Employee Health and Firm Performance

Daniel A. Rettl and Alexander Schandlbauer

♦ Using administrative data on the universe of firms in Denmark, we find that even temporary and small health shocks to employee health like seasonal influenza can significantly reduce firm profitability. The effects are driven by labor-intensive firms and decrease in firm size and financial flexibility, suggesting that firms that are better able to shift resources can insulate themselves better. Our results indicate that employees are shielded from these negative effects, while owners (especially of small firms) see reduced dividends. Back-of-the-envelope calculations propose that all but the largest firms may benefit from subsidizing vaccination programs for their employees.

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