The Impoverishing Effect of Tobacco Use in Indonesia

Smoking households in Indonesia diverted a significant share of their budget to tobacco. Tobacco expenditure is deemed unproductive, as it crowds out resources from essential commodities and increases health care expenditure driven by tobacco-induced diseases. Therefore, despite having adequate resources, some smoking families in Indonesia may spend less on basic needs, which inadvertently puts their standard of living below the poverty line.

Employing data from 2021 (March) Indonesia's Socioeconomic Survey (SUSENAS), this research aims to quantify the impoverishing effect of tobacco consumption in Indonesia, considering spending on tobacco and tobacco-attributable health care costs as unproductive expenditure. The de facto headcount poverty rate and poverty gap index are calculated by removing tobacco expenditures and tobacco-attributable health care expenditures from the household's total spending.

Accounting for unproductive spending related to tobacco use, Indonesia's headcount poverty ratio in March 2021 would rise by 3.22 percentage points, equivalent to an additional 8.75 million people living below the poverty line. In addition, the poverty gap index would increase by 0.77 percentage points. The impoverishment effect of tobacco is larger among rural populations than their urban counterparts. Moreover, the impoverishment is mainly driven by direct tobacco spending rather than tobacco-attributable health care expenditure.

Significant portions of Indonesia's population are exposed to secondary poverty because of tobacco use. A high level of cigarette spending among smoking households is the major source of the impoverishing effect of tobacco use.

The study provides quantitative evidence of the true cost of smoking in Indonesia, where the de facto number of the poor population after accounting for tobacco-related spending is higher than what is published in the official statistics. The findings of this study support tobacco control policies in Indonesia, particularly to effectively reduce tobacco use and mitigate the impoverishing impact of tobacco use on low-income households.