Against Smoking Bans in “Public Spaces”

In Canada, the government prohibits smoking in “indoor public spaces,” which, according to the law, consist of bars, restaurants, bowling alleys, etc. The term “indoor public spaces,” however, is misleading: they are public only in the sense that there are other people sharing the space, yet, many of these “indoor public spaces” are owned by private individuals. There are several reasons for protecting their right to choose whether they want a smoke-free or smoke-filled establishment.

Many complain that smoking in bars is encouraging to nonsmokers and exposes them to secondhand smoke. There are many reasons why this argument may not hold. For now, though, it is more important to focus on the demonization of smoking. By categorically prohibiting restaurant owners from allowing their customers to smoke inside, the government prevents people from doing something they may want to do, i.e. to smoke in a bar or own a bar that allows smoking). Smoking is not good or bad “in itself,” but, rather, it is only good or bad according to individual preference, including, but not limited to, the tradeoff of overall health for immediate pleasure, the terms of which some individuals would happily agree with. Moreover, there is an enormous amount of information detailing the economic, health, and social harms associated with smoking available to consumers that allows them to choose intelligently.

A popular argument for banning smoking in indoor public spaces pertains to workers’ rights: smoking indoors threatens employee health and welfare and because many workers do not have the convenience of choosing their place of employment–so the argument goes–allowing it forces them to choose between inhaling toxic cigarette fumes and unemployment.

To some extent, indoor smoking harms workers. Does that really justify banning it?

Closer examination of firm behavior demonstrates that it varies based on the economic implications of “safety.” Between 2008 and 2010, 700 construction workers died from workplace injuries in Canada. In addition, 637 individuals died in manufacturing workplaces and 329 in the transportation industry. Although these numbers may seem surprising, the theory of compensating differentials explains why outcomes in some industries differ from those in others.

According to the compensating wage differentials theory, workers are compensated by firms in a number of ways: these include wages, nonwage benefits, and working conditions. Any given individual has a set of preferences between these forms of compensation. A risk adverse employee, for instance, may be willing to give up much of his paycheck for a little more safety. Someone comfortable with risk, however, could be willing to put herself squarely in danger’s way for better pay. That some individuals are comfortable with more risk explains why construction workers, for instance, agree to work in dangerous settings: higher compensation allays most concerns, whereas lower compensation highlights them. Firms need to offer compensation for labour to attract workers—when they decrease safety, labour supply shrinks and forces the firm to boost wages. Thus, there is a positive correlation between risk and compensation. And there is no authoritatively “ideal” level of risk; instead, there is a multitude of individually preferred ones.

Thus, to attract workers, owners of establishments that allow smoking indoors would need to offer wages high enough to distract employees from the health hazard associated with working there (assuming these concerns are present). For some workers, the increase in pay would offset their health concerns. Similarly, restaurant owners must consider whether indoor smoking discourages consumers from eating at their establishment. If there is growing opposition to smoking, for example, restaurant owners must choose between allowing customers to smoke indoors and losing whatever percentage of their customer base that refuses to eat in an establishment that permits indoor smoking.

Examining both consumer and employee perspectives on smoking indoors lead to a common conclusion: laws dictating firm behavior typically enforce an arbitrary standard and ignore individual preferences. Instead, the government should allow property owners to decide what is best for their respective establishments and let people pursue their individual desires freely.

Michael Sullivan is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Reforming Canadian Healthcare

The provinces are responsible for administering and delivering healthcare in Canada and while provincial jurisdiction may appear odd, it was not of major concern when the Fathers of Confederation ratified the British North America Act in 1867. Following several years of debate, however, the Judicial Committee of the Privy Council declared the provinces responsible for administering and provisioning healthcare. The federal government is responsible for public health, in addition to providing healthcare to certain groups, including First Nations, Inuit, military personnel, and federal inmates. It does provide funding to the provinces via the Canada Health Transfer, which is supposed to assist them with costs and ensure some degree of equivalency between provincial healthcare systems.

Former Saskatchewan Premier Tommy Douglas, widely recognized to be the “Father of Medicare,” fought ardently for the implementation of a publicly funded healthcare system. In 1962, one year after his departure from provincial politics, Saskatchewan began providing public healthcare and, shortly thereafter, so too did Alberta. Former Prime Minister John Diefenbaker, in 1958, announced the federal government would fund 50 per cent of provincial healthcare, and eight years later, then Prime Minister Lester B. Pearson ratified this motion.

As a result, Ottawa’s role in healthcare funding is controversial and has been a major policy issue in Canada. Indeed, without federal funding, there would be significant disparities among the provinces in terms of quality, yet, despite these concerns, healthcare innovation is provincial jurisdiction.

The debate over federal funding remerged following the expiration of the Canada Health Accord, established in 2004 under Paul Martin’s tenure as Prime Minister of Canada. It guaranteed six per cent annual increases in funding for healthcare and was supposed to help with deficiencies, such as high wait times. Stephen Harper’s government recently committed to a six per cent increase until 2017, after which the government will fund based on inflation-adjusted economic growth (although the level of funding will not fall below 3 per cent). This development has prompted critics to demand the government return to guaranteeing the six per cent increase, arguing that underfunding issues could worsen the system, and more worrying, allow new issues to emerge.

However, despite funding increases, very little has changed in terms of quality. Kelly McParland of the National Post, for instance, notes the lack of progress in reducing wait times. Moreover, citing the Health Council, he noted that homecare services for seniors are inadequate, primary care is insufficient, and prescription drugs are unaffordable. For example, as reported by the National Post, the federal government has given $41 billion in extra healthcare funding since 2004, yet in 2010 Canada ranked last of 11 countries in wait times.

McParland is not the sole critic. Indeed, there are several reports revealing the shortcomings of Canada’s healthcare system given the amount of money spent on it. Funding, therefore, is not necessarily the issue. There needs to be real reform of the Canadian healthcare system: Ottawa should retain its role, however, the provinces must consider new healthcare models as a means of strengthening their programs. Perhaps the first step ought to be reforming the Canada Health Act to be less restrictive in terms of delivery requirements. The Act requires that healthcare be publicly administered, greatly restricting any partnership with private entities. France, on the other hand, embraces a two-tier system, which typically performs highly in comparison to healthcare systems administered by other rich, democratic countries, in terms of both cost and outcome.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Marketing Canadian Lobster

The Canadian lobster industry is set to undergo significant changes this year that will not only affect fishers and processors, but also consumers. At the Canadian Lobster Value Recovery Summit, held in Halifax last week, stakeholders agreed to implement a levy system by next year (although, the details are incomplete). The hope is that applying a levy on each pound of lobster meat caught and processed would go to marketing these as reliable, high standard, Canadian products. Doing so will expectantly expand consumer interest and demand, aiding this unique industry. However, the additional cost could potentially dissuade those who currently enjoy Canadian lobster at current prices–which are at all-time lows.

Implementing a levy does have some potential to bolster the industry. Charging $0.01/pound from both harvester and processor would raise an estimated $25 million annually according news reports on the Summit. The lobster landings have been increasing in recent years with an average between 50,000 and 55,000 tonnes, but exceeding 74,000 in 2012, the expected revenue could potentially increase if this trend continues. Money from the levy will help brand Canadian lobster and market it to consumers. Having a recognizable and well known product is becoming more and more important as companies in the US have started their own marketing initiatives causing increased trade competition. Yet, there are concerns about the effectiveness and efficiency of using a universal marketing scheme for a product that has such a diverse group of producers.

Furthermore, it will likely stabilize the price of lobster. Atlantic Canada’s lobster haul is high lately, which has reduced prices to extraordinarily low levels. Harvesters are not reducing supply to control demand, because they are also in competition with one another and, therefore, each individual company wants to reach their quota. By increasing the marketing effort, in addition to taking advantage of new trade opportunities, however, the lobster industry is confident that it can support a greater consumer base, which would also lift prices to a more sustainable level. Trade agreements between Canada, Europe, and South Korea bolster this opportunity and proper marketing will help attract new consumers.

Domestic consumers are unlikely to welcome the price increase that will result from the proposed levy, though, and when it comes into effect, those who have become accustomed to inexpensive lobster during years when supply exceed demand could reduce their demand. Unfortunately, however, the price of lobster is unsustainable for the industry as a whole. Some fishermen have had to exit the industry lately, unable to break even with expenditures on wages and rising operating costs (such as oil). If the Canadian lobster industry can increase their customer base through marketing and sustain this increase in prices, it has the opportunity to expand and become a profitable industry in the Canadian economy.

There are already quota and licensing systems in place for harvesting Canadian lobster and, so long as the levy functions efficiently, the lobster industry stands to achieve significant gains from the proposed changes. The supply of lobster depends largely on the systems already in place and the new system aims to increase demand in order to meet the available resources. It is important for the rest of Canada to understand that increasing lobster prices and selling in new markets will benefit the entire country by strengthening the Canadian lobster industry and, as a result, the economy.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute