Cost of absenteeism due to air pollution among private sector companies in Ulaanbaatar, Mongolia
Research Report. May 2020
Ulaanbaatar, Mongolia, is both world’s coldest capital city and among the world’s capital cities with the highest level of seasonally polluted air during winter. Over 80 percent of this seasonal air pollution is due to domestic heating with coal stoves in residential communities known as ‘ger districts’ due to the prevalence of traditional nomadic housing used in these areas. This report presents the direct and indirect costs of winter seasonal air pollution due to employee absenteeism in the private sector. In winter 2019, UNICEF convened a meeting in Ulaanbaatar, at which human resource (HR) officials and high-ranking executives from several well-known Mongolian corporations shared their opinions on how winter air pollution impacts absenteeism rates among their employees. Through this meeting, UNICEF postulated that absenteeism must be a significant driver of ‘hidden’ opportunity costs, affecting not only corporate bottom lines but also employee financial well-being.
The design of the study included creating inclusion and exclusion criteria. These criteria encompassed business type, employee numbers, availability of employee attendance records, format of records, quality and completeness of records, and willingness to share records. Representatives of employers and select employees were surveyed using quantitative and qualitative instruments to characterize direct and indirect costs, and absences due to illnesses that are common during highly polluted months.
The sampling design of the study was purposeful sampling. Data from between 2015 and 2019 were analysed, from a total of eight companies and including a total of 2,764 employees. Almost all of the companies used fingerprint scanners that link each employee to a payroll number. Questionnaire data was obtained for 1,330 employees working for private sector companies spanning six economic sectors. A total of 133 people participated in 26 focus group discussions and 20 people completed individual interviews.
The main purpose of this study was to assess both direct and indirect hidden costs to private sector companies as well as individual employee costs associated with absenteeism due to air pollution in Ulaanbaatar, Mongolia.
The results of the study show that the combined direct and indirect hidden costs of absenteeism identified as being related to wintertime air pollution are significant for both employees and employers in the private sector in Ulaanbaatar, Mongolia. The major drivers of direct cost to employees identified were health-care expenses, including doctor visits, medication, hospitalization and transportation, in addition to loss of earnings. Although the employees surveyed were evenly divided by gender, it was found that the cost of illness-related absences was disproportionately higher for female workers, especially those with young children. The major hidden cost drivers for employers were the number and human capital costs of employee absences.
- Female employees and employees with a young child are more likely to be absent. Companies with flexible working arrangements available to employees have much lower rates of absenteeism. Most sick absences are unpaid. To compensate for taking a sick absence, employees work at night or they work overtime to finish their assigned tasks. Additionally, a sick employee might not take leave unless they are very ill. From the employer’s perspective, companies that did not have any plans for reducing absenteeism by flexible working were at a strong disadvantage.
- Respiratory diseases account for the majority of air pollution-related illness. All participants perceived that air pollution adversely affects their health. The highest average coarse particulate matter (PM10) concentration was associated with the upper range of absenteeism. Both PM10 and sulfur dioxide (SO2) air pollution were positively associated with absenteeism. Colder temperatures and lower humidity levels were also significantly linked to increased absences.
- The hidden cost of absences to employers was nearly $7.5 million lost due to absenteeism over the last five years among the private companies participating in this study. This loss represents a $1.4 million annual hidden indirect opportunity cost to the Mongolian economy due to air pollution. Companies without flexible working arrangements face greater rates of absenteeism, expending time in their search for substitutes and increasing the indirect cost of absenteeism. Finding substitute employees from outside the company can be difficult, particularly if specially licensed staffs are required.
- Annual individual employee direct costs related to illness caused by air pollution totalled 875,000 Mongolian tugriks (MNT) ($317.60) for an average of three instances of three-day illness-related absences during the winter in Ulaanbaatar. This sum included diagnostic and doctor visit-related costs per instance of air pollution-related illness of MNT 65,000 (three times), medication costs per illness of MNT 70,000 (four times), and hospitalization costs per absence of MNT 200,000 (one time). Direct cost unrelated to health care (transportation) was 50,000 MNT (four times). Individual indirect cost equated to the median value of lost wages for a three-day absence, amounting to 120,000 MNT. The costs to employees may amount to as much as 10 per cent of annualized income.