XL Problems: Waistlines, Gold and Taxes
When Japan struck companies in 2008 with unconventional legislation (the “Metabo Law”) to tackle obesity, job seekers in good shape may have had doubts about adding the size of their waists to their CVs next to the “Experience” line. The Metabo Law sets guidelines for monitoring waistlines for citizens between 40 and 74. The law is targeted at companies, which could face penalties if they do not achieve the goal of reducing waistlines of their employees and dependents by 10% in a 4-year period. Moreover, companies slightly off-target would have to increase their contributions to a welfare fund by 10%, and those over a certain percentage of overweight employees could face direct fines. As an enforcement mechanism, waistlines were measured during employees’ annual medical check-ups, and men exceeding 33.5 inches (85 cm) and women over 31.5 (80 cm) were enrolled in diet programs and fitness classes or asked to see a doctor.
The targets of this policy were clearly stated by the Japanese Ministry of Health: (1) decreasing the risk of diabetes and cardiovascular diseases, and (2) ultimately reducing medical costs to loosen the burden of the government’s healthcare system. However, as with any other policy, the Metabo Law has its limitations. The first and most evident is that it tackles the problem at a late stage in life (individuals over 40 years old). Even though this is not a negligible number as it stands for 56 million people (43% of total population) in Japan, obesity and health problems with irreversible damages, including diabetes, can be developed at an earlier stage in life. Second, the policy may create further issues regarding the labor market, as it can produce market barriers for companies that will now have an incentive to give preference to job-seekers already under the established waistlines. The line of thought may be that these individuals will not require an excessive amount of time to comply with the law by attending diet programs, fitness centers or visiting doctors. Despite stringent anti-discrimination laws in Japan, there may be an unintended bias towards off-limit individuals as companies worry about productivity.
Still, the Metabo Law puts pressure on companies and individuals themselves to take action and find solutions. Companies may be inclined to institute programs to teach better eating habits to employees or ways to integrate a work-life balance. In general, the policy sets the ground for the promotion of educational initiatives that could shift the patterns of consumption and behavior of affected individuals.
Another unconventional measure was implemented by the Municipality of Dubai, in the United Arab Emirates, in 2013. The program, named “Your Weight in Gold”, rewarded participants with 1 gram of gold for every kilogram of weight lost in a two-months period. In addition, it provided children between 2 and 14 years old with 2 grams of gold per kilogram lost. The condition for payout was that the participant lose 2 kilograms. This type of program, although potentially effective in the short-term, has a high cost for the state and it may send the wrong signals to participants. For example, they may choose skipping meals or over-exercising to obtain the big prize. More worryingly, parents may feed children poorly for two months, potentially causing long-term eating disorders in infants. Fortunately, the policy was called off in 2015 after only two summers.
Meanwhile, policies in other countries seem more product-oriented and come in the form of Pigouvian taxes, which are taxes that aim to reduce the negative externality of an activity or a product in the economy by impacting consumption. Although taxes are not an innovative policy in and of itself, the subject being taxed in these countries make these initiatives an alternative mechanism to tackle the weighty problem that obesity represents. For example, Mexico has started taxing sugary drinks in 2013, after the Senate approved a controversial “Special Tax on Products and Services" (IEPS, in Spanish), with the goal of tackling obesity and diabetes. The tax increased the cost of the targeted drinks by 1 Mexican Peso (USD 0.057) or 20% per liter.
As a result, the Mexican National Institute of Public Health has estimated that sales of sugary drinks have declined by 12% and that water consumption has increased by 10% in the previous year.
In addition, the government benefited from outstanding tax revenues of USD 1.9 billion in 2014. In general, it appears that the policy had the expected outcome of reducing consumption to a significant level. However, the policy’s criticisms include the reduction of the population’s purchasing power, with a more pervasive effect over low-income segments, and reducing manufacturers' revenue, which most certainly will put pressure on the government to reverse the policy.
Other countries have implemented similar taxes in a more precise manner. For example, in 2011, Hungary introduced a tax of HUF 7 (27% over the final price) per liter over soft drinks containing more than 8g of sugar per 100ml, and left drinks with a content higher than 25% of fruits or vegetables exempted from taxation. Similarly, it taxed salty snacks containing more than 1g of salt per 100g. Earlier in 2010, Denmark imposed a levy of 25% over ice creams with sugar content above 0.5g per 100 ml, while taxing those products with a lower content of sugar by a lower rate. The goal of these measures is clear: decrease consumption. However, they go one step further by providing incentives for companies to modify formulations by reducing the amount of salt or sugar in the product in order to either reduce or be exempted of the Pigouvian tax. Companies managing to adapt will be able to improve their competitiveness in the country while offering healthier options to the public.
Countries should continue adapting their policies to their needs through information at hand and viable mechanisms throughout the process of achieving the goal of reducing obesity and health-related diseases. However, there are always factors playing against the intended benefits when it comes to changing individuals' and companies’ behaviors. The main resistance tends to be associated with the debate of the role of the State in society. Countries taking action may be seen as too intrusive while wanting to tackle this problem. Also, companies affected may counteract the measures with pressure over the State to eliminate the imposed tax, as was the case in Denmark and currently in Mexico.
In the past, the taxation of cigarettes and alcohol reduced consumption of these products in a significant manner. However, taxing food is always a sensitive issue that requires greater attention. Countries undertaking these types of policies should clarify the intended goal of the policy and provide as much scientific evidence and quantitative data as possible. Furthermore, clear rules for all actors in the market need to be established so that the policy is not considered discriminatory for certain sectors. For instance, the tax must be aimed at homogenous products and target both national and foreign products. In addition, countries need to assess if substitutes are more beneficial than the targeted product. It may be that water is not chosen as the immediate substitute of sugary drinks for the population of a certain country, and that the policy pushes consumption towards solutions with no absolute benefits.
Other solutions involve the strengthening of mechanisms to assure that companies inform customers about their products. Europe has substantially improved its rules for companies to be more specific in terms of labeling of products. However, deceptive marketing remains a major issue. In the end, when it comes to addressing health, there is no magic pill that can erase the decisions taken by an individual throughout his or her entire life. It may seem intrusive that governments try to establish preventive measures for their citizens, and policies such as the ones mentioned in this article may have their problems. In spite of these issues, the benefits appear to heavily outweigh its setbacks.
Sources:
World Health Organization (2015), ‘Sugars intake for adults and children’.
BBC News (2015), ‘Scientific experts: Sugar intake ‘should be halved’’
Emirates 24 News (2015), Dubai’s ‘Your Child in Gold’: Indians biggest losers - take gold’.
Arabian Business (2015), ‘Dubai Municipality ends ‘Your Weight in Gold’ initiative’.
Laura Stampler (2014), ‘Dubai’s kids now worth their weight (loss) in gold’. Time Magazine.
Ecorys (2014), ‘Food taxes and their impact on competitiveness in the agri-food sector’.
Colchero MA, Salgado JC, Unar et al (2014), ‘Aspectos económicos relacionados con un impuesto al refresco en México’. Instituto Nacional de Salud Pública (INSP).
Jayarajan N. (2011), ‘The Fat’s on Fire: Curbing Obesity in Japan’. Boston University (BU)
The Guardian (2008). ‘Japanese firms face penalties for overweight staff’
