The Economic Impact of Health in the Russian Federation

Marc Suhrcke, Lorenzo Rocco, Martin McKee, Stefano Mazzuco, Dieter Urban, Alfred Steinherr, 2007

4.1 What has been the impact of adult (ill-)health on economic outcomes?

After assessing the impact of adult health on economic status in the Russian Federation, our main findings are as follows:

• A simple, conservative estimate indicates significant costs of absenteeism due to illness.
• Ill-health appears to have had a significant and sizeable impact on labour productivity in recent years, but less so on labour supply, at least among jobholders.
• However, the labour supply has been significantly and sizeably affected to the extent that jobholders suffering from chronic illness have retired as a result of such illness.
• Severe alcohol consumption significantly increases the probability of losing one’s job.
• The death of a household member affects surviving household members’ welfare and behaviour in at least two ways, i.e. by increasing the probability of depression and increased alcohol consumption.
• Chronic illness has negatively affected household incomes, particularly during the period 1998–2002.

[…]

 4.1.1 The impact of health on labour market outcomes 

 The cost of work absenteeism due to illness

On average 10 days are lost per employee per year due to illness in the Russian Federation, while the average for Member States belonging to the EU prior to May 2004 is just below 8 days. Work absenteeism due to illness is a widely used, if imperfect, illustration of the effect of illness on the labour supply of individuals…

The overall cost associated with the reported work days lost due to illness in the Russian Federation varies between 0.55% and 1.37% of GDP, depending on the estimation method. […]

 4.1.1.2

The impact of health on labour supply and labour productivity 

Significant research has explored the labour market impact of ill-health in high-income countries. This research demonstrates a negative impact of ill-health both on labour productivity and on labour supply.

Among jobholders, ill-health appears to have had a significant and sizeable impact on labour productivity – but less so on labour supply – in the Russian Federation in recent years. The impact also seems to be more pronounced among males than females. These findings, while slightly different from some in Organisation for Economic Co-operation and Development (OECD) countries, are not necessarily surprising, since the social welfare system in the Russian Federation operates very differently than those in OECD countries, affecting the relationship between health and the labour market. In fact, the finding of a significant impact on the wage rate rather than on hours worked is evidence of health’s particularly strong economic impact.

 4.1.1.3 The impact of chronic illness on early retirement 

[The study reveals  a statistically very robust and sizeable impact of chronic illness on both the age of retirement and on the probability of retiring in the subsequent year in the Russian Federation]

The effect of chronic illness is found to vary with income: the lower the income the more chronic illness affects the retirement decision.

This implies that less-affluent people carry a double burden of ill-health: first, they are more likely to suffer from chronic illness; second, once they fall ill, they suffer worse economic consequences than rich people – a feature that tends to perpetuate socioeconomic disadvantage. Technically speaking, this result is reflected in the statistically significant interaction term between income and chronic illness in the regression models. […]

4.1.1.4 The impact of alcohol consumption on the probability of being fired

Heavy alcohol consumption is arguably the most important proximate cause of adult mortality in the Russian Federation. […] The negative economic impact of severe alcohol consumption is that it significantly increases the probability of losing one’s job.

4.1.2 Some wider costs of adult mortality: effect on other household members 

The death of a household member was found to increase the probability of suffering from depression by 53%. […] The probability of depression decreases with the age of the deceased. We also controlled for possible differences in per-capita income in order to check whether depression was related to this factor rather than to the death per se. It appears that differences in per-capita income do not affect the probability of depression.

 4.1.3 The effect of chronic illness on income 

Chronic illness has had a negative impact on household incomes in the Russian Federation, particularly in the period 1998–2002.  [The report claims that] chronic illness to contribute to an annual loss of 5.6% of per-capita median income for a hypothetical individual with given characteristics. [The research] confirmed a negative effect of poor health (in general) on household income. This effect is greater in 1998–2002 than before the Russian financial crisis. […].

© World Health Organization 2007, on behalf of the European Observatory on Health Systems and Policies

Source: www.euro.who.int