Companies are paying closer attention to an individual’s health when hiring and setting wages as a result of increased employer-based insurance.
“I have taught employment workshops and I will say, look in the mirror and ask yourself: ‘Am I someone that I would want to hire?’” said Michael Kofoed, a doctoral student studying economics at the University of Georgia’s Terry College of Business. Kofoed studies the relationship between obesity and labor markets.
Kofoed described his research as a blend of two common economics, labor and health. “As an economist I started thinking perhaps there is a link between these two,” he said.
Kofoed’s research looks at the impact obesity has on employment and wages by comparing the employer-based health insurance in the U.S. and single-payer health insurance in Canada.
“What I have found in the United States is that there is a negative penalty for being obese,” said Kofoed. Discrimination is present in the hiring process and when employers are setting wages, Kofoed said, which would be unfair if obese workers performed at the same level as healthy workers, but they do not.
In the United States, Michigan is the only state that has legislation outlawing discrimination based on weight. The majority of Employers have no legal obligation to consider employees of different weights equally, and many are choosing to factor in the economic cost of hiring obese workers.
Economic Cost of Obesity
“One in three U.S. adults is obese, and researchers say the impact on business can be boiled down to a number: $1,000 to $6,000 in added cost per year for each obese employee, the figure rising along with a worker’s body mass index,” reported National Public Radio in their series “Living Large:Obesity in America.”
Obesity cost employers both in loss in productivity and additional healthcare cost.
“Obesity-related absenteeism costs employers as much as $6.4 billion a year, health economists led by Eric Finkelstein of Duke University calculated,” reported Reuters.
In addition to productivity cost, some of the most common and costly health conditions are associated with obesity including, heart disease, stroke and type II diabetes.
The Journal of Health Economics reported last year that obesity and its related health problems incur health care cost equaling $190.2 billion per year–more than the health care cost associated with smoking.
With new provisions of the Affordable Care Act going into effect over the next couple of years, companies will be covering the bill for these large health care costs. In order to balance increased cost, many employers are lowering the pay of obese workers.
“The cash wages for obese workers are lower than those for non-obese workers because the cost to employers of providing health insurance for these workers is higher,” reported the National Bureau of Economic Research.
“Your health is going to determine your productivity in the labor market, which in turn is going to determine your wage outcomes,” Kofoed said. Obese workers will not be able to perform the same as healthy workers and increases in the cost of their health care will be factored into their productivity and result in lower wages.
Financial Incentives for Health
Companies can also use financial incentives to promote healthier habits among their workers. Higher premiums or co-payments may be charged to employees above certain healthy weight standards, or discounted health payments may be awarded to employees who participate in a company’s health and wellness program.
The Athens Clarke County Wellness program offers Clarke County employees a program that provides healthy living support and exercise programs.
“The incentive-based program, which began in April 2004, is dedicated to enhancing the mind, body, and spirit of ACC employees and designed to empower them to take personal responsibility for their health and well-being,” reports the ACC Wellness program in their Wellness Program Manual.
Employees who participate in the ACC Wellness program can receive financial benefits from their participation in the program through reductions to their health insurance premiums or awarded administrative leave days.
“If we know that the obese are being penalized for their weight than perhaps we can help them realize one of the big incentives of losing the weight could be increasing their labor market outcomes,” said Kofoed.
In addition to education and experience, health may be the next determinant in landing a job in this competitive job market.
As an economist, I encourage people to get fit and take better care of their health which will translate into better employment outcomes, said Kofoed,. “The big thing is your health does matter in the labor market.”