Regional economic activity and absenteeism: a new approach to estimating the indirect costs of employee productivity loss.

This paper presents a new approach to estimating the indirect costs of health-related absenteeism. Productivity losses related to employee absenteeism have negative business implications for employers and these losses effectively deprive the business of an expected level of employee labor. The approach herein quantifies absenteeism cost using an output per labor hour-based method and extends employer-level results to the region. This new approach was applied to the employed population of 3 health insurance carriers. The economic cost of absenteeism was estimated to be $6.8 million, $0.8 million, and $0.7 million on average for the 3 employers; regional losses were roughly twice the magnitude of employer-specific losses. The new approach suggests that costs related to absenteeism for high output per labor hour industries exceed similar estimates derived from application of the human capital approach. The materially higher costs under the new approach emphasize the importance of accurately estimating productivity losses.