Alternative Valuations of Work Loss and Productivity

In this article, we examine the indirect costs (i.e., work loss and productivity costs) of employee illness from the employer's perspective. We provide a conceptual framework to help employers consider alternative views with regard to assessing indirect costs and valuing the health care they purchase. First, we discuss the matter of perspective and how an employer should view and assess indirect costs. We briefly review current models of measuring indirect costs, and we critique these models. Then we introduce a simple, conceptual framework based on the ideas of health capital and labor productivity, and we lay out the effects of health investment on indirect costs while considering what employees desire and employers can provide. Finally, we offer an agenda for further research.