Topic

Productivity and indirect costs

Productivity costs are the value of work lost when illness keeps people from their jobs, through absence or early death. The human capital approach values all of the working time lost, whereas the friction cost method counts only the time until the worker is replaced. Their inclusion depends on the perspective of the evaluation.

Concepts in this topic

• AbsenteeismTime lost from work due to illness, injury, or caregiving responsibilities, resulting in a direct, measurable cost to employers through lost productivity.
• Friction Cost MethodA productivity loss valuation approach estimating only the cost of the finite period needed to restore normal production, generally lower than human capital estimates.
• Human Capital ApproachA way to value productivity lost to illness or premature death by applying an economic value, often based on earnings, to forgone productive time.