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Enterprise Commitment to Occupational Health and Safety: Can "Soft" Investments Survive
Hard Times?
Peter Dorman
Amsterdam: Workshop on the Economic Evaluation of Occupational Safety and Health
September 18, 2009
Situating the Analysis
Normative Positive
“Improve” decision-making in firms
Promote OSH investments
Identify costs and benefits perceived by firms
To explain differences
Toward an economic etiology
More Situating: A Typology of Costs
All social costs
Economic costs
Internal costs
Hard Soft
OSH and the Business Cycle
A well-known relationship
A dispute over interpretation
Paradoxes for the perspective of cost analysis
Business Cycle Evidence: A Few Warnings
1. Fatal and nonfatal data have different patterns.
2. Many nonfatal observations are missing.
3. Time series should be corrected for changes in the composition of employment.
4. Time series should be de-trended (and much of the trend may be spurious).
Business Cycle Evidence: Finland
0
2
4
6
8
10
12
14
16
18
1993 1995 1997 1999 2001 2003 2005 2007
0
20
40
60
80
100
120
Unemployment rate Nonfatal accident rate (index)
Business Cycle Evidence: France
0
2
4
6
8
10
12
14
1990 1992 1994 1996 1998 2000 2002 2004 2006
0
20
40
60
80
100
120
Unemployment rate Nonfatal accident rate (index)
Business Cycle Evidence: Germany
0
2
4
6
8
10
12
14
1992 1994 1996 1998 2000 2002 2004 2006
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: Greece
0
2
4
6
8
10
12
14
1990 1992 1994 1996 1998 2000 2002
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: Italy
0
2
4
6
8
10
12
14
1991 1993 1995 1997 1999 2001 2003 2005 2007
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: Spain
0
5
10
15
20
25
30
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: Sweden
0
1
2
3
4
5
6
7
8
9
1993 1995 1997 1999 2001 2003 2005 2007
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: The UK
0
2
4
6
8
10
12
1991 1993 1995 1997 1999 2001 2003 2005
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Business Cycle Evidence: The US
0
1
2
3
4
5
6
7
8
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
0
20
40
60
80
100
120
Unemployment rate Nonfatal injury rate (index)
Interpreting the Evidence
The impact is real
Employment changes less than output
Last hired, first fired
The impact is an illusion
Effect of unemployment on reporting incentives
Boone and van Ours (2006), Terrés de Ercilla et al. (2004)
But what about the cyclicality of economic costs?
Why Not All Costs Can Be Hardened
Underreporting
Uncertain etiology
Measurement costs
routine vs non-routine reporting
tangibles vs intangibles
Workers can be replaced
Soft Costs at the Enterprise Level
Relationship with regulators
Flexibility costs
Uncertainty costs
Reputation costs
Relationship with workforce
Commitment costs
Conflict costs
Costs Vary
Firms in the secondary sector
lower absenteeism cost
less development/use of human capital
adversarial workplace relations accepted
Regulatory retreat
more reliance on voluntary compliance
less need to exceed the regulatory floor
Expansion of precarious labor force
What to Expect from the Current Recession
1. It is rooted in global imbalances.
2. There can be no sustainable recovery without rebalancing.
3. This will require large changes in the pattern of investment and demand.
4. Buffers from competition will be greatly reduced.
Key Questions for the Near Future
1. Will the cyclical pattern of injuries and illnesses be repeated?
2. If it is, will it be fictitious or real?
3. Will precarious employment expand?
4. Will employers be less motivated by soft costs?
