Melbourne Institute Working Paper Series
Working Paper No. 16/16
Mental Health and Productivity at Work:
Does What You Do Matter?
Melisa Bubonya, Deborah A. Cobb-Clark and Mark Wooden
Mental Health and Productivity at Work:
Does What You Do Matter?*
Melisa Bubonya
†
, Deborah A. Cobb-Clark
‡
and Mark Wooden
§
†
Melbourne Institute of Applied Economic and Social Research,
The University of Melbourne
‡
School of Economics, The University of Sydney; Institute for the Study of Labor (IZA);
and ARC Centre of Excellence for Children and Families over the Life Course
§
Melbourne Institute of Applied Economic and Social Research,
The University of Melbourne; and Institute for the Study of Labor (IZA)
Melbourne Institute Working Paper No. 16/16
ISSN 1447-5863 (Online)
ISBN 978-0-73-405211-7
April 2016
* This paper uses confidentialized unit record file data from the HILDA Survey. The HILDA
Survey Project was initiated and is funded by the Department of Social Services (DSS) and is
managed by the Melbourne Institute of Applied Economic and Social Research. The findings
and views reported in this paper, however, are those of the authors and should not
be attributed to either the DSS or the Melbourne Institute. The authors are grateful for
financial support from an Australian Research Council Discovery Grant (DP140102614).
Corresponding author: Deborah Cobb-Clark, <Deborah.cobb-clark@sydney.edu.au>.
Melbourne Institute of Applied Economic and Social Research
The University of Melbourne
Victoria 3010 Australia
Telephone (03) 8344 2100
Fax (03) 8344 2111
Email melb-inst@unimelb.edu.au
WWW Address http://www.melbourneinstitute.com
2
Abstract
Much of the economic cost of mental illness stems from workers’ reduced productivity. We
analyze the links between mental health and two alternative workplace productivity measures
– absenteeism and presenteeism (i.e., lower productivity while attending work) – explicitly
allowing these relationships to be moderated by the nature of the job itself. We find that
absence rates are approximately five percent higher among workers who report being in poor
mental health. Moreover, job conditions are related to both presenteeism and absenteeism
even after accounting for workers’ self-reported mental health status. Job conditions are
relatively more important in understanding diminished productivity at work if workers are in
good rather than poor mental health. The effects of job complexity and stress on absenteeism
do not depend on workers’ mental health, while job security and control moderate the effect
of mental illness on absence days.
JEL classification: I12, J22, J24
Keywords: Mental health, presenteeism, absenteeism, work productivity
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1. Introduction
Mental illness is pervasive and costly. It is estimated that, at any given time, one in five
working-age adults has a mental health problem with the lifetime prevalence rate reaching up
to 50 percent (OECD 2012). In England the economic cost of mental illness in the 2009-10
financial year has been estimated to equal £105.2 billion (Centre for Mental Health 2010),
while in the United States estimates for the period 2001 to 2003 indicate that serious mental
illness is associated with an annual loss in earnings totaling $193.2 billion (Kessler et al.
2008). The economic cost includes both the direct (e.g., health care costs, disability
payments, and provision of support services) and indirect costs (imposed on care givers,
family members, and communities) of mental illness. It also includes the opportunity cost of
the output foregone, with the mentally ill not only less likely to participate in the labor
market, but also have higher unemployment rates and diminished productivity when they do
(e.g., Kessler and Frank 1997; Lim et al. 2000; Marcotte and Wilcox-Gök 2001; OECD 2012;
Frijters et al. 2014).
Public policy often focuses on limiting direct health care expenditure, restricting access
to disability support, and creating employment incentives as the primary means to contain the
escalating costs of mental illness. Yet most individuals with mental disorders are in work
(OECD 2012). Consequently, much of the economic cost of mental illness occurs because
workers – most of whom do not access social assistance – are simply less productive when
they have mental health issues. In the United States, for example, approximately half of the
overall cost of depression is attributable to the reduced productivity of workers (Kessler and
Frank 1997; NIMH 2000; Marcotte and Wilcox-Gok 2001; Greenberg et al. 2003). Relatedly,
work incapacity due to mental health disorders has been reported to account for 5.9 percent of
work days lost in Germany and 14 percent of certified sickness absences in the UK (ILO
2000). Not surprisingly, the Organisation for Economic Co-operation and Development
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(OECD 2012) has prioritized mental health as a new and pressing labor market challenge.
More specifically, there is an urgent need to identify ways that employment policies and
employer practices can be redesigned to support the inclusion and productivity of those
experiencing mental illness.
Our objective is to analyze the relationship between mental health and two alternative
measures of workplace productivity: i) absenteeism; and ii) presenteeism (i.e., diminished
performance at work). Absenteeism has long been regarded as an important measure of
productivity (see Johns 2010; OECD 2012). Interest in presenteeism, on the other hand, is
relatively new and stems from the growing recognition that there are large productivity losses
associated with attending work while ill. In fact, the overall productivity loss associated with
presenteeism is estimated to be greater than that associated with absenteeism in the case of
chronic diseases (Collins et al. 2005) and mental health (Lim et al. 2000; Hemp 2004; Hilton
et al. 2008). Joint consideration of both forms of productivity loss is important in light of the
conceptual links between them and the potential for employers to raise productivity along
either dimension (see Johns 2010).
In contrast to much of the previous literature, we take advantage of large-scale,
nationally representative panel data in our analysis. Much of the previous evidence is derived
from samples that are not representative of the broader population (often drawn from
employers or from patients of health service providers) or restricted to coverage of specific
occupation or industry groups. In addition, we exploit standard panel data techniques – fixed
effects in the case of presenteeism and correlated random effects in the case of absenteeism –
to control for unobserved heterogeneity. The estimation strategy minimizes the potential for
reverse causality and omitted variable bias. Thus, we move beyond existing cross-sectional
estimates of associations to establish a more causal interpretation of the effects of poor
mental health on attendance at work.
