Freakonomics, sick days and UK GDP

When we look at UK GDP recovery and growth figures, is it safe to assume that improved staff absenteeism levels are a key ingredient in the upswing? Our medical director Dr Alex Smallwood applies some Freakonomics thinking to that question and digs beneath the surface.

Freakonomics theory often reveals the flaws in received wisdoms.  Could it challenge the assumption that a healthy workforce and a healthy national economy are intertwined?  It sounds unlikely.  Healthy workers boost productivity and thus the competitiveness underpinning national economic development, while a growing economy provides the good jobs with ideal working conditions that give people social interaction, identity, purpose and wellbeing.

Statistics support this received wisdom.  They show that staff absence is at an all-time low at 5.9 days per employee per annum (CIPD, 2019), and that falling absence rates are part of a long trend.  An inverse correlation can be seen by a falling absence rate and rising UK GDP, as shown below.

Sources: Labour Force Survey person data sets, ONS, 2018.

 

However, a far more shocking statistic to me is the one that shows that the current cost of absence to the UK economy is still £100bn.  That is the same figure as the entire GDP of Portugal (PHE, 2019).      The UK can do better than this, surely?

Plus, while the trends shown in the above are related, we cannot assume causality as other factors are clearly at play in the recovery of the economy.  So, let’s look at the real trends.

Other factors at play

The main factor in UK recovery is probably the simple fact that UK unemployment has halved in the last five years, and now stands at a record low of 4%.  In 2011 the figure was 8.4% after the 2008 recession, according to ONS Labour Force data.

Other factors include the exponential rate of change in technology, the work-space and working lifestyles.  So many more people now make a living from jobs that did not exist a few years ago and we have seen a dramatic rise in the numbers of self-employed workers, thriving with a new working lifestyle aided by Wi-fi, cloud sharing services and video-calls, letting them work anytime, anywhere. These new 'digital nomads' travel the world or at least our new cyber-cafes and hot-desk spaces, many highly productive and profitable.

We should also factor in the fact that our service sectors account for the bulk of this self-employed labour force just as they have also led the UK’s GDP five-year long recovery after the 2008 recession.  UK production and manufacturing has yet to recover fully to pre-recession levels, ONS data shows.  So there is a flip-side to this lauded UK recovery.

 The flip-side of the figures

The other way to look at this is to study the nature of worker performance and health, because what it reveals can undermine any glib assumption that absence reduction and GDP growth go hand in hand as neatly as that.

First, worker productivity has actually experienced low growth and remained stagnant between 2008 and 2018, the reason for which is unclear.  Before this it had been steadily rising.

Second, the falling absence rates also fail to give the whole picture. There is a large difference between private and public sector absence rates which skews the picture. In the private sector the rate is 4.4 days per employee p.a.  In the public sector the rate rises to 8.4.

Given around 83% of the total value of goods and services produced by the UK economy each year is currently owed by the statutory sector to the private sector - £1.8 trillion (ONS, 2019). This means that private sector productivity is supporting the whole UK economy. These 4 extra private sector days (excluding different holiday entitlements) allow for some of this productivity. If absence rates had remained the same for the last 19 years, then arguably the private sector would have been unable to support the public sector and GDP.

Moreover, despite the fall in absence figures, the proportion of absence which is due to mental ill health and to stress is increasing.  In the statutory sector, one of the commonest quoted reasons for workplace stress and absenteeism is the direct effect of other absent colleagues.

“Presenteeism” – the practice of employees dragging themselves into work ill and barely productive – was reported in 80% of organisations in 2019, rising from 70% in 2016 according to the CIPD.

Also, for working age people with MSK conditions and disabilities, health issues remain a barrier to getting into and remaining in employment, as PHE, 2019).

It is obvious that UK employers can do better in keeping staff healthy working productively.

More proactive approach by firms to employee wellbeing

Recent years have seen employers being increasingly proactive about workforce wellbeing, and while health promotion and support schemes are less common in the private sector than in the public sector, it is encouraging that there is more mental wellbeing support in both sectors, such as providing earlier access to counselling.

In the private sector, around a third of employers are acting to improve employee well-being with a dedicated wellbeing strategy, while two-thirds use a more ad-hoc approach.    This trend is reversed in the public sector, where two-thirds have dedicated strategies and a third take the ad-hoc way.   Of course, given the weaker public sector absence performance, I would question their methods.

‘Freakonomics’ or fact?

While many factors deliver growth and recovery for UK GDP, few are as powerful as managing staff absence well, but it has to be done better.  Improving the absence rates of an increased working population, in the public sector too, will boost productivity far more powerfully.

Maybe when it gets harder to achieve efficiencies within organisations and systems, when the return on effort starts to slow down, then more dynamic solutions are needed to re-boot results?

We know that active use of rehabilitation, early assessment and supported work plans reduces absence (short, medium and long-term) by over 72%, and that using this method maintains that reduction. We have health economic tools and calculators that show that a 1000-workforce could typically save £170,000 in costs every month, so it can boost profits too.

By using the model that we employ, the UK economy could see a reduction in lost working days of 21.5 million days from work-related illness and a further 53.5 million days for general illness - correlated with its associated productivity gain (HSE, 2018, ONS, 2016).

Imagine where that could help the UK economy and GDP get to with the extra 75 million working days – almost three extra working days per employee.

REFERENCES

Chartered Institute of Personnel and Development [CIPD] (2019) Health and Well-being at Work Survey (CIPD 2019)

World Health Organization & Burton, Joan. (‎2010)‎. WHO healthy workplace framework and model: background and supporting literature and practices. World Health Organization. https://apps.who.int/iris/handle/10665/113144

Health and Safety Executive : http://www.hse.gov.uk/statistics/dayslost.htm