Tobacco Documents Online

Arthur Andersen Economic Consulting III. CONCLUSION Our conclusions include the following: 1. The number of jobs said to be dependent on tobacco is far fewer than the 2.3 million claimed on the basis of the Price Waterhouse Report. Of the 2.3 million jobs widely claimed to be dependent on tobacco, only 259,616, or 11 percent, are actually involved in growing, warehousing, manufacturing or wholesaling tobacco products. 2. The PW Report attributes 1.6 million jobs, more than two-thirds of the total 2.3 million claimed to be dependent on tobacco, from sectors of the economy that have no relation at all to tobacco by a technique that cannot be used. to determine whether a job is dependent on tobacco. 3. The Tobacco Institute's Estimates of the number of jobs which would be lost if tobacco taxes were increased are grossly inflated and unreliable. The actual number of jobs affected would be a small fraction of the number cited by the Tobacco Institute. 4. Money diverted from spending on tobacco products due to a tobacco tax increase will not disappear from the economy, but will be redirected into other goods and services, creating employment and business opportunities comparable to those in the tobacco industry. Therefore, the 1.6 million jobs from outside the tobacco industry that Price Waterhouse "attributes" to tobacco-related spending are unlikely to be lost as the result of a tobacco tax increase. The same can be said for many of the 431,635 jobs Price Waterhouse states are in the retail and supplier segments of the tobacco economy. 5. Jobs in tobacco growing, tobacco manufacturing, tobacco warehousing and tobacco wholesaling which are affected by any decrease in tobacco consumption will result in a shift from one sector to other sectors of the economy, but will not necessarily result in fewer jobs being available as long as money not spent on tobacco is redirected into other sectors of the economy. 6. Most states would experience economic gains from reduced tobacco consumption, as spending in non-tobacco states that is now directed toward tobacco products is re-directed to other goods and services. 7. The PW Report and TI Estimates fail to acknowledge the significant economic benefits of reduced tobacco consumption, which include reducing lost productivity and health care costs caused by tobacco. 9

. Arthur Andersen Economic Consulting 8. The job loss estimates attempt to project job losses on the basis of a snapshot of industry employment in 1990, ignoring the decline in tobacco industry employment that has occurred, and is projected to continue to occur, whether or not the tobacco excise tax is increased. Therefore, many jobs which the Tobacco Institute says would be lost as the result of a tax increase will be lost even without a tax increase. - 9. Tobacco production probably will not decrease to the extent predicted by the Tobacco Institute. The Tobacco Institute uses a formula for measuring the impact of a price increase on tobacco consumption that is inconsistent with generally accepted research and experience in the U.S. and abroad. The actual decrease is likely to be smaller. 10. The Tobacco Institute calculations fail to take into account that a significant percentage of American tobacco production is for export. Tobacco products produced for export will not be affected by a tobacco tax increase. The Tobacco Institute also fails to take into account the fact that cigarette manufacturers have reduced prices significantly within the past several months, which would offset in large measure the effect of a price increase brought about by a tobacco tax increase. This causes the Tobacco Institute to significantly overestimate the impact of a tax increase on jobs. These and other serious flaws . in the Price Waterhouse Report and the Tobacco Institute Estimates build upon one-another in a cumulative fashion to present grossly exaggerated and misleading estimates of job loss from an increase in the federal excise tax on tobacco products.

Arthur Andersen Economic Consulting IV. SOURCES * ALLEN, R. C., "The False Dilemma: the Impact of Tobacco Control Policies on employment in Canada, " Department of Economics, University of British Columbia, Vancouver 1993. * The Economic Impact of the Tobacco Industry on the United States Economy, Price Waterhouse 1990. * HERDMAN, R.H., HEWITT M. and LASHOBER, M., "Smoking Related Deaths and Financial Costs: Office of Technology Assessment Estimates for 1990," Office of Technology Assessment, Washington, D.C. 1993. * Statistical Abstract of the United States 1988, U.S. Department of Commerce, Bureau of the Census, Washington, D. C. 1987. * WARNER, K.E., "Health and Economic Implications of a Tobacco-free Society," Journal of the American Medical Association 258 (1987) p. 2080-2086. * Tobacco Situation and Outlook Report; U.S. Department of Agriculture, Economic Research Service, September 1993.