Signature
C_FC = min(D_a, D_F) / 7 * H * w * e
| Inputs | Definition | Unit |
|---|---|---|
D_a | Length of the absence from its start, in calendar days | calendar days |
D_F | Time needed to restore production after a worker becomes absent; in the Dutch manual the average vacancy duration plus four weeks | calendar days |
H | Hours the worker normally works in a week | hours per week |
w | Value of an hour of work, such as average labour cost per hour | currency per hour |
e | Share of the output of an absent hour that is actually lost, often assumed to be 0.8; 1 when w already includes the adjustment | proportion from 0 to 1 |
C_FC | Value of paid work lost during the part of the absence that falls within the friction period | currency in the stated price year per worker |
|---|
Function
Absenteeism measurement and valuation function
Maps the time a worker is absent from paid work because of ill health, the usual hours worked and a value per hour to the share of working time lost and to a productivity cost. The value depends on the method: the human capital approach counts the whole absence, while the friction cost method counts only the period an employer needs to restore production.
Implementations
Excel
Friction cost with the absence capped
With calendar days absent in DaysAbsent, the friction period in FrictionDays, weekly hours in WeeklyHours, the hourly value in HourlyValue and the elasticity in Elasticity, Excel returns the friction cost.
=MIN(DaysAbsent,FrictionDays)/7*WeeklyHours*HourlyValue*Elasticity
Assumptions
Start date of the absence known
The calculation needs the date the absence began. When it began before the recall period of the questionnaire, the earlier days are added so that the cap is applied to the whole absence.
Friction period for the setting and years
D_F depends on the labour market. The Dutch costing manual averages it over five years to limit fluctuation: 115 calendar days, about 16.4 weeks, for 2018 to 2022.
Replacement from the unemployed
The method assumes that workers who leave long-term can be replaced, so the loss to society ends with the friction period. Chains of vacancies, and costs of recruiting and training replacements, are further components that many studies leave out.
Worked examples
Forty-week absence valued by friction cost
With a friction period of 16 weeks, 112 days, and an elasticity of 0.8, the same 40-week absence at 37.5 hours a week and 30 pounds an hour gives 14,400 pounds, less than a third of the human capital estimate, as in the article. The figures are illustrative.
D_a = 280; D_F = 112; H = 37.5; w = 30; e = 0.8; C_FC = 14400
Dutch costing manual absence longer than the friction period
A person working 24 hours a week is absent for 150 calendar days. Losses are capped at the 115-day friction period and valued at the Dutch reference price of 39.88 euros an hour in 2022 prices, which already includes the elasticity adjustment, so e is 1. The cost is 15,724.11 euros, as in example 9 of the manual.
D_a = 150; D_F = 115; H = 24; w = 39.88; e = 1; C_FC = 15724.11
Dutch costing manual absence shorter than the friction period
The same person absent for 56 calendar days is below the cap, so all 8 weeks count: 7,656.96 euros, as in example 9 of the manual.
D_a = 56; D_F = 115; H = 24; w = 39.88; e = 1; C_FC = 7656.96
Common errors
Applying the elasticity twice
The Dutch reference price of 39.88 euros an hour is based on labour costs that already include an adjustment for the elasticity of labour. Multiplying it by a further 0.8 understates the friction cost by a fifth.
Counting the friction period from the survey date
Capping the absence at the friction period from the start of the recall period, not the start of the absence, counts days already beyond the cap for workers whose absence began earlier.
Comparing costs across valuation methods
Human capital and friction cost estimates of the same absence can differ several-fold, so productivity costs from studies using different methods, friction periods or hourly values are not directly comparable.
Sources
Friction cost method
Koopmanschap MA, Rutten FFH, van Ineveld BM, van Roijen L. The friction cost method for measuring indirect costs of disease. Journal of Health Economics. 1995;14(2):171-189. Original statement of the friction cost method, limiting production losses to the period needed to restore production; its estimates for the Netherlands were considerably lower than human capital estimates.
Elasticity and friction period in practice
Pike J, Grosse SD. Friction cost estimates of productivity costs in cost-of-illness studies in comparison with human capital estimates: a review. Applied Health Economics and Health Policy. 2018;16(6):765-778. Section II, friction cost approach (production lost during the friction period often assumed to be 80% of gross production because of the elasticity of production with respect to working time, citing Koopmanschap and colleagues; information needed on the start and length of the friction period; chains of vacancies).
Dutch friction period and reference price
Hakkaart-van Roijen L, Peeters S, Kanters T. Costing manual: methods and reference prices for economic evaluations in healthcare, 2024 version. Diemen: Zorginstituut Nederland; 2024. Section 6.1.2.1 (friction cost method recommended; friction period as average vacancy term plus 4 weeks; 115 calendar days, 16.4 weeks, for 2018 to 2022; table 6-2 productivity costs of 39.88 euros per hour in 2022, labour costs including an adjustment for the elasticity of labour; example 9).
Canonical Identity
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