The absence decision: a theoretical and empirical analysis

Economists have been somewhat remiss in dealing with the issue of worker absence. This is surprising given the figures involved. In the year of the last miners' strike, 27 million working days were lost as a result of strike activity, a figure which pales by comparison with the 375 million working days lost on average as a result of absenteeism over the 1980's [Economic Trends]. Furthermore, a study by management consultants, Arthur Anderson, recently estimated the cost of absenteeism to the UK industry at £6 billion per year [The Independent, 22/10/91]. Despite all this, relatively little attention has been paid in the economic literature to either the causes and/or the effects of absenteeism. Nevertheless, the discipline has benefited from a basic yet rigorous theoretical structure founded on static neo-classical labour supply theory. The aim of this Thesis is to address two main weaknesses of the existing theory of absence behaviour. Firstly, there is a distinct shortage of models which explicitly incorporate labour demand considerations and, consequently, ways in which employers might attempt to control absenteeism. Hence, emphasis in this Thesis is placed on the analysis of methods of absence control such as the provision of experience rated sick pay and overtime. A second weakness of the existing theory concerns the somewhat limited 'static' approach which has generally been adopted in the economic literature. Thus, this Thesis acknowledges the role of risk and uncertainty in absence behaviour by setting the analysis within a dynamic framework. The key objective of this Thesis is to explore the determinants of absence behaviour and identify ways in which contractual arrangements and, therefore, labour demand considerations manipulate the incentive to absent from the work place. The empirical analysis supports the hypothesis that observed absence behaviour is primarily influenced by the nature of the employment contract and, therefore, by the interaction of labour supply and labour demand.