Investing in the Epidemic: The Cost of AIDS to Businesses in Africa Center for International Health Boston University School of Public Health Sydney Rosen, Jonathon Simon, Matthew Fox, William MacLeod, Jeffrey Vincent, and Donald Thea July 2002 With technical assistance from Eleanor Gouws and Brian Williams and financial support from the South Africa Mission and the Applied Research on Child Health Project of the U.S. Agency for International Development
Introduction • Objectives of the study • Analytical framework • Companies in the study Center for International Health 2002 www.international-health.org/aids_economics
Objectives of the Study 1. Evaluate the case for employers to “invest in the epidemic.” 2. Develop a methodology for estimating the cost of HIV/AIDS to organizations. 3. Calculate the costs of AIDS in the workforce to companies of different sizes and in different locations and sectors. 4. Estimate returns to investments in HIV/AIDS prevention and care. Center for International Health 2002 www.international-health.org/aids_economics
Analytical Framework Direct Costs Indirect Costs • Reduced On-the-Job • Benefits Payments From an Productivity • Insurance Premiums Individual • Increased Absenteeism • Recruitment and Employee with • Supervisory Time Training HIV/AIDS • Vacancies • Accidents • Market Impacts on • Management Burden From High • Production Disruptions Wage Rates HIV/AIDS Rates • Market Impacts on • Loss of Workforce Morale, in the Workforce Insurance Premiums Cohesion, Experience and Society • Labor Disputes • Physical Security Total Cost to Firm of HIV/AIDS in the Workforce Center for International Health 2002 www.international-health.org/aids_economics
Timing of Cases, Costs, and Liability Timeline Progression of HIV/AIDS Cost to Company Liability in the Workforce Acquired by Company Employee becomes infected No cost to company at this stage Present value of Year 0 all costs from years 0-12 Employee remains No cost to company at this stage Year 0-8 asymptomatic and fully productive Morbidity-related costs are incurred Morbidity begins (some Year 2-8 (absenteeism, productivity, early mortality, some long- management time, medical care) term non-progressors) Employee leaves workforce Termination-related costs are through death or retirement incurred (death and disability Year 6-12 (some long-term survivors) benefits, loss of morale, experience, & cohesion) Company hires replacement Turnover costs are incurred Year 6-12 employee (vacancy, recruiting, training) Center for International Health 2002 www.international-health.org/aids_economics
Companies in the Study Site Co. Co. Co. Co. Co. Co. A B C D E F Sector Heavy Agric. Mining Mining Retail Media industry Location South KwaZulu Botswana KwaZulu KwaZulu South Africa Natal Natal Natal Africa Size of >25,000 5,000- 500- 500- <500 1,000- workforce 10,000 1,000 1,000 5,000 Est. HIV 8.8% 22.9% 31.6% 24.0% 7.9% 10.2% prevalence (1999) (1999) (2000) (2001) (2001) (2001) Assumptions: Discount rate: 7% (real) Median survival time: 9 years Center for International Health 2002 www.international-health.org/aids_economics
Results • Cost per infection • Aggregate costs per year • Returns to investments Center for International Health 2002 www.international-health.org/aids_economics
Cost (Present Value) Per Incident Infection (Males age 35-49) $166,000 $100,000 Present value per infection (2001 $US) $75,000 4.0 x $50,000 3.8 x 3.7 x $25,000 1.6 x 0.8 x 1.3 x $0 Co A Co B Co C Co D Co E Co F Contract/casual Unskilled worker Skilled worker Supervisor Manager Center for International Health 2002 www.international-health.org/aids_economics
Why Is the Cost Per Infection So Different? Variable Higher cost to firm Lower cost to firm Level of death and Large; defined benefit; Premiums capped; disability benefits benefit levels stable benefit levels falling (Co A, C, F) (Co B, D, E) Medical care Medical aid coverage for Most use company clinics all employees and public hospitals (Co A, C, F) (Co B, D, E) Status of unskilled Permanent employees Many are contractors workers with full benefits with few benefits (Co A, C, D, F) (Co B, E) Salaries (labor Higher, so absences and Lower, so absences and productivity) turnover cost more turnover cost less (Co A, C, D, F) (Co B, E) Center for International Health 2002 www.international-health.org/aids_economics
Distribution of the Cost of an Incident Infection 4% 3% 4% 3% 8% 8% Leave and 23% 23% 8% 8% 36% 36% absenteeism Productivity loss Retirement, death, and disability Medical care 15% 15% Recruitment and 56% 56% training 45% 45% Company A Company B Center for International Health 2002 www.international-health.org/aids_economics
The “AIDS Tax” on Business: Aggregate Cost of Incident Infections 2001 14% 12% % of salaries and wages 10% 8% 6% 4% 2% 0% Company A Company B Company C Company D Company E Company F Contract workers Unskilled workers Skilled workers Supervisors Managers Total Center for International Health 2002 www.international-health.org/aids_economics
Reducing the AIDS Tax: Profits from Prevention Example: Company B, males aged 35-49 (2001) For an STD management program that: • Costs $3/employee/year • Reduces HIV incidence by 50% The profit to the company for providing the program to all employees in this age group is: NPV (profit) of prevention program $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Unskilled Skilled Supervisors Managers Total workers workers Center for International Health 2002 www.international-health.org/aids_economics
Reducing the AIDS Tax: Profits from Treatment Example: Company D, African males age 35-49 (2001) For a treatment program that: • Extends working life by 5 years • Costs $400/person/year The profit to the company for treating all eligible employees in this age group is: $12,000 Savings from treatment $9,000 $6,000 $3,000 $0 Unskilled Skilled Supervisors, Total workers workers managers Center for International Health 2002 www.international-health.org/aids_economics
Conclusions • Shifting the burden of HIV/AIDS • The value of intervention Center for International Health 2002 www.international-health.org/aids_economics
Shifting the Burden • Company B (and others) represents a low end estimate of the costs of workforce HIV/AIDS; Company A (and others) is probably high end. • Company B is bearing less of the total (economic) cost to society of HIV/AIDS than is Company A. • Company A intends to reduce its benefits and outsource unskilled tasks; Company B has already done this. • Businesses are systematically shifting the burden of HIV/AIDS to the public sector, NGOs, workers, and households. • The burden shift poses a public policy optimization problem: how do we induce business action on AIDS while creating and sustaining jobs and development? Center for International Health 2002 www.international-health.org/aids_economics
The Value of Intervention • Even for low-cost companies, investments in HIV/AIDS prevention and treatment can have positive returns. • These investments have many other benefits, including – retaining workforce skill and experience – improving employee morale and discipline and reducing impacts on labor relations – maintaining social stability in the surrounding community. • Businesses are systematically under-investing in HIV/AIDS programs. They will have positive financial, social, and ethical returns for many (perhaps most) companies. Center for International Health 2002 www.international-health.org/aids_economics
Recommend
More recommend
