How Negative Demographics Can Help The Economy

By Tim Parker | November 12, 2010 AAA

There are certain groups of people in our society that just can't catch a break. Report after report shows new ways that these people are a drain on the economy, but are they really nothing more than a money pit? (For a related reading, see The Evolution Of Sinful Investing.)

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The Obese
Obesity affects an estimated 34% of adults in the United States. Those who are obese have increased instances of Type 2 diabetes, heart disease, stroke, gallbladder disease and many more health concerns. One study reports that in 2008, the costs to treat obesity hit $147 billion. To look at all of the statistics that go with obesity, it's easy to see why those who are overweight get a bad rap.

The dramatic rise in obesity can be traced to various factors, but one of those is our bad eating habits - and that is one of places where these unhealthy habits are helping our economy. In 1970, Americans spent about $6 billion on fast food. By 2000, that figure had grown to $110 billion. The nation is also spending a record amount trying to lose weight. Health club and gym revenues topped $19.1 billion in 2008, and the amount spent on weight loss products and services hit an estimated $40 billion. (For more, see 5 Ways To Get Healthy And Save Thousands A Year.)

Smokers
It's getting increasingly difficult to smoke anywhere these days. Americans are loudly protesting secondhand smoke, but 23% of men and 20% of women still light up on a regular basis. Smoking leads to a higher risk of heart attack and stroke as well as lung cancer. The amount of money spent on medical care for smokers has reached an estimated $75 billion. Is it really as bad as it appears?

Maybe not; cigarette smokers pay a hefty tax. In the Insurance Program Reauthorization Act of 2009, Obama raised federal cigarette tax from $0.39 to $1.01 per pack. Next, if you believe the cigarette manufacturers, smokers actually don't cost the economy any money at all. In fact, there's a net gain. A study commissioned by Philip Morris found that because smokers die earlier than non-smokers, they are saving the economy money by requiring less medical care, less pension benefits and less retirement care.

You might find this to be a little uncaring and cold-hearted; others did as well. When a spokesman for Phillip Morris was asked about this, he said, "This is an economic impact study, no more, no less." (But they might not want to build an advertising campaign out of it.)

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Gamblers
"Know when to hold 'em. Know when to fold 'em", right? Gambling is one of those lifestyles that doesn't seem to be as much on activists' radar screens as in the past, but gambling still costs the economy a pretty penny. Gambler's Anonymous estimates that there are over 12 million compulsive gamblers in the United States with each compulsive gambler having an average debt of $80,000. Note, these figures come from sources that are over 20 years old, so these numbers may be even higher now.

A 2002 study published in the Journal of Socio-Economics found that higher bankruptcy rates existed in communities where casinos were located. Additionally, compulsive gamblers have a higher incidence of divorce and other social impacts that lead to an economic drain on the economy.

We're nothing if not fair here, so let's not necessarily roll snake eyes on the gambling industry just yet. One study found that in a community where a casino was located, there was a 12% to 17% drop in welfare payments and another study commissioned by the National Research Council found a net economic gain to some of these same communities. This same study found that jobs are created in communities where casinos are built. (For more, see Going All-In: Comparing Investing And Gambling.)

The Bottom Line
While we're not trying sway your opinion on any of the above issues, it might be fair to say that those often vilified corners of society that people love to hate might not be as much of an economic drain as we often think. As with most situations, there are always two sides to the story. (For a related reading, see Casino Stats: Why Gamblers Rarely Win.)

Find out what happened in financial news this week. Read Water Cooler Finance: G20 Leader Spats And China Fakes It.

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