A general model of the impact of absenteeism on employers and employees

Abstract

Most studies on the indirect costs of an illness and the cost effectiveness of a medical intervention or employer-sponsored wellness program assume that the value of reducing the number of days employees miss from work due to illness is the wage rate. This paper presents a general model to examine the magnitude and incidence of costs associated with absenteeism under alternative assumptions regarding the size of the firm, the production function, the nature of the firm's product, and the competitiveness of the labor market. We conclude that the cost of lost work time can be substantially higher than the wage when perfect substitutes are not available to replace absent workers and there is team production or a penalty associated with not meeting an output target. In the long run, workers are likely to bear much of the incidence of the costs associated with absenteeism, and therefore be the likely beneficiaries of any reduction in absenteeism. SummaryMost studies on the indirect costs of an illness and the cost effectiveness of a medical intervention or employersponsored wellness program assume that the value of reducing the number of days employees miss from work due to illness is the wage rate. This paper presents a general model to examine the magnitude and incidence of costs associated with absenteeism under alternative assumptions regarding the size of the firm, the production function, the nature of the firm's product, and the competitiveness of the labor market. We conclude that the cost of lost work time can be substantially higher than the wage when perfect substitutes are not available to replace absent workers and there is team production or a penalty associated with not meeting an output target. In the long run, workers are likely to bear much of the incidence of the costs associated with absenteeism, and therefore be the likely beneficiaries of any reduction in absenteeism.

Well-being at work – overview and perspective

“…In the simplest terms, sickness absence has been shown to directly affect productivity (49). However, the literature linking health or well-being to productivity generally has important methodological limitations with regard to measuring both well-being and productivity (14,(50)(51)(52).…”

Economic Analysis of Methamphetamine Prevention Effects and Employer Costs

“…For absenteeism, employer cost is the revenue forgone by not having an employee show up at work. The marginal revenue product of labor provides a lower-bound estimate of employer revenue lost through absenteeism and may be conservatively estimated as the total employee compensation that would have been earned during the absent period (Pauly et al, 2002). The additional annual hours of methamphetaminerelated absenteeism estimated from the NSDUH data were multiplied by the BLS hourly compensation data (adjusted for age and the lower compensation received by methamphetamine users, as detailed below) to yield, for each year of age, employer methamphetamine-related absenteeism costs per year per methamphetamine user.…”

Profiting from presenteeism? Effects of an enforced activation policy on firm profits

“…If absence is costly to the firm above and beyond direct wage costs, we might expect part-time absences to reduce some of these costs. Pauly et al (2002) present a theoretical model of the costs of employee absence. Absence is found to be more costly when there is team production and where substitute workers are difficult to find.…”