Existing studies on the cost of inflammatory arthritis (IA) and osteoarthritis (OA) are often cross-sectional and/or involve patients with various disease durations, thus not providing a comprehensive perspective on the cost of illness from the time of diagnosis. In this study, we therefore assessed the cost of lost productivity in an inception cohort of patients with IA and OA in the year before and after diagnosis. Employment status, monthly income, days absent from work, and presenteeism were collected at diagnosis and 1 year later to estimate the annual costs of unemployment, absenteeism, and presenteeism using human capital approach. Non-parametric bootstrapping was performed to account for the uncertainty of the estimated costs. Compared to patients with OA (n = 64), patients with IA (n = 102, including 48 rheumatoid arthritis, 19 spondyloarthritis, 23 psoriatic arthritis, and 12 seronegative IA patients) were younger (mean age: 52.3 vs. 59.5 years) with a greater proportion receiving treatment (99.0% vs. 67.2%) and a greater decrease in presenteeism score (median: 15% vs 10%) 1 year after diagnosis. Annual costs of absenteeism and presenteeism were lower in patients with IA than those with OA both in the year before (USD566 vs. USD733 and USD8,472 vs. USD10,684, respectively) and after diagnosis (USD636 vs. USD1,035 and USD6,866 vs. USD9,362, respectively). Both IA and OA impose substantial cost of lost productivity in the year before and after diagnosis. The greater improvement in productivity seen in patients with IA suggests that treatment for IA improves work productivity.