osocial security program ▪benefits do not depend on contributions, or which is financed directly out of the government budget. ▪This type of social security system would be most vulnerable to the HIV/AIDS epidemic, as claims would increase proportionally with mortality rates, while revenues, if the system is financed from contributions rather than the government budget, stay constant. •Fiscal Balance oHIV/AIDS affects government revenues primarily through its adverse impact on the tax base. oAs the rate of population growth declines, so do components of the tax base such as personal income, company profits, imports, or consumption." oAlso, company profits are negatively affected by HlV/AIDS-related costs, and losses of public servants could result in a decline in tax collection rates. oAt the same time, certain categories of expenditure (e.g. health and social expenditure, and overall personnel costs) will increase 15.3Supply of Labour •The overall size of the labour force declines •the age structure shifts due to changes in mortality and birth rates •the skill composition of the supply of labour changes •labour turnover rates increase. 15.4Companies •Direct Cost oAbsenteeism osick leave odisability pensions omedical care opensions to surviving dependents oloss of productivity ofuneral cost and attendance •Training and learning on the job
Page 21 of 39 oReduce the incentives to companies to invest in training of their employees. oThe returns from investments in human capital to companies can be measured by the time an employee can be expected to stay with the company, discounted by an appropriate interest rate. oIf mortality rise, returns fall 15.5Economic Growth and per capita Income •HIV I AIDS may affect economic growth and income per capita through various channels. •Disruptions to the production process caused by sickness and death of employees have an adverse impact on productivity, and the ecline in the rate of growth of the labour force •results in a fall in the rate of growth of GDP. •Also, HIVIAIDS affects the supply of human capital (relative to the size of the labour force) if the average level of experience in the workforce declines, if HIV prevalence rates differ across segments of the population, and if the quality of education deteriorates. •Capital Accumulation oneoclassical growth model: a decline in the rate of growth of the labour force is associated with an increase in the steady-state capital-labour ratio and thus output per head opublic and private domestic savings fall as AIDS-related expenditures rise and, for private households, families have to cushion off the income loss that occurs if a breadwinner falls sick and dies. oAlso, the rate of return to capital is likely to decline, owing to a fall in productivity, increasing personnel expenditure, and a possible increase in the capital-labour ratio.
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