Investing in the Epidemic: The Cost of AIDS to Businesses in Africa

Transcription

1 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

2 Introduction Objectives of the study Analytical framework Companies in the study

3 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.

4 Analytical Framework From an Individual Employee with HIV/AIDS From High HIV/AIDS Rates in the Workforce and Society Direct Costs Benefits Payments Insurance Premiums Recruitment and Training Accidents Market Impacts on Wage Rates Market Impacts on Insurance Premiums Physical Security Indirect Costs Reduced On-the-Job Productivity Increased Absenteeism Supervisory Time Vacancies Management Burden Production Disruptions Loss of Workforce Morale, Cohesion, Experience Labor Disputes Total Cost to Firm of HIV/AIDS in the Workforce

5 Timing of Cases, Costs, and Liability Timeline Progression of HIV/AIDS in the Workforce Cost to Company Liability Acquired by Company Year 0 Employee becomes infected No cost to company at this stage Present value of all costs from years 0-12 Year 0-8 Employee remains asymptomatic and fully productive No cost to company at this stage Year 2-8 Morbidity begins (some early mortality, some longterm non-progressors) Morbidity-related costs are incurred (absenteeism, productivity, management time, medical care) Year 6-12 Employee leaves workforce through death or retirement (some long-term survivors) Termination-related costs are incurred (death and disability benefits, loss of morale, experience, & cohesion) Year 6-12 Company hires replacement employee Turnover costs are incurred (vacancy, recruiting, training)

6 Companies in the Study Site Co. Co. Co. Co. Co. Co. A B C D E F Sector Heavy industry Agric. Mining Mining Retail Media Location South Africa KwaZulu Natal Botswana KwaZulu Natal KwaZulu Natal South Africa Size of workforce >25,000 5,000-10, , ,000 <500 1,000-5,000 Est. HIV prevalence 8.8% (1999) 22.9% (1999) 31.6% (2000) 24.0% (2001) 7.9% (2001) 10.2% (2001) Assumptions: Discount rate: 7% (real) Median survival time: 9 years

7 Results Cost per infection Aggregate costs per year Returns to investments

8 Present value per infection (2001 $US) Cost (Present Value) Per Incident Infection $100,000 $166,000 (Males age 35-49) $75,000 $50, x 3.7 x 3.8 x $25, x 1.6 x 0.8 x $0 Co A Co B Co C Co D Co E Co F Contract/casual Unskilled worker Skilled worker Supervisor Manager

9 Why Is the Cost Per Infection So Different? Variable Higher cost to firm Lower cost to firm Level of death and disability benefits Medical care Status of unskilled workers Salaries (labor productivity) Large; defined benefit; benefit levels stable (Co A, C, F) Medical aid coverage for all employees (Co A, C, F) Permanent employees with full benefits (Co A, C, D, F) Higher, so absences and turnover cost more (Co A, C, D, F) Premiums capped; benefit levels falling (Co B, D, E) Most use company clinics and public hospitals (Co B, D, E) Many are contractors with few benefits (Co B, E) Lower, so absences and turnover cost less (Co B, E)

10 Distribution of the Cost of an Incident Infection 8% 8% 23% Leave and absenteeism 4% 3% 36% Productivity loss Retirement, death, and disability 45% 15% Medical care Recruitment and training 56% Company A Company B

11 % of salaries and wages The AIDS Tax on Business: Aggregate Cost of Incident Infections % 12% 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

12 NPV (profit) of prevention program Reducing the AIDS Tax: Profits from Prevention Example: Company B, males aged (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: $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Unskilled workers Skilled workers Supervisors Managers Total

13 Savings from treatment Reducing the AIDS Tax: Profits from Treatment Example: Company D, African males age (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 $9,000 $6,000 $3,000 $0 Unskilled workers Skilled workers Supervisors, managers Total

14 Conclusions Shifting the burden of HIV/AIDS The value of intervention

15 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?

16 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.