hiv/aids and its impacts of on labor markets - world...

HIV/AIDS and its

Impacts of

on Labor Markets

World Bank Labor Market Policy Core Course

April 8, 2010

Damien de Walque

The World Bank

Development Research Group (DECRG)

2

The HIV/AIDS epidemic is

“the most formidable development challenge of

our time”

“By overwhelming the continent’s health and

social services, by creating millions of orphans,

and by decimating health workers and teachers,

AIDS is causing social and economic crises

which in turn threaten political stability.

In already unstable societies, this cocktail of

disasters is a sure recipe for more conflict. And

conflict, in turn, provides fertile ground for

further infections."

UN Secretary-General Kofi Annan, January 2000

3

Overview of Presentation

Part I - Introduction: Current status of the Epidemic

Part II - How is AIDS Affecting Costs to Business and

Labor? Findings from Southern Africa

Part III - How is AIDS Affecting Agricultural Labor

Productivity? The Case of Tea in Kenya

Part IV - How AIDS Treatment is Changing the Impact of

HIV/AIDS? Evidence from Kenya and Botswana

Part V - Conclusions: Treatment and Prevention

4

Part I —

Introduction:

Current Status of the AIDS

Epidemic

5

2007 Global estimates for adults

Source: UNAIDS Dec. 2007 Epidemiological Update

Adults

Women

New HIV infections

(adults)

Deaths due to AIDS

(adults)

30.8 million [28.2 – 33.6]

15.4 million [13.9 – 16.6]

2.1 million [1.4 – 3.6]

1.7 million [1.6 – 2.1]

Total: 33.2 (30.6 – 36.1) million

Western & Central Europe

760 000[600 000 – 1.1 million]

Middle East & North Africa

380 000[270 000 – 500 000]Sub-Saharan Africa

22.5 million[20.9 – 24.3 million]

Eastern Europe & Central Asia

1.6 million [1.2 – 2.1 million]

South & South-East Asia

4.0 million[3.3 – 5.1 million]Oceania

75 000[53 000 – 120 000]

North America

1.3 million[480 000 – 1.9 million]

Latin America

1.6 million[1.4 – 1.9 million]

East Asia

800 000[620 000 – 960 000]

Caribbean

230 000[210 000 – 270 000]

Adults and children estimated to be living with HIV, 2007

Estimated adult and child deaths from AIDS, 2007

Western & Central Europe

12 000[<15 000]

Middle East & North Africa

25 000[20 000 – 34 000]Sub-Saharan Africa

1.6 million[1.5 – 2.0 million]

Eastern Europe & Central Asia

55 000 [42 000 – 88 000]

South & South-East Asia

270 000[230 000 – 380 000]Oceania

1200[<500 – 2700]

North America

21 000[18 000 – 31 000]

Latin America

58 000[49 000 – 91 000]

East Asia

32 000[28 000 – 49 000]

Caribbean

11 000[9800 – 18 000]

Total: 2.1 (1.9 – 2.4) million

Over 6900 new HIV infections a day in 2007

• More than 96% are in low and

middle income countries

• About 1150 are in children under 15

years of age

• About 5750 are in adults aged 15

years and older

of whom:

— almost 50% are among women

— about 40% are among young

people (15-24)

9

Global estimates of Adult

Deaths

HIV/AIDS 1.7 million

Tuberculosis 1.6 million

Cardiovascular Diseases 16.7 million

80% of CVD deaths in developing countries

Smoking related 4.8 million

80% in men, 50% in developing countries

Violence and Injuries >5 million

BUT, compared to other diseases, AIDS tends

to kill relatively young and productive people.

10

Figure 1: Age profile of HIV prevalence. Males

0

2

4

6

8

10

12

14

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Age group

HIV

pre

va

len

ce

(in

pe

rce

nt)

Burkina Faso Cameroon Ghana Kenya Tanzania

11

Figure 2: Age profile of HIV prevalence. Females

0

2

4

6

8

10

12

14

15-19 20-24 25-29 30-34 35-39 40-44 45-49

Age group

HIV

pre

vale

nce (i

n p

erc

ent)

Burkina Faso Cameroon Ghana Kenya Tanzania

12

Part II —

The cost of HIV/AIDS to businesses in

southern Africa

(Source: Rosen, Vincent, MacLeod et

al., AIDS 2004, 18: 317-324)

13

Objectives of the Study

1. Develop a methodology for estimating

the cost of HIV/AIDS to organizations.

2. Calculate the costs of AIDS in the

workforce to companies of different

sizes and in different locations and

sectors.

14

Framework for Analysis

Increased expenses Lost productivity

From one employee

with HIV/AIDS

(individual costs)

Benefits payments

Medical care

Recruitment of replacement

Training of replacement

Increased leave and absenteeism

Reduced on-the-job productivity

Supervisor’s time

Vacancy

Inexperienced replacement

From many

employees with

HIV/AIDS

(organizational costs)

Accidents due to sick or inexperienced

employees

Litigation over benefits, dismissals, etc.

Production disruptions

Loss of institutional memory, experience

Breakdown of workforce morale, cohesion

Diversion of senior managers’ time

Deteriorating labour relations

From high HIV

prevalence in society

(market or external

costs)

Higher cost of material inputs

More security needed due to

breakdown in civil society

Higher wages due to shortage of skilled

workers

Reduced demand for products or services

Higher risk premium on investment

Higher cost of capital

Higher cost of transactions with government and

labour

Total costs of HIV/AIDS

Measured

Unmeasured

*

15

Timing of Cases, Costs, and Liability

Progression of HIV/AIDSin the Workforce

Cost to Company

Morbidity begins (some early mortality, some long-term non-progressors)

Employee becomes infected

Employee leaves workforce through death or retirement (some long-term survivors)

Company hires replacement employee

No cost to company at this stage

Morbidity-related costs are incurred(absenteeism, productivity, management time, medical care)

Termination-related costs are incurred (death and disability benefits, loss of morale, experience, & cohesion)

Turnover costs are incurred (vacancy, recruiting, training)

Timeline

Year 0

Year 2-8

Year 6-12

Year 6-12

Liability Acquired by

Company

Discounted sum of all costs from years 0-10

Employee remains asymptomatic and fully productive

No cost to company at this stageYear 0-8

16

Companies in the Study

Site Co.

A

Co.

B

Co.

C

Co.

D

Co.

E

Co.

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

500-1,000 500-1,000 <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)

Discount rate: 7% (real) Median survival time: 9 years

Assumptions:

17

$0

$15,000

$30,000

$45,000

$60,000

$75,000

$90,000

Co A Co B Co C Co D Co E Co F

Pre

sent valu

e p

er

infe

ction (

2001 $

US

)

Non-permanent Unskilled Skilled Supervisor Manager

Cost Per Incident HIV Infection

Present value per infection for males age 35-49

(Multiple of median annual salary)

(3.8 x)

(1.7 x)

(0.8 x)

(3.8 x)

(1.3 x)

(3.9 x)

18

Why Is the Cost Per Infection So Different?

Variable Higher cost to firm Lower cost to firm

Level of death and

disability benefits

Large; defined benefit;

benefit levels stable

(Co A, C, F)

Premiums capped; benefit

levels falling

(Co B, D, E)

Medical care Medical aid coverage for all

employees

(Co A, C, F)

Most use company clinics

and public hospitals

(Co B, D, E)

Status of unskilled

workers

Permanent employees with

full benefits

(Co A, C, D, F)

Many are contractors with

few benefits

(Co B, E)

Salaries (labor

productivity)

Higher, so absences and

turnover cost more

(Co A, C, D, F)

Lower, so absences and

turnover cost less

(Co B, E)

19

Distribution of the Cost

of an Incident Infection

Leave and absenteeism

Productivity loss

Retirement, death, and disability

Medical care

Recruitment and training

23%

15%

45%

8%

8%

23%

15%

45%

8%

8%

56%

36%4%

3%

56%

36%4%

3%

Company A (high cost) Company B (low cost)

20

Magnitude of the Costs

of a New Infection

Company A Company B

Actual Size

Part III —

The Impact of HIV/AIDS

on Labor Productivity in Kenya

(Source: Fox, Rosen, MacLeod et al.,

Tropical Medicine and International

Health 2004, 9: 318-324)

22

Objectives of the Study

1. Determine the distribution of deaths in the

workforce of a large agricultural firm in

western Kenya.

2. Estimate the decline in on-the-job labor

productivity associated with HIV/AIDS

(impaired presenteeism).

3. Estimate the additional paid and unpaid leave

taken by workers with HIV/AIDS.

4. Calculate the earnings loss caused by

HIV/AIDS.

23

Study Site

Tea estates owned by large agribusiness in Kericho District in the highlands of western Kenya.

Company has ~10,000 tea pluckers (~ 79% male), paid by kilogram of tea leaf plucked.

Labor supply adjusted for tea leaf supply daily.

Free on-site medical care for all workers and dependents; workers get paid sick leave.

VCT available but few accepted at time of study.

Treat opportunistic infections, provide palliative care.

No antiretrovirals at this time (started Oct. 2004).

24

Number of Deaths Per Year

• 600 natural cause deaths and medical retirements at company hospital

• 198 workers, 402 dependents• Many HIV+ workers and dependents leave voluntarily and are

not counted here.

220

164

135

92

70

93

55

0

20

40

60

80

100

120

140

160

180

200

220

1997 1998 1999 2000 2001 2002 2003

Nu

mb

er

of

de

ath

s

> expected malaria and

diarrheal disease in rainy year

estimated based on

Jan-May 03

25

Distribution of Deaths by Age

16%

5%

3%

9%8%

6%4%

2%1% 1% 1% 1%

18%

6%

2%

19%

0

20

40

60

80

100

120

<1

1-4

5-9

10-

14

15-

19

20-

24

25-

29

30-

34

35-

39

40-

44

45-

49

50-

54

55-

59

60-

64

65

>

Unk

nown

Nu

mb

er

of

de

ath

s Effect of HIV/AIDS

26

Distribution of Deaths by Cause

All natural cause deaths, 1997-2002

0% 20% 40% 60% 80% 100%

Dependents (inc.

children) (n=402)

Workers (n=197)

HIV

TB

Other

27

Impact of HIV/AIDS

on Labor Productivity

28

Study Population

―Cases‖ (n=54) are tea pluckers who

died at company health facilities of an AIDS-

related cause (n=43)

were medically retired due to HIV/AIDS (n=11).

―Controls‖ are pluckers who were working in

the same fields over the same time period as

the cases (4:1).

29

Effect of HIV/AIDS on

Kgs Plucked/Day (Adjusted)

Differences are

adjusted for years of

service and unit.

Cases’ shortfall

increases consistently

starting 1.5 years

before death.

YBD § Shortfall

(Kg/day)

Shortfall

(%)†

p-value

2.5 -0.5 1.% 0.834

2.0 -2.4 6.% 0.220

1.5 -4.1 10% 0.028

1.0 -5.6 13% 0.004

0.5 -6.9 16% 0.002

0.0 -7.9 19% 0.003

§ Years before death

† Expressed as a percent of the average amount plucked by

controls, 41.7 kgs/day

30

Effect of HIV/AIDS on

Kgs Plucked/Day (Adjusted)

30

32

34

36

38

40

42

44

46

48

3.0 2.5 2.0 1.5 1.0 0.5 0.0

Years before death

Av

era

ge

kg

s p

luc

ke

d/d

ay

Cases Controls

3.9 kgs/day

9.3 kgs/day

31

5.4

8.8

21.4

33.2

17.116.4

0

5

10

15

20

25

30

35

40

45

50

Sick Leave Annual Leave Unpaid Leave

Nu

mb

er

of

lea

ve

da

ys

Controls

Cases 2-3 Years Before Death

Cases 1-2 Years Before Death

Cases 0-1 Year Before Death

Effect of HIV/AIDS on

Paid and Unpaid Leave

In 3rd year before death, cases were absent 32 days more than controls.

In 2nd year before death, cases were absent 35 days more than controls.

In final year before death, cases were absent 31 days more than controls.

All differences significant at .05 level except annual leave in year 2-3 before death.

32

Overall Loss of Productivity and

Earnings Due to HIV/AIDS

In each of the last two years before death, a tea plucker with HIV/AIDS:

Is absent from work 31 days more often (an increase of 87 percent)

Spends 22 more days on light duty (an increase of 66 percent)

Plucks an average of 7.1 kg less tea leaf per day spent plucking (a decrease of 17 percent)

Has reduced annual earnings of 18%.

Produces 35.1% less tea in final year

33

Part IV

How AIDS Treatment is Changing the

Impact of HIV/AIDS on labor markets

and productivity?

Evidence from Kenya and Botswana

34

The impact of providing

antiretroviral treatment (ART) to

patients Source: Thirumurthy, Graff Zivin, and Goldstein:

The Economics of AIDS Treatment: Labor

Supply in Western Kenya,

The intervention

Provide ART to patients, rule is for a CD4<200, but

initial rationing

Treatment for opportunistic infections

Nutrition supplementation, but not much until later

Data – two rounds of household survey –

random sample & patients

35

Treatment: Evaluation Design

We know what happens to counterfactual

group: Medical evidence: patients continued decline in health

and death. Zero labor supply in round 20

10

20

30

Mean h

ours

work

ed in p

ast w

eek

-50 0 50 100 150 200 250 300 350 400Days on ARVs

treated counterfactual

36

CD4 Counts before and after

treatment50

100

150

200

250

300

Med

ian

CD

4 co

unt

-40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90Weeks Before/After ARV Initiation

Source: Goldstein, Graff Zivin and Thirumurthy 2007

37

Body Mass Index and Labor Force

Participation Before and After

ARV Therapy

Source: AMPATH Medical Records System – data as of March 2005.

.6.7

.8.9

Fra

ctio

n p

art

icip

atin

g in

la

bo

r fo

rce

-8 0 8 16 24 32 40 48 56Weeks on ARVs

Source (right): Household survey data.

19

20

21

22

Media

n B

MI

-40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90Weeks Before/After ARV Initiation

38

Treatment:

Main Findings – Labor supply

Very large (and rapid) increases in patient labor

supply

16.7 percentage points LFP; 6.9 Hours

Among other household members

Sizable decreases in labor supply of young

boys

22.7 percentage points LFP; 8.6 Hours

No significant response for girls, others living in

the household

Patient earnings are close to the cost of

treatment

39

HIV/AIDS, ARV Treatment and

Worker Absenteeism

Evidence from a large firm in Botswana

Source: Habyarimana, Mabakile and

Pop-Eleches, 2007.

40

CD4 count and absenteeism

41

Absenteeism before and after

treatment initiation

42

Main results from Botswana

Enrolled workers miss about 20 days in the

year prior to treatment initiation

Five times the annual absence duration from

illness among other workers

The introduction of ARV treatment is followed

by a large reduction absenteeism 6-12 months

following treatment inception.

Absenteeism 1 to 4 years after treatment is low

and comparable to other workers.

43

Part V

Treatment and Prevention

44

How to sustain ART in the long run? Example:

Thailand

Total Cost of Public ART (NAPHA)

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

Millions

Cost of Public ART_1 line_asy Cost of Public ART_1 line_sym

Cost of Public ART_2 line_asy Cost of Public ART_2 line_sym

Source: Revenga et al, 2007

45

Treatment in the long run?

The greater the success of treatment, the more patients

Second line therapy is much more expensive.

Adherence crucial: role of health infrastructure and staff

Still…

Prevention, prevention, prevention!

46

Impact of condom use on the

number of new HIV infections in India

(Over et al. 2004)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1995 2000 2005 2010 2015 2020 2025 2030 2035

Year

Nu

mb

er

of

HIV

in

fecti

on

s p

er

ye

ar

40% condom 50% condom 70% condom 90% condom