New Study Shows Worker Health Declines as Sales Surge

Monday, November 11, 2024

The phrase “work-life balance” inherently implies a tradeoff between professional success and personal well-being outside of work. Many people have felt the strain of increased expectations and workload imposed on them by an employer, but anecdotes are a poor way to understand whether increased strain causes health to worsen or to understand the magnitude of that effect. However, the true health sacrifices workers sometimes make for their company can be objectively evaluated through careful economic research.

Two Purdue economists examine the consequences of higher workloads on employee health in their paper “No Pain, No Gain: Work Demand, Work Effort, and Worker Health,” published in The Review of Economics and Statistics. Purdue’s David Hummels, Distinguished Professor of Economics, and Chong Xiang, Professor of Economics, and coauthor Jakob Munch, Professor of Economics at the University of Copenhagen, find striking impacts on the health of workers when companies’ sales increase rapidly.

To identify these effects, Hummels, Munch, and Xiang used Danish administrative data that enabled them to consistently track workers and the companies they work for over time. Danish healthcare is free and universal, and workers use of the healthcare system is carefully tracked. This means that, unlike the U.S., access to healthcare does not depend on income or employment status, and researchers can link use of the healthcare system to changes in the employees’ work environment.

These data enable Hummels, Munch, and Xiang to measure two key behavioral responses. First, how do companies adjust their workforce in response to sharp increases in sales – either by hiring more workers or asking existing workers to put in longer hours? Second, how do workers’ health outcomes change when their work intensity rises?

They find that workers log longer hours and earn more money as the company they work for increases sales. These increases in sales subsequently lead to a higher likelihood of workers purchasing anti-depressants and heart-disease medication. In addition, when working for companies experiencing sales increases, employees are more likely to be hospitalized with diagnoses related to stress and burnout, heart attack, stroke and severe liver disease. The last of these is considered an indicator of alcoholism.

To be certain they were identifying a causal effect of work intensity on health, Hummels, Xiang and Munch investigated the timing and persistence of these adverse health effects as well as which workers are most affected.

In the months immediately after a sharp increase in sales, workers begin to experience negative health effects they had not suffered previously. Unfortunately, some of these health effects persist even after the surge in sales slows down. Use of anti-depressants and heart-disease-drugs remains elevated for years after heightened sales. These effects are even greater for at-risk workers, such as workers over age 50, and those who were already working long hours before the sales increase occurred.

In addition to these novel results, Hummels, Xiang and Munch quantify the anticipated change in employee well-being when working in a firm with growing sales, accounting for both higher earnings and worsening health.

They find an average worker’s welfare loss accounts for nearly one quarter of their earnings gains for rising sales. Even though employees may make more money in periods with higher sales, the health consequences these workers face significantly offsets these benefits.

“This isn’t a case where workers are complaining about work stress for no real reason,” says Hummels. “It has real, and lasting, health consequences.”

Reducing excessive work hours and managing workloads is one way companies can combat the negative health outcomes associated with rapidly increasing sales. “It is rapid surges in sales that lead to adverse consequences,” says Hummels, “Smoothing effort, or being more effective in bringing on additional workers rather than asking for more work effort in short sprints, may be an effective way to combat these adverse consequences.”

Another possible solution is to implement measures that support employees’ mental health. As Xiang points out, “Most of the negative health effects are related to stress from work. According to the CDC, work-related stress is a leading workplace risk factor for health. However, while the U.S. spends trillions of dollars on health every year, only a small portion, less than 10%, goes towards mental health care.”

By comprehensively evaluating the health impacts of higher work demand on employees, Hummels, Xiang and Munch provide critical insights for policymakers seeking to better the lives of workers. And they provide workers with key information that can help them balance demands at work with its consequences for their personal health.