Exercise Tax on cigarettes
The prevalence of smoking for Australian aged 15+ in 2016 was 14.7%, it was 21.8% for the United States, and the World prevalence was 20.5% (Worldbank.org, 2018). Both economies were below the world’s prevalence rate. In all the three cases, the males had a higher prevalence than the females. In Australia, the prevalence of male smoking in 2016 was 16.5, in the US it was 24.6%, and the world’s male prevalence was 34.6%. In Australia, the prevalence of female smoking in 2016 was 13%, in the US it was 19.1%, and the world’s male prevalence was 6.4%. In 2016 therefore, the prevalence of male smoking of the adult population was high in the US compared to Australia; however, both were below the world’s male prevalence. Similarly, in 2016, the prevalence of female smoking was higher in the US than in Australia; however, both were above the world’s female prevalence.
S is supply curve, S + tax is the supply curve after excise tax, De is the elastic demand curve, Di is the inelastic demand curve, e1 is initial equilibrium, e2 is new equilibrium in case of inelastic demand, and e3 is new equilibrium in case of elastic demand. Di is steeper than De. From the initial equilibrium price P* and quantity of cigarette Q*, in the case of inelastic demand Di, quantity falls to Q2 and price rises to P2 after the excise. The tax revenue for the government after the excise becomes area P2e2cP1; there is a big increase in price, while the reduction in demand is small. In the case of elastic demand De, quantity falls to Q3 and price rises to P3 after the excise. Thetaxation-law revenue for the government after the excise becomes area P3e3gP4; there is a small increase in price, while the reduction in demand is big. In real life, the nature of cigarette demand is that it’s inelastic to price changes such that, it would only take a huge price increment in order for smokers to
The government wishes to lower the rate of smoking because it’s so costly to the society. The costs of smoking are way higher than the benefits derived from smoking. One of the said benefits of smoking is that it prevents infection against several diseases (Gadye, 2015). However, this is limited and the cost are worse; according to Bellew, Greenhalgh and Winstanley (2015) for example, in 2004-05, smoking prevented 148 deaths, but in the same year it caused 15,050 deaths. The prevention of the several diseases it’s at a cost of so many lives. Furthermore, the prevention against the several diseases does not guarantee that the smoker may not get other smoking related diseases such as cancer. According to Smith (2018), more than half of regular tobacco smokers die as a result; the annual society’s economic cost is two trillion dollar. The growth of tobacco in many countries is causing desertification as farmers’ clear forests to facilitate for the same. Desertification is one of the main issue behind the changing climatic conditions as trees are known to attract rainfall, hence, lower rain levels may be a greater cost to the society who depend on rainfall for farming. The world’s annual deaths from tobacco consumption is six million people. Another benefit is tax revenue, but the tax revenue raised are not sufficient to curb the smoking relates diseases.
Policy Recommendations to Lower Smoking Rates
Smoking can be considered least useful to a person’s body. The older a person becomes, the lower his/her immunity against diseases becomes. Smoking harms the lung cells for every time it’s undertaken. Thus, smoking for a very long time may expose the smoker to related disease such as cancer because the cells becomes completely damaged. Trying to cure such diseases results in loss of living standards since it consumes funds that would be used in other productive activities. Death at the extreme cases results in some children left without the breadwinner and thus low standards of living. To avoid such costs, smokers should quit smoking as they grow old.
In Australia, the following policies have been enacted in addition to smoking tax. One is banning cigarettes advertisement; in this case, many non-smokers won’t be aware of the existence of this product since advertisement always make a good to attract consumers. There is a ban on smoking in public places. This is because second hand smoking is harmful and also kills many people. The plain packaging of cigarettes is also another most effective policy (Davidson and de Silva, 2017). Branding the packages makes its look appealing to potential consumers and thus the government does not want it to attract the young generation into smoking (Pattemore, 2016). Plain packaging is also attached to reduced cigarette advertisement.
Plain packaging has be considered to be effective in the fact that it avoids branding that makes the cigarettes look appealing. The attractiveness of the brand is responsible for causing many people to start smoking. Even if cigarette companies are not comfortable with this legislation, they have to find other ways of introducing their brand but the packaging remains plain. This research has identified that the costs of tobacco smoking impose a huge cost to the society and thus the government should try to minimize it as much as possible. Taxing cigarettes is not an effective legislation given that its demand is inelastic and thus it will only add to the costs of living. Other policies like plain packaging are more effective in discouraging new smokers. The government should identify other policies which could lower the smoking for the existing smokers since most of the policies discussed in this paper are aimed at preventing entrant into smoking. The ramification if this does not happen is that in the future the health cost will still be high since many people are currently smoking. Plain packaging has been introduced to many economies and has proved to be more effective.
Effectiveness of Plain Packaging
Unemployment is a situation where people have no jobs irrespective of whether they participate in the labor force or not. Unemployment types are many depending of the causes. Structural unemployment is a type that results from structural change in the workplace. In this, there might be an introduction of new technology that may be doing a task that initially was done by several workers; the workers whose task are taken by the new technology lose their jobs (Nash, 2017). New technology may also demand possession of certain skills for all workers; those who fail to qualify for that may lose their job; they will go and take time acquiring the skills. In some other cases, certain factor may make a company to shift operation overseas such as high production costs; only the most important workers may be taken to the new operation area while all others are left jobless. Cyclical unemployment result from poor business performance (Sawe, 2016). Some conditions in an economy may be discouraging aggregate demand and thus creating a disincentive for heavy production. Inadequate demand make businesses to cut its employees since fewer of them can be able to satisfy the existing demand; they only take them back when economy achieves a recovery.
Frictional unemployment is a type that result from unavailability of information (market failure). When student complete their studies, they are unaware of the employing companies, and on the other hand, the employing companies are also not aware that this potential employee is looking for a job. However, this type could also be voluntary where unsatisfied working people quit jobs to seek better jobs; also when people are choosy in the jobs they can undertake. Hidden unemployment is a type that exist due to the existence of discouraged workers. These workers fail to meet the Australian set conditions for a person to qualify to be considered unemployed which are; actively seeking, having no job, and available for any job type. They are therefore not included in the labor force but still have a need to get a job. Underemployment is unemployment issue resulting from poor economic conditions such that there are no adequate jobs and the supply is very high (Scutt, 2016). Increased production costs may force businesses to employ only few labor hours.
There has been both an increase and decrease in the supply of labor force participation in Australia for the youths aged 15 – 24. The decrease is for only the Australian youths of this age bracket. Due to low economic performance, businesses opt to employ fewer people who are more experienced rather than a large number. This has resulted in reduced job vacancies. Since the youths are less experienced, businesses always choose to employ the elderly experienced workers. For this reason, the youths are now seeking a hiding place, they have opted to get back to school in order to gain more education skills such that their demand by employers will be higher when the economy gets back to its good health. This has also been attributed to improved government reforms on higher education fees. As a result the supply for this age group has decreased.
Costs of Smoking
The equilibrium wage is W and equilibrium participators in the labor force is Q. Supply by youths falls from S to a new supply S1, this is correspondent to a fall in labor force participation from Q to Q1. An increase in supply is represented to moving to S2 from S, correspondent to increase from Q to Q2. Wage rate is supposed to rise from W to W1 for a supply decrease or fall from W to W2 for a supply increase, but given the fact that there are still more unemployed workers, the equilibrium wage will still hold even after the changes.
The demand for these young workers is because of their flexibility. There is rapid growth in the service sector, and since it involves irregular hours, the youths are the best fit for this sector. The youths are fast to learn and understand and thus they’re the most favored by technological changes.
From equilibrium wage W* and participation Q*, the demand curve D is forced to shift to D1 since the factor causing an increase in demand is not a wage factor. Participation thus rises from Q* to Q1; wage change from W* to W1.
Even though students are taking their studies, there are some who pay their fees by themselves. Furthermore, they have extra needs that cannot be satisfied by the money received from guardians unless those that are well-off. Thus, there is a need to earn some income to facilitate for such needs. Since they still want to continue with their education, they opt to take part-time jobs which they engage into after classes. Furthermore, even for the youths who are not furthering their education, the shortage of jobs has lowered the probability of falling into a full-time job employment and thus, part-time jobs become the only option (Dhillon and Cassidy, 2018). The growth of the service sector is also creating many part-time jobs which are convenient for the youths (Vandenbroek, 2018).
The youth (15 – 24 years) unemployment rate in Australia is hovering around 12.5% (Irvine, 2018). This unemployment rate has been higher and has fallen due to many youths getting back to further their studies. Poor economic growth is the major reason for this high youth unemployment rate. Many areas where the youths had been employed before the global recession that took place in 2008 -2009 have experienced a slow growth rate. According to Jericho (2018), there are many underemployed youths, for those aged 15 – 19 years, 31% are underemployed, and for 20 – 24 years, 20% are underemployed. The reason for underemployment is that most of them are engaged in retail and service sector which are more cyclical (Grattan, 2017). Furthermore, most of them want to both study and work. There is more underemployment in the case for part-time jobs.
Types of Unemployment
According to OECD (2018), while the youth unemployment rate in Australia was 12.6% in 2017, it was 9.2% for the US. In both economies, there were a higher proportion of unemployed males compared to female youths. In Australia, 13.7% males are unemployed and 10.3% in the US. In Australia, 11.5% females are unemployed and 8.5% in the US. The OECD total for 2017 was 12.3% for men and 11.5% for females. Australia unemployment for male youths was above the OECD total and for females it was equal to the OECD total. For the US, both its male and female youth unemployment rate were below the OECD level respectively.
References
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Vandenbroek, P. (2018). Youth unemployment statistics: a quick guide. [Online] Aph.gov.au. Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1718/Quick_Guides/YthUnemployment [Accessed 7 Oct. 2018].
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