Atlanta Fed: Ex-smokers highest earners

Do you have clients who smoke? Advising them to quit may be good for their wealth. New research shows that ex-smokers not only earn higher salaries than smokers, they also have higher pay packages than people who have never smoked in their lives.

Atlanta Fed: Ex-smokers highest earners

It's well known that non-smokers earn higher salaries than smokers. Now, new analysis from the Federal Reserve Bank of Atlanta has found being an ex-smoker isn’t such a drag after all, as they are actually the highest earners of all.

People who had quit smoking for at least a year earn more than those who have never smoked at all, or current smokers, according to a new working paper from the Atlanta Fed. Bank economists Julie Hotchkiss and Melinda Pitts analysed US census data and found those who have never smoked earn 95% of the hourly wages of former smokers.

The figures also show smokers earned about 80% of non-smokers’ wages, and it took just one cigarette a day to trigger the wage gap, according to the researchers.

“Smoking erodes the value of your human capital in the labor market,” Pitts said.

While it’s possible that smokers have lower productivity, and therefore earn less, the researchers could not find evidence to support the theory because the frequency at which people smoke doesn’t significantly affect their earnings.

“The idea is that if the productivity was affected by smoking, then heavier smokers would have a much larger wage gap. We didn’t find support for this hypothesis,” Pitts said.

Education level was the largest contributing variable. Non-smokers tended to be more educated, and were less likely to have spouses who smoke. They were also more likely to live in states with higher cigarette prices. Unmeasured factors like an employer’s tolerance to smoking behavior could also be driving the wage gap.

As for the ex-smoker advantage? The researchers suggest the traits required to quit smoking were linked to business skills and productivity.

 “It takes a special person to quit an addictive behavior, and there is a higher reward for smoking cessation than not ever starting it,” said Pitts. “I think the qualities of persistence, patience and everything else that goes along with being able to quit are valuable to employers.”