Impact Of Depression On Labor Productivity - Call Center "Metro Manila"
Several researches across countries have been conducted regarding mental health and its effect on labor market outcomes. This study focuses on the relationship between depression and labor productivity, specifically on call center agents. By providing information about the nature of work in the business-process outsourcing (BPO) industry and measures with regards to depression, this study aims to support past researches and examine whether results that will be gathered here in the Philippines will be consistent with those of the other countries.
Mental Health and Depression
Mental illnesses are among the top 10 costliest diseases. Globally, more than 300 million people have depression and it is the leading cause of disability, ill health, and suicide according to the World Health Organization (2018). Matteo (2017) gathered data from the World Health Organization-Philippines (WHO-PH) and the Department of Health (DOH) regarding the statistics concerning depression here in the Philippines. It is found that 3.29 million Filipinos are battling depression, and there was an increase of more than 18% during the period of 2005-2015. On the other hand, there are 3.07 million people with anxiety disorder, also a mental health issue. Unceasing feeling of sadness and guilt, decreased concentration, difficulty in focusing, and occurrence of suicidal thoughts are just some depressive symptoms experienced by mentally unhealthy people. Because of these, human capital accumulation is reduced and it affects the labor force participation and wages. Moreover, mental illnesses reduce employment and productivity in countries – rich or poor, since studies have found out that it is one of the main health problem of people especially those in the working age. Previous studies have estimated that one in five working adults is experiencing mental difficulties and are clinically diagnosed with mental disorders. Mental health being “so common and so disabling”, economists consider this as an issue that is needed to be discussed.
Costs of Mental Illnesses
Mental disorders have costs to society. Like any other diseases, these have impacts on economic growth and aggregate output. Decreased productivity of employees carry most of the burden on the economic costs of mental illnesses. Human capital costs distinguish the direct costs such as health care costs and support services, and indirect costs associated with diagnosis of illnesses like income losses, decrease in production, and other visible costs. Trautmann, Rehm, & Wittchen (2016) investigated that costs from mental illnesses are larger compared to costs brought by somatic diseases, and that “societies are willing to spend much more on somatic diseases than on mental disorders, even though both disability and economic costs are at least as high as those caused by somatic conditions”.
Davlasheridze, Goetz, & Han (2018) cited Bloom et al. (2011) that on the next 20 years, economic loss of mental health disorders were forecasted to exceed $16 trillion, which is larger than the costs brought about by other non-communicable diseases. These costs include medical costs, opportunity costs (especially in the labor force), direct and indirect costs, value of lost outputs, reduced economic activity (which leads to decreased economic growth), and value of life. With this, economic growth models and data from Bureau of Economic Analysis and the U.S. Census were used to estimate the cost. Results showed that per additional day of poor mental health, the national per capita income growth rate have approximately 1.84 to 2.16 percentage point reduction. Poor mental health indeed have negative economic costs, and also negative association with economic growth. Payments of welfare and taxes that are lost cost billions when people cannot work productively due to unhealthy mental conditions.
Stromberg, Aboagye, Hagberg, Bergström, Lohela-Karlsson (2017) studied on estimating productivity costs from losses due to presenteeism, absenteeism, and other work-environment related problems by proposing wage multipliers. They have found out that job characteristics such as the degree of time sensitivity of output, teamwork, and difficulty in replacing a worker, have resulted to a having a link to production loss as a result of health and work environment related problems. This implies that these costs can exceed the wage of the workers. Reduction in the performance of the workers contribute substantially to production costs. Absenteeism resulted to be the costliest, and not only presenteeism and absenteeism but also work environment-related problems contribute to the losses and it has greater impact than presenteeism. Also, the authors discussed that similar to other studies, absenteeism’s economic impacts are simpler to estimate than that of presenteeism, but the latter has significantly higher productivity losses.
As Hirch et al. (2015) developed a theoretical model of presenteeism in Germany, they stated that incentives, which are also considered as costs, are provided as higher wages and it prevent workers from being away from work. The model implies that with a higher wage, being away from work is more hurtful for the employee since there is higher loss in income. Another implication is that a higher wage provides more incentive for the worker to exert more effort.
Mental Health and Labor Market Outcomes
Several literatures have already proved that depression indeed lowers productivity in the workplace as it affects the mental condition of the worker. Aside from the employees being prone to being absent, depression makes it difficult for them to concentrate on their jobs. Cseh (2008) interestingly studied about the impact of depression on wages, as it is “one of the most common diagnoses in the health care sector”, according to the World Health Organization (2001). Cseh found that depressive symptoms have a negative effect on earnings. In line with Cseh’s study, other researches also concluded that people who are psychologically challenged have decreases in income.
Chatterji, Alegria, & Takeuchi (2011) estimated the effect of psychiatric disorders on employment, working hours, and earnings. They primarily used the National Comorbidity Survey-Replication (NCS-R) wherein it contains diagnostic assessments, along with the correlations of psychiatric disorders. The results from this study have shown that psychiatric disorders are associated with percentage decreases in the participation in the labor force and on employment. Mental disorders have been reducing employment and its probability, and results have shown statistically significant and negative effects of psychiatric disorders on the labor force participation. Similarly, in Ohio, United States, Hartge (2015) examined the impact of ADHD on labor market outcomes namely earning and job termination, as ADHD diagnosis rates continue to increase. ADHD is a “neurodevelopmental disorder characterized by broadly defined behavioral symptoms at various stages of life”, in which it affects the attentiveness of a person in doing work and being easily distracted and absent-minded.
Hartge (2015) used a principal-agent approach wherein a principal will bring about a level of effort, e, and it assumes that the agent will bear a cost, since ADHD symptoms includes "failure to pay close attention to details, difficulty organizing tasks and activities, or inability to remain seated in appropriate situations", where it can lead to that person's "poorer work performance in employment settings", which will obviously cost him more effort. Surveys were conducted and metrics were used in getting information from ADHD agents. Results showed a negative effect on the relationship of earnings and with people who are ADHD-diagnosed after the age of 14. In contrast, results also showed that people with early diagnosis have higher chances of being terminated on their jobs compared to those who were diagnosed at an early age.
Moreover, depression, being the most prevalent mental health problem among adults, have gotten the attention of researchers Peng, Meyerhoefer, and Zuyekas (2013) to also study its relationship on labor market outcomes namely employment, hourly wage, hours worked, and absenteeism in the United States. Results showed significant and negative effect of depression on employment, hourly wage, and weekly hours worked while absenteeism have been reported to be positively related to that mental disorder. Endogeneity and reverse causality have been the problems in conducting this study since the variables may be biased, but nonetheless using instrumental variables of exclusion restrictions in multiple equation models were conducted to avoid certain issues on the methodology. Similarly, Monus (2018) discussed how mental illnesses and services affects employees' work potential in Canada. Mood and anxiety disorders were the indicators used to distinguish poor mental health, while different types of maltreatment experienced by the respondents as a child was the instrument variable used in identifying the mental health disorder. Similar with earlier studies concerning this issue, the results using Canadian data are just the same confirming that mental illnesses such as depression, bipolar disorder, OCD, panic disorder (to name a few) decreases the employment rate or the probability of working.
Absenteeism and Presenteeism
Furthermore, there is another study about the relationship between mental health and absenteeism & presenteeism, which Bubonya, Cobb-Clark, & Wooden (2017) regarded this as “two alternative workplace productivity measures”, wherein absenteeism is being absent without any reason and presenteeism is being “at work but out of it”. Data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, which collects data annually from samples of Australian households since 2001 were used. To analyze presenteeism, they selected 15-64 years old individuals who work for wages. A Self-Completion Questionnaire (SCQ) which contains questions derived from the Short Form (SF-36) Health Survey, was used to gather information from the respondents. Questions regarding feelings caused by emotional problems such as “cutting down the amount of time you spent on work or other activities”, “accomplished less than you would like”, and “didn’t do work or other activities as carefully as usual” were recorded with yes or no responses. Also, samples of 15-64 years old employees are selected for the analyzation of absenteeism.
The Mental Health Inventory (MHI-5) was used as the indicator of mental health. It is a sub-scale of SF-36 which proved to be an effective screening instrument for the diagnosis of mental illnesses on people especially in highly populated countries. Bubonya, et al. (2007) found that results were consistent with those of the studies similar to this. Hence, there were significant negative relationships between having bad mental health and productivity.More related studies about productivity losses are measured using the concept of presenteeism and absenteeism. In five cities of Colombia, patients with depression were studied as they contribute to the losses from production due to absenteeism and presenteeism.
Uribe, Pinto, Vecino-Ortiz, Gomez-Restrepo, & Rondon (2017) used the World Health Organization’s Health and Work Performance Questionnaire (HPQ) in order to evaluate absenteeism and presenteeism. Data were gathered from 107 depressed employees. Decline in work performances were reported and 840 million US dollars were the estimated cost of productivity loss in 2015. Depression and presenteeism, as well as its relationship with absenteeism showed a significant and positive relationship, while depression and work productivity are negatively related based on the results.
Likewise, Woo et al. (2011) have found out that mental illnesses, such as depression, have negative impacts on labor market outcomes namely employment and work productivity. Indirect costs were measured using the concept of LPT or lost productive time, wherein it consists of absenteeism and presenteeism. LPT from presenteesim or the "reduction of work performance while at work" was found out to be greater than the missed hours or days of work or the LPT from absenteeism. 106 employees were screened, tested, and assessed in this study. Included were those patients who have met the DSM-IV diagnostic criteria for MDD or major depressive disorder, and in measuring the severity of depressive symptoms, the Hamilton Rating Scales for Depression (HAM-D) was used. Lower productivity and greater absences were recorded with MDD-diagnosed workers, but it was improved after the patients underwent the 8-week treatment of anti-depressants and psychotherapy.
Additionally, Pedersen and Skagen (2018) discussed two economic approaches that is related to presenteeism which are productivity loss and labor supply. They found out that the determinants such as the health status of employees, their age and gender, having a fear of unemployment, their attitude towards sickness absence and presenteeism, and having management responsibility, have a statistically significant relationship with presenteeism. Also, since depression causes vulnerability to employees, Lerner et al. (2010) gave a hypothesis that the mental illness is worsened when workers are being exposed to psychosocial work stressors. Depressed respondents showed worse presenteeism and absenteeism. More depressive symptoms, poorer physical health, and being more demanding at work and less job control occurred with presenteeism (Lerner et al., 2010).
Call Center Industry in the Philippines
The business-process outsourcing (BPO) industry contributes abundantly to the Philippine economy. At present, a total revenue of $23 billion (or 1.15 trillion pesos) is earned by the call center sector alone. Call centers provide many of job opportunities which help reduce the number of unemployed persons in the country. The Philippine call center industry grows fast given the English speaking skills of Filipino graduates and their attraction to the high wage offered by companies. Sushma & Rizvi (2008) gathered information about stress and mental health among call center employees in New Delhi, India, which is also caters large BPO industries. They have found that the five key stressors in call centers are the following: nature of job, quality/quantity conflict, intensity, targets (specifically performance targets wherein it drives out pressure to the employees), and their mental health. The culture of the centers was described as having “good social network of well-behaved people, employees are highly payable”.
Mental illnesses, such as depression and anxiety disorder, are undertreated especially in low-income and middle-income countries. With these, Uribe et al. (2017) provided some discussions using the results they have gathered to reduce the losses from productivity by suggesting "provision of full-access to good-quality mental health services and measures to decrease mental illness stigma". Also, Lerner et al. (2004), who also studied about the impact of depression on work outcomes, suggest a need for programs which will help lessen the consequences brought by mental illnesses to being productive at work and on other labor market outcomes for further economic development. From the research of Sushma & Rizvi (2008), they recommend stress management program needs as to reducing the occurrence of stress and mental health problems to the employees.
Pedersen and Skagen (2018) highlighted the importance of self-reported status of employees’ health, wherein it is found out that worse health situation leads to more presenteeism. Rost, Meng, & Xu (2014) found evidences from the employer’s perspective in handling work productivity losses caused by depression. They reported that one-half of the companies do not consider hiring temporary workers. Estimates that were calculated will help in providing programs for the employers in valuing improvements in work productivity, also in order for them to generate large return on investments. Because of these, studying the impacts of mental illnesses to the labor productivity gives importance to the wellness of employees by focusing on mental health, such as call center agents here in our country. It will also give awareness for the employers on how to reduce losses and costs due to low productivity, which will benefit the economy.
