Economic Consequences of Illness in the Workplace

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When employers focus only on the direct, out-of-pocket costs of health care, they fail to consider the indirect costs of illness in the workplace form workers' impaired functioning on the job and absenteeism. The authors present a case study of the effects of clinical depression on direct and indirect health-related costs and provide a model that employers can apply to a wide range of illnesses to analyze their investments in health care. The authors apply the framework to several workplace situations — employees' depression, cigarette smoking breaks, and arthritis — to estimate the costs of lost productivity. They also show how to do a break-even analysis to determine when employers' investments in health interventions are likely justified.

Paul E. Greenberg is vice president and director, Health Care Economics Practice, Analysis Group, Inc. Stan N. Finkelstein is executive director of the Program on the Pharmaceutical Industry and senior lecturer, MIT Sloan School of Management. Ernst R. Berndt is professor of applied economics, MIT Sloan School of Management.

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