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Discussion Paper No. 19
ContentsI. The HIV/AIDS epidemic in Côte d’Ivoire and its impact on Abidjan’s industrial sector
1.2 Impact of HIV/AIDS on sectors of the economy 1.3 Presentation of the findings of the study carried out in Abidjan
2.2 Disorganization of work and invisible costs
3.2 The importance of medical aid schemes in firms 3.3 How a socio-medical policy could help mitigate the organizational dysfunctions caused by HIV/AIDS 3.4 Discussion of the economic profitability of such a policy Tables and diagrams
AbstractUsing the findings of research carried out in 1995-1996 on the economic impact of HIV/AIDS on three firms in Abidjan, we look into companies’ reactions to the dysfunctions caused by the epidemic. The dysfunctions result in two main categories of costs: the observable and quantifiable costs, for the most part absenteeism on health grounds, the cost of medical care and falling productivity; and the less easily perceptible effects of the gradual disorganization of work. The complexity and diversity of the effects of HIV/AIDS on businesses raises the question of devising an appropriate strategic response. In this context, it would appear that the key variable is the turnover level, and that this, therefore, is where action should be taken. Such action may, for instance, be in the form of improved medical monitoring of employees in the workplace or participation by employers in employees’ health insurance. In our analysis such measures are not just socially sound, but make economic sense in that they would help check the deterioration in socialization and learning capacities and in working relations, skills and routines, i.e. the main conditions for productive work.
See also:
I. The HIV/AIDS epidemic in Côte d’Ivoire and its impact on Abidjan’s industrial sectorThe number of AIDS cases reported by the World Health Organization in Côte d’Ivoire had reached 31,963 by 20 November 1996, placing the country in seventh position in the African continent, behind the countries of the Great Lakes region, and foremost among West African countries (WHO, 1996). This sorry record had been presaged by the studies of the spread of HIV infection in Abidjan carried out in the late 1980s (Denis et al., 1987; De Cock et al., 1989). The findings showed that the adult population was particularly affected, with the HIV seroprevalence rates in urban and rural areas increasing with age up to the 20-29 age bracket before falling in the older age groups (Gershy-Damet et al., 1991). Moreover, although it is difficult now to forecast the dynamics of the epidemic in Côte d’Ivoire because of the multitude and complexity of factors to be taken into account (Garenne, 1996), the increase in HIV prevalence among pregnant women in Abidjan over the years is particularly worrying. A 3.3 per cent finding was published in 1987 (Denis et al., op. cit.), while in 1989 the figure was put at 8.3 per cent (Gershy-Damet et al., op. cit.) and in 1995, at 13.7 per cent, with as much as 17.1 per cent in the 25-29 age bracket (Sylla-Koko et al., 1995). For all the information and prevention measures taken in the country in the 1990s, especially in Abidjan, epidemiological data reveal a high risk of HIV transmission for the sexually active adult population. It is also important to note that most of the economically active population falls within the 20-29 and 30-39 age brackets. This is of particular concern to us here because the combined characteristics of the epidemic adversely affect economic activity in countries with a high prevalence of HIV, especially Côte d’Ivoire. If the working population continues to be affected over a long period, it is to be feared that both the agricultural sector (Barnett and Halswimmer, 1995; Gillespie, 1989) and the industrial sector (Nkowane, 1988; Baggaley et al., 1995) will suffer the economic consequences. The extra burden placed on both households and organizations (firms, co-operatives, associations), is slowly but surely undermining domestic economic performance (Forsythe et al., 1996). We were particularly interested in Abidjan’s industrial sector and the effects the HIV epidemic could have on its activity for two main reasons. One was the high prevalence observed in Abidjan and the concentration of manufacturing firms in the area (PRDE, 1996), and the other was the difference in AIDS cases between men and women. Because the man/woman ratio of AIDS deaths in the period 1986-1992 was 6 to 1 (Garenne, 1996) and most of the workers employed in the industrial sector, with the exception of a few firms, are men, the assumption was that this sector would be particularly affected by HIV infection as compared with other urban occupations in which women predominate. Three firms located in Abidjan were thus the focus of a research project (1) whose findings, presented below, formed the basis for a study of the dysfunctions caused by HIV/AIDS and possible responses by businesses to them. The study of three manufacturing firms carried out in Abidjan in 1995 and 1996 (table 1) enabled the impact of HIV/AIDS on their activities to be identified and measured, using as a basis the cases of HIV infection reported by each establishment’s resident physician (table 2). This method thus excludes cases of seropositivity among staff members not known to the company doctors.
The research period varied from one firm to another because of the nature
and quality of the information needed for a retrospective study (table
1). The research involved repeated interviews with company doctors (2)
and with chief executives, personnel managers, chief accountants, other
managerial and supervisory staff and workers. Other information from outside
the three firms was obtained from members of associations for HIV-infected
persons, trade unions and insurance companies. The findings of partial
investigations into other industrial and agro-industrial enterprises bear
out the arguments set out below.
Source: Aventin, Huard 1997. (3)
Table 3 presents an evaluation of the direct and indirect costs of HIV/AIDS
to the three firms, taking into account only reported cases, as exhaustive
data is unavailable. These costs, which are observable and quantifiable
in monetary terms, are distinct from the organizational costs which are
‘difficult to quantify’ (Aventin and Huard, 1997) or the ‘invisible costs’,
so named because they are difficult to observe and evaluate. The latter
effects of the epidemic on businesses will be analysed in part 2.2.
Source: Aventin, Huard 1997 (cf. note 3).
Having calculated the highest cost percentages for each firm, we found that the impact of HIV varied from firm to firm, in particular according to such social policies as a firm’s contribution to employees’ health insurance or payment of an invalidity pension as in the case of firm 1. Absenteeism on health grounds represented 31 per cent of the overall cost for firm three. Was that due to the fact that almost none of the employees had health insurance, and consequently did not have access to medical care as easily as in firm 1? Moreover, we noted that for all three firms, the highest costs were incurred during to the employees’ morbidity phase. The table reveals that, even including its indirect consequences such as recruiting and training new employees, death does not appear to be what is most costly. This observation will be discussed in the second part.
II. Analysis of the costs and dysfunctions caused by HIV/AIDS in the workplaceThese are costs of the disruption to firms as itemized in table 3. The costs, of which managers are aware, vary from one business to another, as regards both their amount in proportion to the number of employees and the proportion of each cost to the total amount, which is why these results must be interpreted with caution. The comparative analysis must take account of organizational differences and the policies of each firm. For instance, if lost productivity accounts for 31 per cent of total costs in firm 3, it is partly because the other costs are low. In firm 2, the maximum amount set aside by the employer for medicines is 15.5 million CFA francs a year, whereas in firm 1 the annual expenditure is six times higher for four times fewer employees. It can also be seen that mortality-related costs are apparently lower than morbidity-related costs. This applies to the three firms, all of which have a well-organized system for the participation of work colleagues in the funerals of deceased employees. Only a limited number of workers are allowed to attend funerals and in some cases they are selected by personnel officers and union delegates so as to prevent mass absenteeism. In fact, however, the situation is rather more complex because it may be difficult for employers to go against the strong sociocultural traditions associated with funerals (Eschlimann, 1985; Thomas, 1991). From additional ad hoc surveys we have found that some managers of major tropical crop plantations have had to regulate attendance at funerals strictly, on pain of dismissal, so as to curb massive and regular absenteeism. No studies have been made of the costs of these consequences, but we cannot rule out the assumption that deaths from AIDS give or have given rise to substantial indirect costs.Since, then, the economic cost of HIV/AIDS varies according to policy and organizational factors, it is only to be expected that managers’ reactions will vary according to the extent of the impact identified, and also according to their strategies and investment capacity. Diagram 1 presents all the compensatory measures observed during this study.
![]() Diagram 1 does not only concern the three firms under consideration, but aims to give a broader picture of the situation, particularly as regards discriminatory practices. (5) Analysis of the measures taken by firms to offset the consequences of HIV/AIDS shows that they can be divided into two tendencies. One has to do with a process we call a ‘dynamic of rejection’ since the thrust of the measures involved is one of exclusion - primarily unlawful screening, discrimination in recruitment and unfair dismissal (Aventin, 1996). The immediate effectiveness of such measures conceals serious dysfunctions which we shall address below. The other tendency, which remains hypothetical, would imply a ‘dynamic of consolidation’ and would consist of combating absenteeism by introducing improved medical monitoring of employees or enabling them to have access to medical care through the employers’ contribution to health insurance. Training employees with all-round skills, capable of changing post according to need, is another way of coping with the problems caused by absenteeism. More flexible shift work when work is required around the clock allows for a better distribution of staff according to skills and work requirements. However, even though these measures offset the difficulties and help consolidate productive work, they are of limited effectiveness because they have no incidence on turnover, a major factor in the disorganization of work. Staff morbidity and mortality increase turnover in businesses as departures have to be made up for by new recruitment to keep up staff numbers. Even though this may mean that the number of employees remains stable, staff rotation and the upheaval it can cause by changing the ratio of experienced to new employees give rise to training problems (Glance et al., 1997) and also socialization problems. Socialization is what enables the new employee to fit into the work community by internalizing tacit knowledge about the professional, social and cultural environment. This knowledge is an integral part of learning, which is not confined merely to acquiring technical and professional skills, and will determine the behaviour of the individual in a coherent group. ‘Workers are subjects who evolve, who are not endowed a priori with a particular principle of rationality but whose behaviour is constructed through the learning process’ (Dosi, 1991). This is conducive to greater consistency in individual tasks and the activity as a whole, that is to say models of interaction which provide efficient solutions to specific problems (Coriat and Weinstein, 1995) and helps to strengthen the firm’s capacity to react and adapt to an unfavourable environment (Kalika, 1991). These routines thus form tacit models of behaviour adopted by workers almost automatically; they form the heart of the enterprise and are the basis for its efficiency (Nelson and Winter, 1982).
![]() This evolutionary approach to a firm’s activity (diagram 2) stresses the mechanisms through which skills are built up and passed on, and so makes for a clearer understanding of the nature of the impact of HIV/AIDS. The fact is that changes in the proportion of new to old employees caused by faster turnover raise two key problems: first, the loss of consistency in the firm’s activity because of the inexperience of new employees, particularly when it comes to tacit knowledge that is not easily transferred; and second, the decline in capacity for transmitting knowledge as skilled employees die or can no longer work because of AIDS. This shows the cumulative effects of what was initially a change in the turnover rate. Replacing absent employees per se does not worry the employer particularly (unless they are the most highly qualified workers), but it does have effects which are not immediately apparent, especially as the consequences of staff rotation only emerge over time, leading to the gradual disruption of the routines that are specific to a particular firm. Since the routines have a strong tacit dimension, they cannot be easily imitated (Dosi et al., 1990). Earlier, we mentioned the concept of a ‘dynamic of rejection’ in the context of some firms’ reactions to HIV/AIDS-related problems. Thus, although the ‘rejecting’ measures might have the immediate effect of reducing costs, they ultimately lead to the disorganization of work by speeding up staff turnover. The long-term effect might be the opposite of the one desired, since the disruption of routines and capacities for learning can be expected to affect performance and competitiveness. It is nevertheless difficult to identify and gauge these consequences in terms of costs, which is why the term ‘invisible costs’ has been used.
III. Some thoughts on a suitable response by businesses to HIV/AIDSThere are two kinds of impact of HIV/AIDS on firms, one easily observable, as confirmed by micro-economic or sectoral studies, and the other less visible, working slowly on the organization and operational structures of industries. At the moment, managers are concerned only about the visible effects, and then only in the context of their own business, whose individual characteristics make them all special cases. If we refer back to the findings of the survey carried out in Abidjan (table 3), firm 1 was not very concerned about recruiting and training new staff because it had reorganized its post system in response to the drop in client orders in the early 1990s, not because of HIV/AIDS. Economically speaking, therefore, it was not worried about the absence or lack of staff, since it was overstaffed at the time. Such was not the case of firm 2, which was thriving and replaced the 31 employees who died or left and trained the newcomers.The different impact of HIV/AIDS on the various firms makes it difficult to devise an overall solution to what is, moreover, an evolving problem. We also question the effectiveness of the various measures observed today, both because they are incomplete or deal only with the ‘symptoms’, and because, like discriminatory practices, they speed up the processes of the disorganization of work which, over and above the visible costs, are clearly the most serious consequences. What is now needed is to seek a transitional solution to these problems that will be applicable to most industries and at the same time tackle the root cause of the problem, i.e. staff turnover. It may be posited that, while opting for a health policy may entail costs for a firm, it has its advantages, one of them being that it reduces absenteeism on health grounds, which also puts a burden on the firm. On the basis of this postulate and our observation of firm 1’s implementation of a social and health policy, we can see the economic sense of such an option and how it can be used to offset variations in turnover.In the absence of any public social provision for individual medical aid in Côte d’Ivoire, with the exception of just a few medical centres which offer services funded in part by the Caisse Nationale de Prévoyance Sociale (National Social Welfare Fund) (CNPS, 1994), some public and private sector enterprises contribute in varying proportions to the payment of employees’ health insurance (Aventin and Gnabéli, 1996). One might wonder why firm 1, whose highest cost is for medical care, continues to be willing to allocate large amounts to medical aid. We would like to suggest three possible, and complementary, replies to this question:
It recognizes the relationship between the physical health and morale of the staff on the one hand, and work productivity on the other. The quality of social benefits, especially the offer of medical cover, in a country where health care is expensive (World Bank, 1993), is highly appreciated by employees. This policy, which is of benefit to the staff as a whole, narrows hierarchical gaps and strengthens social ties and work cohesion among employees.
The employer’s contribution to employees’ medical cover facilitates access to health care and prevents the partial purchase of drugs or the interruption of a course of treatment which the worker considers too expensive. With no data available on the cost of medical absenteeism - whatever the pathological cause - before and after the introduction of a medical aid scheme, we have been unable to carry out a comparative study. Nevertheless, it is possible to present and state the case for the various parameters that enter into such a comparison. The question of cost or profitability remains the core issue for managers. We will base our demonstration, on the one hand, on the potential gains to be derived from opting for a well developed medical policy and, on the other, on the possibility of cutting the cost of such a policy. By a developed health policy, for enterprises with over 50 employees, we mean: regular checks on employees by a doctor employed by the company and working on the premises, the employment of nursing staff, the provision of premises to be used as a dispensary equipped with essential drugs and first aid material, (9) and a contribution by the employer to employees’ medical insurance so that they can afford pharmaceutical products. (10) In addition to cutting the cost of medical absenteeism, these arrangements should be conducive to a reduction in the loss of productivity of employees who, even when in poor health, continue to work for fear that, without a medical certificate - which means paying for an appointment with a doctor and the travel costs incurred - they will have their daily wages docked. At the same time the presence of a company doctor regulates the behaviour of employees who take unwarranted sick leave. Lowering the morbidity rate through improved access to care and pharmaceutical products also reduces staff movements. A lower incidence of staff mortality and an increase in the average duration of attendance at work encourage the transmission of skills and acquisition of the tacit knowledge specific to the group. There is indeed a price to pay for the absence of all these compensations. Is that price higher overall than the cost of health insurance? To judge that, we need to establish a cost/effectiveness curve. If, as we suggest, the costs of the disorganization of work are cumulative and progressive, we would obtain a curve of the following type:
![]() of work caused by HIV We are not in a position to determine the relative time- and cost-scales, which vary according to many parameters relating to the fragility and vulnerability of each business. However, if we take the hypothesis illustrated by diagram 3, we can see that the cost of the disorganization of work can rise exponentially until the business collapses; alternatively it may take the shape of a logistic-type curve, levelling out at a high cost level which eats into profitability and, even though it may be stabilized temporarily, leaves the business far more vulnerable than it would be without HIV/AIDS. Setting up a health system is a costly investment in the early years; thereafter, rigorous management is needed to limit fluctuations in the cost of the system borne by the beneficiaries, i.e. the employees (and their families). It may be assumed that the disorganization of work will eventually cost more than a medical aid system and the sooner medical monitoring and care are made available, the sooner the dysfunctions caused by the HIV epidemic will be brought under control. The different firms’ responses will ultimately depend on how the typical cases suggested by this diagram evolve, and the cost of a workplace health system will be seen, not as an additional burden, but as an investment which will become profitable after so many years, depending on the firm. In order to speed up or increase the return on this investment, it is important to be aware of ways of minimizing the cost of a medical aid scheme for employees while providing the same levels of service and efficiency. Several measures are worth considering and indeed necessary:
Conclusion and prospectsWe have noted that the lack of effective treatment against HIV/AIDS in Africa indirectly affects economic activity, since such treatments would prolong the life expectancy of HIV-infected persons and affect the mortality and morbidity of a company’s workforce and hence its turnover, all the attendant organizational consequences. However, there is little evidence of suitable medical response: too few businesses outside the public sector contribute to employee health insurance. A survey carried out in Abidjan in 1992 covering 2,064 households in the Yopougon district showed that 18.4 per cent of individuals said that they had medical insurance and 58 per cent of those insured were with the Mutuelle Générale de Fonctionnaires (civil servants’ mutual insurance scheme) (Touré et al., 1993). This means that their access to this benefit is connected to their professional status. In the private sector, the provision of insurance for employees is far less common, with the exception of managers, who generally have private social security coverage paid for by the employer (Bazin and Gnabéli, 1996).We note that there are three main limitations to the establishment of workplace health-care schemes. Firstly, even the progressive establishment of a medical aid scheme involves disbursement and therefore implies that funds are available for what is in many cases an unforeseen investment. Secondly, public and private sector employees and their families are only a minority of the working population; workers in the informal sector are not accounted for. Thirdly, such a policy accentuates the sometimes paternalistic role of employers in Africa (Henry, 1993) - when employees lose their jobs they also lose the social benefits that go with them, in particular access to health insurance. That being said, the employer should consider these health-related issues not as a favour granted to employees or a secondary aspect in relation to work, but as an economic tool for staff management. Notwithstanding the above-mentioned limitations, the application of a health policy by firms might lead to interesting trends at the macro-economic level:
Source: Aventin, Huard 1997. (11)
Source: Aventin, Huard 1997 (cf. note 3).
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![]() of work caused by HIV
Notes1. The research findings will be presented in the doctoral thesis of Laurent Aventin, available in 1998. 2. The medical information provided by the doctors was anonymous for reasons of confidentiality in the study. The doctors took a very active part in the research, particularly when certain cost assessments required them to identify cases. 3. For further information on the costs presented in table 3, refer to the article by Aventin L., and Huard, P.: ‘Reactions of African firms to the impact of HIV/AIDS on their operations: Some thoughts based on observations made in Abidjan, Côte d'Ivoire’. Submitted to both the Revue d'Economie du Développement and the Journal of African Economies at the time of writing this paper. 5. It should be noted that because of the sensitive nature of the topic, research into discriminatory practices in business, in particular with the assistance of associations of seropositive persons or legal experts, cannot be conducted in conjunction with research on economic costs in the same firms. The two studies were therefore carried out simultaneously in different firms. 6. Initially, decree No. 65-210 of 17 June 1965 stated that ‘the company doctor shall be responsible for dispensing first-aid to workers who are victims of accidents or taken ill where such need arises in the workplace and with the means available to the establishment …’. In practice all manifestations of sickness of employees are treated in the workplace, including those not related to work. 7. According to Weiss, the organization of work affects absenteeism and can become a management tool to regulate the structural dysfunctions of the enterprise, in particular those caused by absenteeism (Weiss, 1979). 8. Research carried out in Abidjan in 1995 and 1996 on 30 companies from all sectors provides insights into the different health schemes and coverage of these companies. The findings of these studies are partially presented in a paper (cf. bibliography: Aventin and Gnabéli, 1996). 9. List of first aid products laid down in labour law: Decree No. 67-321 of 21 July 1967, which codifies the statutory provision pursuant to Part VI ‘Health and Safety - Medical Service’ of Law No. 64-290 of 1 August 1964, establishing the Labour Code. Official gazette of Côte d’Ivoire, 9 July 1968. Terms retained in the amendment to the Labour Code of February 1995. 10. Although labour law regulates the presence of a doctor and medical staff in the workplace according to the number of employees, and the provision of premises, equipment and first aid material, these conditions are not always respected by the employer. Furthermore, the employer’s contribution to the payment of employees’ medical insurance is not compulsory or even recommended. 11. For further information on the costs presented in table 3, refer to the article by Aventin L., and Huard, P.: ‘Reactions of African firms to the impact of HIV/AIDS on their operations: Some thoughts based on observations made in Abidjan, Côte d’Ivoire’. Submitted to both the Revue d'Economie du Développement and the Journal of African Economies at the time of writing this paper.
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About the authorsLaurent Aventin: Studying for a doctorate in public health, research funded by the Agence Nationale de Recherche sur le SIDA (National AIDS Research Agency). Works with the Grand Programme SIDA, ORSTOM, 911 Av. Agropolis, BP 5045, 34032 Montpellier Cedex 1 - France. E-mail: laurent.aventin@mpl.orstom.frPierre Huard: Professor at the University of Aix-Marseille II, Laboratoire d’Economie et de Sociologie du Travail (CNRS) (CNRS Laboratory of Economics and Sociology of Labour), 35 Av. Jules Ferry, 13626 Aix-en-Provence - France. E-mail: huard.p@univ-aix.fr |
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