies have been compiled by Scollo, Lal, Hyland and Glantz (2003) on studying the economic impact of the limitations on smoking. The studies were conducted and funded by the tobacco industry as well as the non-tobacco industry. The research into these studies revealed that 94% of the studies supported by the tobacco industry revealed that there was or would be a negative impact of implementing a smoke-free policy but all the non-industry funded studies concluded a negative economic impact. The tobacco industry denies the addictive properties and the poor health outcomes associated with tobacco use, according to Yach and Bettcher (2000) even while WHO contends that smoking is responsible for more than five million deaths per year (BBC, 2003). Smoking restrictions not only protect the non-smokers from the adverse health effects of passive smoking, they also facilitate the smokers’ decision to reduce or quit smoking (Bero, Montini, Bryan-Jones & Mangurian, 2001). Study by Alamar and Glantz shows that the workers enjoy better health when restaurants are declared smoke-free zones is testimony to the fact that exposure to environmental tobacco smoke (ETS) is a health hazard. Passive smoking does affect the employees as better productivity has been reported by the restaurant staff in smoke-free areas which ultimately leads to reduced losses or expenditure on healthcare. Non-smokers are at a high risk of lung cancer, heart diseases and respiratory disorders when exposed to ETS. ETS exposure causes lower respiratory tract infection amongst children such as bronchitis and pneumonia apart from fluid in the middle ear, upper respiratory tract infection and reduced lung function (Ashley & Ferrence, 1998). Children may or may not be able to complain of the breathing difficulties as more and more cases of asthma are being detected. Children are passive smokers being subjected to ETS at home. Research by Gilliland et al., (2003) confirms that household ETS exposure among the fourth-grade students was associated with increased rates of respiratory-illness related absences. Smoke emitted from the puff contains more than 4000 chemicals including carbon monoxide, nicotine and diverse irritants as well as 40 carcinogens. These chemicals not only act locally but also at a distance. They are absorbed into the blood and disseminated through out the body. Smoking is responsible for 30% of all cancer deaths and 75 to 90 percent of all heat attacks (Bartal, 2001). Side stream smoke is richer than mainstream smoke in case of certain compounds and is nearly as harmful as active smoking. On the other hand smoking restrictions leave the air pure and clean. Research suggests that total household ban on smoking reduces ETS exposure in adolescence who lived with a smoker by 92% while partial household restrictions reduces by more than 60 percent (Farkas et al., (1999). Total household ban also leads to high rate of successful cessation. The tobacco industry refutes claims that advertising increases the incidence of smoking as they take the plea that advertising is only meant to affect the market share among the various competing brands (Saffer & Chaloupka, 2000). The basis of the advertising response function is the theory of the diminishing marginal product. This implies that after some point additions to advertising results in minimal additions to consumption. National level advertising data demonstrate that cigarette advertising has no effect on cigarette consumption. Nevertheless studies have found strong correlation between trends in the intensity of cigarette marketing and trends in the rates of adolescent smoking initiation (Biener & Siegel, 2000). Adolescents who owned a tobacco promotional item like a cigarette logo on an item of clothing or a sports brand and named a brand of tobacco that attracted them, were more than twice as likely to become established smokers. The youth is certainly carried away by the promotions and they progress to become established smokers. Hence restrictions on tobacco marketing and promotion could reduce addiction to tobacco. On the presumption that advertising raises demand, several advertising regulation were imposed for advertising cigarette smoking. The government prohibited outdoor advertising and banned the use of cartoon characters in cigarette marketing (Farr, Tremblay & Tremblay, 2001). Advertising restrictions can enhance social welfare through effects on consumer surplus and other external costs and benefits. Advertising ban is an effective tool for reducing cigarette smoking. Evidence suggests that cigarette advertising and promotion directly or indirectly increase cigarette demand. Cigarette advertising is effective in getting children’s attention and the level of recall is positively correlated with anticipate smoking behavior or smoking initiation (Saffer, n.d.). The claim of the tobacco industry that the industry is mature and advertising is only designed to promote brand share is opposed. If the industry is mature or declining, retaining existing customers and attracting new ones would be important n the cigarette market as about 5% customers are lost annually due to death or because they quit smoking. Most adults who smoke begin to do so in their adolescence and the content of advertising is to appeal to this segment. Apart from the youth, the tobacco industry has also exploited the emancipation of women through the use of advertisements to entice women into becoming new users of tobacco. Advertisements lead women and girls to believe that cigarette smoking is common place and a socially desirable behavior among females. Tobacco companies spend more than US$ 5 billion a year on marketing and promotion in USA alone. The advertisements engage the consumer in a fancy. Thus, it is evident that selling and advertising increases cigarette consumption and entices women and adolescents as well. The physical injury to health is well known and this leads to a loss of the national exchequer as the healthcare costs go up. As has been seen in the hospitality sector, smoking bans have not reduced the business. On the other hand, they have experienced savings in compensation of workers due to ill health caused by passive smoking. Secondary smoking can be as damaging as active smoking and hence restricting smoking is essential. Restriction on smoking benefits the economy in several ways. Businesses where smoking restrictions have been imposed have not suffered; they have been able to save on expenses related to health care. Lives are better as air is less polluted; health conditions improve and the government has to spend less on insurance claims. The different states file lawsuits against the industry to recover the lost medical costs due to tobacco-related diseases. Filing and fighting the lawsuits is also a cost burden on the state and the restriction on smoking would reduce this as well. Thus with added restriction on the advertising, selling and smoking of tobacco the economy and general public health will increase and prosper. References: Alamar, B. C., & Glantz, S. A., (2004), Smoke-free ordinances increase restaurant profit and value, Contemporary Economic Policy, Vol. 22 No. 4 pp. 520-525 Ashley, M. J., & Ferrence, R., (1998), Reducing childrens exposure to environmental, Tob. Control 1998;7;61-65 Bartal, M., (2001), Health effects of tobacco use and exposure, 29 Oct 2007 Bartosch, W. J., & Pope, J. C., (2002), Economic effect of restaurant smoking restrictions on restaurant business in Massachusetts, 1992 to 1998, Tob. Control 2002;11;38-42 Bero, L. A., Montini, T., Bryan-Jones, K., & Mangurian, C., (2001), Science in regulatory policy making: case studies in the development of workplace smoking restrictions, Tob. Control 2001;10;329-336 Biener, L., & Siegel, M., (2000), Tobacco Marketing and Adolescent Smoking: More Support for a Causal Inference, American Journal of Public Health, March 2000, Vol. 90, No. 3 Dearlove, J. V., Bialous, S. A., & Glantz, S. A., (2002), Tobacco industry manipulation of the hospitality industry to maintain smoking in public places, Tob. Control 2002;11;94-104 Farkas et al., (1999), The effects of household and workplace smoking restrictions on quitting behaviours, Tob. Control 1999;8;261-265 Farr, S., Tremblay, C. H., & Tremblay, V. J., (2001), The Welfare Effect of Advertising Restrictions in the U.S. Cigarette Industry, Review of Industrial Organization 18: 147– 160, 2001. Gilliland et al., (2003), Environmental Tobacco Smoke and Absenteeism Related to Respiratory Illness in Schoolchildren, Am J Epidemiol 2003;157:861–869 Gruber, J., (2001), Tobacco at the Crossroads: The Past and Future of Smoking Regulation in the United States, The Journal of Economic Perspectives, Vol. 15, No. 2. (Spring, 2001), pp. 193-212 Mandel, L. L., Alamar, B. C., & Glantz, S. A., (2005), Smoke-free law did not affect revenue from gaming in Delaware, Tob. Control 2005;14;10-12 Rwjf (2003), N.Y.s Smoke-Free Restaurant Law Doesnt Hurt Business, Wins Wide Support, Study Finds, 29 Oct 2007 Saffer, H., & Chaloupka, F., (2000), The effect of tobacco advertising bans on tobacco consumption, Journal of Health Economics 19 2000.1117–1137 Saffer, H., (n.d.), Tobacco advertising and promotion, 29 Oct 2007 Scollo, M., Lal, A., Hyland, A., & Glantz, S., (2003), Review of the quality of studies on the economic effects of smoke-free policies on the hospitality industry, Tob. 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