Tax on Sugar-Sweetened Beverages Would Not Hurt Jobs, Study Finds

02/13/2014

A 20 percent tax on sugar-sweetened beverages would result in small job gains in both the public and private sectors, according to new research by University of Illinois at Chicago researchers.

Researchers modeled the employment impact of such a tax in Illinois and California. Their findings predict an increase of 4,509 jobs in Illinois and 6,252 jobs in California following the application of such a tax, representing a 0.06 percent and 0.03 percent increase in employment, respectively.

This is the first major study to predict how a tax on sugar-sweetened beverages would impact the labor market. It appears in the American Journal of Public Health. (See the abstract.)

The study shows that job losses due to reduced sugar-sweetened beverage consumption would be offset by consumers reallocating their spending to non-sugar-sweetened beverages and other goods and services. For example, truck drivers who previously delivered regular soda would transport other beverages, such as diet soda and bottled water (often made by the same companies), milk, 100 percent fruit juice, or entirely different products. Potential job losses also would be offset by employment increases associated with revenue generated from the tax.

The study estimates total employment losses and gains across both the public and private sectors. The Robert Wood Johnson Foundation funded the study through its Healthy Eating Research national program.

“Our research shows that a 20 percent tax on sugar-sweetened beverages would not result in overall job loss,” said Lisa Powell, professor of health policy and administration at the University of Illinois at Chicago and lead author of the study. “This is contrary to the beverage industry’s claims of regional job loss due to decreased consumption of sugar-sweetened beverages. The industry’s estimates do not fully account for money that will be spent elsewhere in the economy or the newly generated tax revenue.”

Powell and her team used a comprehensive model to assess the full economic impact of the tax in Illinois and California, including changes in sugar-sweetened beverage demand; substitution to non-sugar-sweetened beverages; adjustments in consumer income and spending levels created by the tax; and, government spending of new tax revenue. This study focused on the impact of a tax in two states, but the researchers expect the overall results would be similar in other states.

Sugar-sweetened beverages, such as soda, energy drinks, sports drinks, and sweetened coffees and teas, add large numbers of calories to the diets of children and adults and are associated with an increased risk of chronic diseases, including Type 2 diabetes, heart disease, and obesity. Sugar-sweetened beverage taxes have been proposed as a way to influence consumers’ behavior to help prevent obesity, improve health and provide funds for health-promotion efforts. Powell's previous research estimated that a 20 percent (within the range of one to two cents per ounce) increase in the price of sugar-sweetened beverages would reduce consumption by 24 percent.

Powell and colleagues conduct much of their research as part of Bridging the Gap, another national research program funded by the Robert Wood Johnson Foundation that is dedicated to improving the understanding of how policies and environmental factors influence diet, physical activity and obesity among youth, as well as youth tobacco use.

Powell's research portfolio is administered by the Institute for Health Research and Policy.

This news release was adapted from the one written by Christine Clayton for the Robert Wood Johnson Foundation in Princeton, N.J. For more information about the foundation, visit www.rwjf.org.