Who bears the cost of workers' health-related presenteeism and absenteeism

With an aging population and a rising prevalence of chronic conditions in the United States (U.S.), it is important to understand what happens when workers suffer unanticipated reductions in productivity. This paper investigates who pays for the loss caused by labor productivity reductions---a phenomenon often described as “presenteeism†or “absenteeism†---due to a stroke. Using the Health and Retirement Study (HRS) data, I find that, in the case of older workers, the employer often pays through higher costs of labor, rather than the worker through lower wages, because wages and earnings remain at the level before the worker had a stroke despite reduced hours. The existence of such rigidity in the employment contract translates to an increase in calculated hourly wages. Thus, this study warns that wages, earnings, or salaries cannot be clearly interpreted as accurate values of the marginal product of labor.