Money in an Ashtray

Money in an Ashtray

By Nick Dmitrovich with data from the Richard M. Fairbanks Foundation


Smoking costs Indiana employers about $2.8 billion annually. That figure is derived from just three of the many negative factors about tobacco, breaking down to:

  • $2.1 billion in lost productivity from smoking breaks,
  • $387 million from smoker absenteeism,
  • And $346 million lost to reduced work performance.

Those numbers might at first seem unreal, but the scope of the problem is pretty big in Indiana. Let’s take a look at how statistics like this are even possible.


Your Money’s Going Up in Smoke

Data on this subject comes to us from the Richard M. Fairbanks Foundation, an Indianapolis-based foundation that advocates for the health and wellness of the city and supports other tax-exempt organizations with grant funding. Late last year, a detailed report was published that described all the ways that tobacco is beating up Indiana’s wallet.

For companies, tobacco generates financial losses on multiple fronts.

  • Absenteeism
    • Smokers have three times more sick days than people who have never smoked.
    • Current smokers were 33% more likely to have an absence from work than non-smoking workers.
    • The excess per-smoker absenteeism cost to employers are approximately $517 per year.
  • Lost Productivity
    • The costs of employing a smoker are estimated to be $5,816 more each year than employing a non-smoker.
    • Smoking employees take an additional 4-30 minutes in break time each day for on-the-job smoking.
    • The annual per smoker cost of lost productivity due to smoking breaks is between $1,642 and $4,103.
  • Reduced Investment
    • Companies who are considering investing or expanding in Indiana are taking note of our high smoking rate. As the report notes, this is having an impact on their selections because of the way healthcare costs play into their decision. “Healthcare costs are second only to payroll expenditures for most businesses,” researchers said. “As a result, more companies are looking at health rankings when deciding where to locate.”
  • Higher Premiums
    • The average health care insurance premiums for smoking employees is approximately 50% higher than for non-smoking employees.
    • The excess annual health care cost per smoking employee ranges from $899 to $3,598.


Everyone’s Caught in this Noxious Cloud

In addition to what employers across the state are paying, every tax-paying household in the state gets hit hard as well.

  • To cover the costs of smoking, residents in Indiana pay an additional $1,125 per household in state and federal taxes.
  • Increases to healthcare expenses and tax burdens caused by smoking amounts to about $3.3 billion annually.
  • An additional $2.2 billion is generated by secondhand smoke and premature death costs. $540 million of that amount is for Medicaid alone.


What Can We Do?

The report detailed several broad social policies that could help reduce smoking in our state. Chief among them was raising the price of cigarettes, which was cited as the most effective option. Interestingly, increasing taxes on cigarettes will add revenue for the state even though it’s been proven to drive down sales. So, there’s a bit of a two-fold benefit. That newly-generated revenue could then be used for prevention and cessation programs, further reducing our rates.

Employers have a unique position in this fight, as they’re afforded an array of control measures they could put in place immediately. For example, employers could:

  • Implement a company-specific smoke-free air policy if state or local laws do not exist or are non-comprehensive.
  • Create a smoke-free workplace policy. These have been found to decrease smoking prevalence rates among employees.
  • Include both counseling and medication coverage in your health benefits package.
  • Provide self-help materials and social support.
  • Have an intervention. There is strong evidence that workplace interventions aimed at individual smokers increases the likelihood of smoking cessation.
  • Offer financial incentives such as cash rewards and commitment contracts to help employees quit smoking. Estimates suggest incentives can triple chances for success.


Start Your Savings

In some ways, employers are actually better positioned to make these kinds of big changes because they can cut right through the bureaucracy that would stall most of the social options. Employers can enact these concepts today – right now, today – without any kind of public approval needed.

Most companies are quick to address expensive inefficiencies. This topic is really no different. It’s costing money and causing problems. It’s time to quit smoking and start saving. What can your company do today to start reclaiming some of its losses from tobacco?

Category Features, Health