Investing in Healthy Companies Doesn't Mean What It Used To

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Like any investor, I like a healthy balance sheet. Lately though, researchers have begun to show the impact unhealthy employees can have on the bottom line. Last week, Gallup published a poll about the loss of productivity in the workplace due to workers' health issues. We're talking some pretty big numbers here, and some companies are proving more adept at combating the issue than others.

Bench-pressing the bottom line
First and foremost, here is an example of the sort of fiscal-fitness problems facing American companies:

  • Overweight or obese workers with no other chronic conditions result in $513 million in lost productivity every year.
  • Overweight or obese workers with one or two chronic conditions result in over $32 billion in lost productivity.
  • Obesity is related to more than 20 chronic conditions.
  • All told, the U.S. suffers $153 billion a year in lost productivity costs, more than four times the rate found in the United Kingdom.
  • The above number jumps to $1.1 trillion when you include people who go to work but do an inadequate job due to chronic conditions.

About 86% of workers in the U.S. workforce are overweight, obese, or have some other chronic health condition.  Is it possible that the physical quality of our workforce is getting in the way of job creation and your company's growth?

Unemployment vs. obesity
Theoretically, if unemployment was linked to obesity, the state with the worst unemployment numbers would also be the most obese -- so, let's look at the states (including the District of Columbia) with the highest unemployment numbers.

Unemployment Rank (worst = 51)

State

Unemployment %

Obesity Rank (worst = 1)

Obesity %

51

Nevada

13.4%

49

22.4%

50

California

11.9%

40

24%

48 (tie)

Michigan

11.1%

8

30.9%

48 (tie)

District of Columbia

11.1%

50

22.2%

47

South Carolina

11%

4

31.5%

45 (tie)

Mississippi

10.6%

1

34%

45 (tie)

Florida

10.6%

28

26.6%

Sources: Bureau of Labor Statistics, Centers for Disease Control and Prevention.

Right off the bat, Nevada and California shoot down the theory that unemployment is tied directly to obesity. That said, Michigan, South Carolina, and Mississippi all show an issue with high unemployment and high obesity. Let's look at the flip side of the coin: What does unemployment look like in the most obese cities?

Obesity Rank (worst = 1)

State

Obesity %

Unemployment Rank (worst = 51)

Unemployment %

1

Mississippi

34%

45 (tie)

10.6%

2

West Virginia

32.5%

39

9.8%

3

Alabama

32.2%

24

8.2%

4

South Carolina

31.5%

47

11%

5

Kentucky

31.3%

13

6.9%

Sources: Bureau of Labor Statistics, Centers for Disease Control and Prevention.

Though Alabama and Kentucky manage to come in below the national average for unemployment, this is not a pretty picture. The states with the most difficult workforce to mobilize already have problematic levels of unemployment.

It is possible to have success
Corporations looking to take advantage of tax breaks may very well find themselves setting up shop in a region full of unhealthy workers. Consider Tennessee, a state that does not show up on either of the above charts. Tennessee's current unemployment rate is 9.8%, 39th worst in the country. The state's obesity rating in 2010 was 30.8%, the ninth highest. So what does it take for a company to successfully create jobs there?

In 2010, Volkswagen (OTC: VLKAY.PK), looking to expand its U.S. presence, scouted several locations as potential homes for a new auto manufacturing plant. While multiple cities in the Midwest clamored for the plant, Chattanooga eventually won the project and the estimated 2,000 jobs that went with it. Hooray for everyone! Except the workforce in Chattanooga was generally overweight and out of shape. Most of the jobs at the plant required physical activity that these new workers weren't capable of doing all day every day. So, instead of crossing its fingers and hoping for the best, Volkswagen sent them to the gym.

For two hours every day, VW employees pushed, pulled, stretched, and worked to build cardiovascular endurance. Workouts were on the clock, tailored to particular positions on the production line, and followed health testing. Though there was no weight threshold for keeping a job, some employees lost 30 pounds in three weeks, and at least one employee lost 60 pounds.

The workouts built camaraderie, lowered health-care premiums, and improved the likelihood that workers were physically capable of performing their jobs.

The program is unique for VW plants globally.

Other companies making an effort
Volkswagen isn't the only company that has recognized the benefits of shaping up its employees: Sherwin-Williams (NYSE: SHW) is also committed to using fitness to improve its bottom line, confirming that every dollar it spends on its fitness center yields $3 in increased productivity, lower health-care costs, lower workers' compensation costs, and lower disability costs, including absenteeism. Nationwide, health-care premiums increased by 9% last year. At Sherwin-Williams they only increased 2%, thanks to the company's health initiatives.

IBM (NYSE: IBM) spends over $1.3 billion a year on health-care costs. Between 2005 and 2007, employees took responsibility for adopting healthier behaviors, and the company saved $190 million.

Citigroup (NYSE: C) developed a new wellness program right before the recession hit in 2008. The company opted not to scale back the operation in the face of hard times, indicating that every dollar spent on wellness initiatives returns $2 to the company.

Johnson & Johnson (NYSE: JNJ) didn't give up on its wellness program during the recession either, expanding some of its wellness programs during the dark days of 2008 and 2009. The company offers a $150 bonus to overweight employees who reduce their body mass index by 10%. After a review of its program, Johnson & Johnson concluded that it saved an estimated $565 per employee in health-care costs.

Going forward
Smart policies come from the best companies in the world, and that includes workplace fitness. It's just one more thing for investors to keep in mind when they evaluate companies and track expansion in domestic markets.

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