Are Happy Workers Better Workers?

Since the days of Elton Mayo and his Hawthorne studies, human resources (of Human Relations, as it was called back then) thinkers have argued that policies that keep workers happy and satisfied are likely to lead to more productive workers and, therefore, more profitable ones.  Whether that is the case, and what precisely makes for a “happy” employees have fueled heated debates within schools of human resources, labour studies, industrial relations, industrial psychology, critical studies, and sociology for decades.
Adding to the plethora of literature on the issue is a new study of Canadian employers by Hewitt Associates , which claims that “highly engaged” employees have better physical and mental health and less absenteeism, which presumably would lead to better productivity.  I’m not sure how they measure “engagement”, since the summary of the study doesn’t tell us and I can’t find the actual study anywhere on the website.  (If anyone has it, please send it along).   That means it hard to assess any of the findings.   
Does it make sense to you that “happy” workers will be more productive?  If so, what makes an employee happy?   If you missed it the first time, and you are interested in a critical take on the theories of human resources, check out this lecture by James Gross of Cornell.