The economics of excess: Australia's weighty issue

Growing obesity rates can be unhealthy for the economy.

A growing number of people across the globe are sustaining themselves on diets high in unhealthy fats and sugars, while living increasingly sedentary lifestyles. One negative consequence of such a lifestyle is its ability to wreak havoc on our energy levels, leaving us feeling sluggish and drained. It can have a similar impact on the economy.

The importance of healthy human capital

Human capital is one of the core factors behind economic growth. Without healthy, skilled, engaged and capable workers, the economy cannot exist.

Morgan Stanley Research noted in their June 2017 Sustainability Compendium that health is an important driver of long-term dynamics, public sector expenditure and consumer trends. According to the Compendium, increasing rates of poor health outcomes linked to obesity and poor diet are having a negative impact on the public purse by reducing the efficacy of human capital.

“Economic activity has traditionally been attributed to the accumulation of human and physical capital, along with increased productivity arising from technological advances. Thus, as one of the major factors behind economic growth, health of human capital is important.”i

According to Morgan Stanley Research, the largest cumulative output losses for GDP growth, of all OECD countries, occurred in Australia, Chile, Czech Republic, Mexico, the United States, and New Zealand.

An expansive challenge to productivity

Human health has the potential to bring about change related to employment/ population ratios and labour force participation rates. Poor health connected to obesity can also be a dampener for workforce productivity.

A decrease in productivity can occur if overweight or obese employees experience conditions that reduce the intensity and quality of the work they perform, such as decreased mobility or dexterity. Health problems stemming from obesity may also result in excessive unplanned absentee levels, with the consequence of lost productivity or the added expense of hiring casual staff.

Beyond lost productivity and absenteeism, broader costs are incurred through insurance claims, such as indemnity claims, workers’ compensation and other microeconomic costs related to recruitment, training, traffic, nursing or injuries. Work time lost due to early retirement should also be weighted in any overall assessment of obesity related expenses.

In recent years, the economic disadvantages of an increasingly overweight workforce have been studied, quantified and articulated by numerous academic papers, government reports and public sector studies, adding credence and tangibility to a complex issue. Policy makers have responded by investing in public policy initiatives that seek to promote better nutrition and more active lifestyles. Industry leaders and executives in the private sector have placed the issue front and centre with a focus on innovative products and internal policies promoting health and wellness.

A bigger reason to care

Most people know that a more productive, vibrant economy yields broad benefits for society as a whole, but beyond the implications for our hip pockets and business bottom lines, obesity has a human toll that touches many of us directly. Chronic diseases associated with being overweight or obese include many of the leading causes of death in Australia, such as some cancers, coronary heart disease, stroke, and chronic kidney diseaseii. As such, the reality is that many of us have already lost loved ones or faced our own health challenges as a result of this epidemic.

By implementing what we know about health and nutrition through workplace initiatives and culture, with the support of government and the broader community, the results could lead to a fitter workforce and a healthier economy that benefits us all and, ultimately saves lives. It may even save yours.

The unhealthy numbers behind a growing problemiii

  • At age 2–5, 8.8% of those born in 2010–2013 were obese, compared with 4.2% of those born in 1990–1993.

  • At age 18–21, 15.2% of those born in 1994–1997 were obese, compared with 8.0% of those born in 1974–1977.

  • Adults in 2014–15 were more likely to be obese than those of the same age 20 years earlier at all but 1 age group.

  • Nearly 2 in 3 (63%) Australian adults were overweight or obese in 2014–15, up from 57% in 1995. This rise been largely driven by a shift towards Australian adults being obese (rather than overweight but not obese), with fewer now in the normal weight range.

  • Excess weight, especially obesity, is a major risk factor for cardiovascular disease, type 2 diabetes, some musculoskeletal conditions and some cancers. As the level of excess weight increases, so does the risk of developing these conditions. In addition, being overweight can hamper the ability to control or manage chronic conditions.

For information on investment opportunities with companies who actively encourage health and wellbeing, please contact your Morgan Stanley Financial Adviser.

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