Background. Diabetes is a highly prevalent condition with substantial associated morbidity. The economic impact of diabetes is dramatic, with estimated total costs of $98 billion in 1997. We sought to investigate the effects of diabetes on work-force participation, including absenteeism, retirement, and disability. Methods. We used the first wave of the Health and Retirement Study (HRS) as a data source. The likelihood of falling into various work-related categories, by diabetes status, was estimated using logistic regression; duration of being in different states of participation was estimated using OLS regression. We then estimated the economic impact of diabetes using the estimates of lost time due to disability, absenteeism, and early retirement combined with median salaries in the HRS sample. Results. Diabetes is a significant predictor of self-rated disability (OR = 3.1), of not working due to health impairments (OR = 2.4), and of receiving Social Security Disability or VA disability (OR = 2.6 and 3.0, respectively). Subjects with diabetes also missed more work time than those without (incremental missed days per year = 2.7). These changes in work-force participation equate to (up until wave 1 of the HRS) to an incremental loss of $57.8 billion in income, and another $7.8 billion in disability payments. Conclusion. Diabetes has a profound economic impact in the US. These figures should be considered when evaluating the cost-effectiveness of diabetes interventions and to inform and improve the allocation of resources for chronic disease management.