FORTUNE MAGAZINE Value Driven by Geoff Colvin

Fewer deaths during a recession

The death rate went down as unemployment rose - a lesson for companies: overworked employees can be bad for business.

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By Geoff Colvin, senior editor at large

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(Fortune Magazine) -- Profits are down at Hillenbrand, America's largest maker of caskets. Admittedly, this fact sounds like the setup for a punch line, but the cause of the shortage in stiffs contains lessons for politicians and business leaders alike.

Hillenbrand's CEO, Kenneth Camp, explained his company's main problem this way in a recent conference call with analysts: "Continuing lower death numbers."

As we grind through the longest recession in 75 years, Americans across the land are not dropping like flies. In fact, there's a virtual epidemic of people not dying.

This rise in the living was predictable. The truth, little known but well documented, is that death rates decline and healthy living habits improve in tough economic times.

Extensive research by Christopher J. Ruhm, an economist at the University of North Carolina, shows that a one-percentage-point rise in the unemployment rate reduces the death rate by 0.5%. Those are U.S. results, but other studies show the same effect in Spain, Germany, and the 23 OECD countries in aggregate.

People live longer in recessions mainly because they become healthier, not because they face fewer external causes of death, such as auto accidents, which decline because people drive less, for example.

What's more, the evidence of improved health shows up in ways beyond lower death rates. As unemployment gets worse, general medical problems become less prevalent: When the economy gets sick, people get healthier.

An important reason seems to be that people adopt smarter lifestyles in recessions, especially those people with the worst health habits. Chain smokers cut back. The indolent go to the gym. Even the severely obese start to lose weight. Combine those improvements and you get a healthier nation, even in the short period of a typical recession.

The obvious question is why people improve their habits when times turn bad. Statistical analysis shows that lower incomes aren't the reason; strapped consumers apparently aren't getting fitter because they must bike to work and survive on oatmeal and turnips.

Instead, one reason seems to be extra free time. Having no job means more time to hit the gym or just go for a walk. Exercise leads to weight loss, and research shows that it correlates with less smoking (though which causes which isn't clear). Being unemployed or underemployed also means more time for sleep, which improves health.

Policymakers in Washington and CEOs can draw two important lessons from the recession's effect on health.

Healthy living, not health care, is the issue.

A lesson for health-care reformers is that their focus, our system of insurance and care, isn't the root cause of America's high medical costs. The recent downturn in dead people is a reminder that the No. 1 culprit for rising health-care costs is lifestyle. It's significant that recessions reduce smoking, inactivity, and obesity.

"Those three things drive chronic conditions," says Cleveland Clinic CEO Dr. Delos Cosgrove, "and chronic conditions account for 75% of the cost of health care in the United States."

If reformers haven't figured out how to alter U.S. lifestyles -- and they apparently haven't -- they shouldn't expect dramatic results by changing how those costs are paid for.

Longer hours can lessen productivity.

A lesson for companies is that it's possible to make employees work so hard that it's bad for the business. If employees can't find time for physical activity -- or are exhausted after grueling 60-hour workweeks -- the employer will pay a price in lost productivity and higher medical costs.

As for Hillenbrand (HI), the recession may be thinning profits, but the company is adapting to the long-term trend. A few years ago it introduced its Dimensions line of caskets for the extra-wide loved one. Sales are brisk.

How to run a healthy firm

1. Make it easy to be fit.

Not every company can afford a deluxe on-site gym like Google's (GOOG, Fortune 500), but subsidized gym memberships cost an employer almost nothing. More companies should offer them.

2. Penalize vice.

You can offer financial incentives to employees with healthy habits, as Aetna (AET, Fortune 500) does, and even fire those who don't stop smoking, a policy that CFI Westgate Resorts adopted six years ago. Yes, it's legal in most places.

3. Lead by example.

Employees focus on what matters to the boss. Everyone at Alcoa (AA, Fortune 500), for example, knows that CEO Klaus Kleinfeld, a marathoner, believes in healthy living. To top of page

Company Price Change % Change
Advanced Micro Devic... 37.52 0.81 2.21%
General Electric Co 11.29 -0.13 -1.14%
Bank of America Corp... 32.79 -0.30 -0.91%
Walt Disney Co 148.72 10.14 7.32%
Ford Motor Co 8.81 -0.23 -2.54%
Data as of Nov 13
Index Last Change % Change
Dow 27,783.59 92.10 0.33%
Nasdaq 8,482.10 -3.99 -0.05%
S&P 500 3,094.04 2.20 0.07%
Treasuries 1.87 -0.04 -2.04%
Data as of 2:08am ET
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