A new study from the University of Minnesota School of Public Health about the impact of smoking bans on restaurant and bar employment is making news this week. The study examined 10 Minnesota cities from 2003-2006, tracking employment numbers and searching for effects correlated with different smoking policies (comprehensive bans, bans with exemptions for bars, and no bans). No statistically significant impact was found, so the researchers conclude that governments should pass comprehensive smoking bans without concern for economic effects. Predictably, the conclusion has been picked up uncritically by the press, and the authors hope it will influence debates over statewide bans.
The study is gated online so I wrote to lead author Liz Klein, now at Ohio State University, and she was kind enough to send me the full paper so that I could look at the methodology. I’ll get to that in a moment, but first I’d like to reiterate that employment effects are among the least important arguments against smoking bans. The real question is whether consenting adults should be free to assemble in a privately owned business to enjoy a legal product. Reasonable people can disagree about various measures to reduce indoor smoking, but to eliminate all businesses where adults can enjoy tobacco and alcohol is a blatant violation of their rights to property, assembly, and contract. Empirical questions about employment are an interesting part of the debate over smoking bans, but while discussing them we shouldn’t lose sight of how anti-liberal comprehensive bans really are.
That said, let’s get to the study.
Fortunately, the methodology is straightforward. Most research in this area focuses on tracking changes in employment in one jurisdiction before and after a smoking ban. This one takes a different approach, tracking employment in 10 cities classified by their smoking policies. Employment was measured by restaurant’s and bar’s self-reported numbers of employees, which they are required by law to send to the state. Two of the cities had no bans on smoking in bars and restaurants and served to identify any secular changes in employment trends. After adjusting the numbers into a per capita measure to account for population differences, no significant effects were found.
All of this is fine as far is it goes, but there are some important limitations. The first is that the cities in the sample weren’t randomly treated with smoking policies. Comprehensive smoking bans get passed in the cities that have the political will to pass them and thus presumably have many residents who like going out to smokefree businesses. Cities with looser bans or no bans at all likely have more relaxed attitudes toward smoking. The employment effects of local bans are therefore potentially very different from those of bans imposed statewide, in which, for example, the preferences of urban voters might trump those of rural bar patrons who’d very much enjoy a cigarette and a beer.
This isn’t idle speculation. A 2006 study (not gated) by economists Robert Fleck and Andrew Hanssen examined California’s statewide smoking ban that went into effect long after many California communities had passed their own local restrictions. Here is a summary by Michael Pakko at the St. Louis Fed:
[Fleck and Hanssen] analyzed quarterly restaurant sales data for 267 California cities over 25 years. They find that the measured impact of smoking bans differs between local bans and the statewide ban. In what the authors call their “naïve” specification that treats all smoke-free laws the same, they find a statistically significant 4 percent decline in revenues associated with smoking bans.
When they estimate the effects of the statewide ban and local bans independently, they find that the measured decline in restaurant sales is attributable to the statewide ban on cities without local bans. The measured effect of the statewide ban is nearly 4 percent, and it is statistically significant. The independent effect of local smoking ordinances is estimated to be very small and is not significant. These findings are consistent with the interpretation that locally originated smoking bans have little effect, but smoking bans that are imposed on a community by a higher jurisdiction can have a detrimental economic impact.
Fleck and Hanssen go on to uncover an important specification problem: They find that cities that adopted smoke-free laws were systematically different from those that did not. The authors find that sales growth tends to be a predictor of smoking bans, rather than the other way around. This “reverse causality” calls into question many earlier findings, and it poses problems for using data from California in drawing inferences about the economic impact of smoking bans elsewhere.
I asked Professor Klein if she thought this limitation should be considered when applying her study to Ohio, where bar owners are currently reporting declining revenues and seeking an exemption from the state. She responded:
While randomization is an ideal option to deal with the potential for confounding, a quasi-experimental design, as we have implemented, is the next best option. We selected comparison cities (by size and type of community) in order to best account for time trends in effect at the time of study (2003-2006).
In other words, the limitation is real, and the applicability of the study depends on one’s confidence that the two small control cities are an adequate substitute for randomization. Given the inherently non-random distribution of local smoking bans, I suggest a caveat ought to be included in discussions of statewide exemptions.
The second major limitation is even more serious, and that is that the study only tracks effects at the community level. Individual businesses could be hit drastically hard by a ban and not show up in the data if local restaurants and bars in general are performing well (and remember, a successful hospitality industry may be one predictor that a community will pass a ban). Klein and the other authors acknowledge this in their paper:
An important limitation in the use of aggregated data is that we are able to estimate an overall average, but we are not able to determine differential effects at the business- or neighborhood-level.
I mentioned this to Klein as well. She replied:
Our study does not make claims about individual businesses, as we had data at the community-level only. However, policies are enacted at the community level, so it seems that evaluation of policy effects at the community level are appropriate. Ultimately, decision-makers have to weigh the scientific and economic evidence to make the best decisions for the health of a community.
Voters and legislators consider exemptions to smoking bans precisely because they realize that policies that are good for the community at large might be disastrous and/or unfair to certain businesses within it. To say that community-level effects are the only thing that matter is to dodge the question. Essentially, it is to tell people put out of business by a ban to suck it up because on the bright side their competitors are doing well. Fortunately most people are more tolerant and compassionate than that and so exemptions to smoking bans may continue to pass.
Two other limitations of the study also come to mind. The first is that job numbers are an imperfect measure of the economic effect on employees. They tell us how many people are working, but they don’t tell us how their hours on the job or tip revenue have been affected. Employees in some bars included in the study might have been made worse off by anti-smoking policies and we wouldn’t know it from the data.
The second is that 2003-2006 were good years for the hospitality industry. The economic picture is very different in 2008-2009. Bars in the study period were likely able to absorb the shock of smoking bans more easily than bars today.
In summary, this new study is interesting and credible. It (and others) suggests that ban opponents sometimes overstate the economic case against smoking bans. Its application is limited, however, and says nothing about the potentially disastrous impacts of smoking bans on individual businesses and employees. Policy makers should continue carving out exemptions to smoking bans for the sake of business owners, their patrons, and the people who choose to work for them. A free society can and should tolerate a diversity of smoking options.