Question

Suppose there is a faith-based organization providing a group activity to learn about HIV transmission and attempt to prevent it. One of the participants in the group was infected with HIV. This person worked as a copy editor at the local newspaper. This person received poor care and early AIDS symptoms began three years after the infection. The person missed multiple work days for one year, and then became completely disabled and could no longer work three months after the onset of AIDS. The employer needed the copy-editing to be done each day, but did not decide to replace the person until it was clear that the person’s disability was permanent. This occurred one month after the onset of disability at a level that kept the person permanently out of work. The employer took two months to find a suitable replacement. It took one month for the person to start, and it took one more month to get the person up to the level of accuracy of the original employee. The original employee died four years to the day after being infected with HIV.

Question: Using a friction cost approach of interest to the employer describe the productivity costs that would be counted. Show a timeline.

Answer 1

1. Friction cost is the cost which is to be incurred due to a change in financial transaction associated directly or indirectly to the transaction.

2. In the above situation mentioned in the question, multiple work days for one year, one month after the onset, two months for recruiting the other employee, one month to start and another one month to reach accuracy as the original one are friction costs or say productivity costs associated to the employer.

3. Not only that the insurance premiums and other unproductive losses for non working days of copy editing are also add ons to the thing.

4. These friction costs are to be reduced by the employer to reduce long term costs and additional costs to be unnecessarily incurred.

5. Care should be taken by alternative employment benefits and insurance policies related to employees of HIV infection.