Blowing up money? The earnings penalty of smoking in the 1970s and the 21st century

Abstract

We analyze the earnings penalty of smoking among Swedish twins in two social contexts: the 1970s, when smoking was common and widely accepted and when there were relatively few tobacco laws aiming to reduce smoking; and the 2000s, when smoking had become more expensive, stigmatizing and less common, and when tobacco laws and regulations had intensified. The results show that the short-term earnings penalty of smoking was much higher in the 21st century than in the 1970s for men. For women, smokers had on average higher annual earnings compared to nonsmokers in the 1970s, but lower annual earnings in the 2000s. In the long run, there was an earnings gap for men between never-smokers and continuous smokers, whereas there was a pronounced earnings ‘bonus’ of smoking cessation for women. The results emphasize the importance of social context and the long-term horizon when evaluating the consequences of smoking for earnings.