The cost of sickness

The Dom Post reports that, while the cost of sick days to employers is $700 per year per employee, the loss from employees turning up and being semi-productive when sick is $900! They then recommend that employers press workers to stay at home until they’re better.

There are two problems I have with that: their assumptions and their method of dealing with opportunity cost. First, they assume that sick employees are half as productive. I would have thought that was extreme, but hopefully they have some studies to back it up in their actual report.

Secondly, one has to consider what the counterfactual is. Suppose employers could choose whether their employee turned up when they were sick. They can choose between having a semi-prodouctive employee for the day, or no employee at all. They may lose money relative to having a fully productive employee, but that’s not an option open to them in most cases. To suggest that the employer is better off without the sick worker you’d have to show that either the risk of infecting others is very costly, or that working delays recovery significantly. Then, perhaps, the employer would be better off keeping the worker at home. But to suggest that, since they’re not as productive as a healthy worker, the employer is better of without them is to make the wrong comparison.

3 replies
  1. Homepaddock
    Homepaddock says:

    The risk of infection and delayed recovery are both pertinent.

    There’s probably a curve of diminishing returns depending on the severity of the illness and how infectious it is where it gets to the stage that more is achieved by someone having time off so not infecting others, recovering properly and returning refreshed than if they stayed at work.

  2. Matt Nolan
    Matt Nolan says:

    I agree rauparaha – I wasn’t exactly sure what they had defined as their counter-factual in the story, so I was a bit dodgy on the prescriptions coming from it.

  3. Matt Nolan
    Matt Nolan says:


    Agreed Homepaddock – however, those issues weren’t covered very transparently in the article. Ultimately, they needed to identify the margin a bit better in order to actually make the claim “it is better to let sick people stay at home than work”.

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