Economic Evaluation of Productivity Costs

Economic evaluation of productivity costs examines the impacts of illness and interventions on workforce output and unpaid contributions. These costs encompass absenteeism, when workers are fully absent; presenteeism, when health impairs on‐the‐job performance; and unpaid labour such as caregiving or domestic tasks. Incorporating productivity costs alongside direct medical expenses offers a more comprehensive assessment of societal value and return on investment for health technologies and policies. Two principal valuation approaches dominate the field: the human capital method, which assigns lost working time a value based on wage rates and projected lifetime earnings, and the friction cost method, which bounds losses to the period required to restore production through labour market adjustments. Debates persist over methodological choices, including the estimation of replacement costs, the appropriate friction period and the treatment of team‐based productivity. A growing body of research addresses instrument selection for measurement, adjustments for occupational heterogeneity and the application of register or survey data to improve accuracy. The global significance of productivity costs is underlined by cross‐country variation in labour markets, social entitlements and guideline recommendations. Practical applications range from prioritising workplace interventions to informing national reimbursement decisions for costly therapies. By integrating robust measurement with transparent valuation methods, economic evaluations can guide policy makers and employers towards interventions that maximise societal welfare and labour market resilience.

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Economic Evaluation of Productivity Costs publication trend

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Technical terms

Human capital method: An approach that values lost productivity by equating working time foregone to wage or earnings potential over the expected remaining work life.

Friction cost method: A method that restricts productivity losses to the time needed to restore initial production levels through labour market replacement and adjustments.

Absenteeism: The measure of total work time lost when an individual is entirely absent from work due to health reasons.

Presenteeism: The reduction in on‐the‐job productivity when a worker attends but performs below normal capacity because of health issues.

Vacancy multiplier: A factor that scales friction cost estimates by accounting for chains of secondary job vacancies created when replacing absent workers.

References

1. Measurement Instruments of Productivity Loss of Paid and Unpaid Work: A Systematic Review and Assessment of Suitability for Health Economic Evaluations From a Societal Perspective. Value in Health (2021).
2. Adjusted productivity costs of stroke by human capital and friction cost methods: a Northern Finland Birth Cohort 1966 study. The European Journal of Health Economics (2021).
3. Friction Costs and the Chain of Vacancies Problem: A Novel Vacancy Multiplier Solution. Value in Health (2020).