The preceding sections have shown that employers are able, morally obligated and legally required to engage in illness and injury prevention through the implementation of effective OHS risk management including hazard management, training and consultation (CCH 2004a, b). Despite this, significant numbers of workplace injuries and illnesses continue to occur each year – both in Australia and around the world. This results in substantial economic and non-financial implications for a range of stakeholders as identified below.
2.1.4.1 Economic consequences of OHS
The economic impact of OHS covers a diverse range of expenditure, from process costs associated with providing a safe workplace such as costs of regulatory compliance, equipment upgrade, insurance premiums and OHS training to those costs relating to OHS failures such as medical expenses, OHS fines and penalties, repairs to equipment, recruitment of replacement labour or damage to corporate reputation. While a detailed analysis of the categories of corporate OHS expenditure is presented in section 2.2.1, the economic costs discussed in this section capture both corporate expenditure and the various externalities associated with an occupational fatality, injury or illness.
The most recent study of the economic cost of workplace injury and illness in Australia reveals the ex-post31 economic cost for the 2005-2006 financial year to be $57.5 billion or approximately 5.9% of GDP (ASCC 2009) which “represents a significant increase in costs as a proportion of GDP from the [previous] 2000-2001 study” (see ASCC 2009, p2; NOHSC 2004a). This estimate captures only the “human cost … associated with actual [compensated] injuries or illnesses” (ASCC 2009, p8). In line with the previous (NOHSC 2004a) study, costs associated with loss of goodwill or reputation and property damage are excluded, as are costs relating to those injuries or illnesses for which a workers’ compensation claim is not accepted. Also excluded from the ASCC’s (2009) analysis however, is the estimated economic value of associated pain, suffering and early death. This was ‘conservatively’ placed at an additional 141% of the $34.3 billion economic cost for the 2000-2001 year in the previous study (NOHSC 2004a). Using a similar ratio suggests an approximate total economic cost of $138.8 billion for the year 2005-2006.
The ASCC (2009) report reveals that items captured in the actual $57.5 billion OHS cost for 2005-2006 include workers’ compensation payments to afflicted employees,
legal costs, uncompensated medical expenses, funeral costs and the costs of overtime, sick leave and staff turnover. These are summarised in Appendix 1. Importantly, the vast majority of these costs are not borne by the firms in which the injury or illness occurred but are externalities distributed across stakeholder groups. Evidence in both the NOHSC (2004a) and ASCC (2009) reports suggests that while an employer will bear 100% of the cost of the injury and disease prevention programs and interventions they undertake, they incur only 4%, on average, of the substantial economic cost of a serious incident32 occurring in their workplace. The remaining 96% of the cost burden of OHS failures is externalised with injured workers meeting up to 49% (44% in 2004) and the remaining 47% (53% in 2004) met by institutions such as public health and social security systems (largely tax-payer funded), other corporations (including cross-subsidisation via compensation premiums) and the wider community (including charities, non-government organisations and the public)
(ASCC 2009; NOHSC 2004a). This is illustrated in Figure 2.1.
Distribution of the Economic Burden of OHS in Australia (2005-2006) 0 5 10 15 20 Short absence Long absence Partial incapacity Full incapacity Fatality
Severity of Occupational Injury or Illness
$ B illio n Worker Community Employer Figure 2-1: The economic cost of OHS in Australia
NOHSC (2004a) suggests that the relationship between the level of physical damage and the associated OHS cost distribution is such that, although the employer bears most of the cost of very minor injuries and diseases33, such as first aid injuries, the burden on employers is largely externalised to workers and the community as severity increases. The share of costs borne by the employer decreases sharply with the increasing severity of damage, leaving “the majority of economic cost associated with permanent incapacity borne by the community, through social welfare and other support schemes, and loss of human capital” (NOHSC 2004a, p27). Together this highlights the economic stake that employees, their families and benefactors, other
32
This refers to injuries and illnesses requiring a minimum of three days’ absence from work and includes work-related fatalities.
33
corporations, taxpayers and the general public each have in the effective management of OHS performance. Managers therefore owe accountability to these stakeholders for their OHS choices, actions and subsequent OHS performance.
2.1.4.2 Non-financial consequences of OHS
The impact of OHS activity on organisational stakeholders, however, extends well beyond that which can be measured in financial terms. The occurrence of workplace injuries or illnesses can have a direct or indirect affect on a range of stakeholders, most obvious being the physical and emotional impact on the injured individual. Global estimates place the number of workers killed in occupational fatalities at over 2.2 million per year and total annual work-related injuries and disease in excess of 430 million cases (ILO 2008d). Locally, Australian compensation data suggests, on average, over 17 cases of serious injury or illness occur every hour (ASCC 2008a) and 134 people every day are permanently impaired as a result of employment-related injury and disease (NOHSC 2004b). Some are never able to work again, others need to work at less skilled jobs, work for fewer hours per week, or work at a slower pace, and many experience chronic pain. A combination of injury and occupational exposure to hazardous substances such as chemicals, toxins and viruses cause a further six work-related deaths each day (ASCC 2008a; Kerr et al. 1996).
This compensation data has, however, been shown to significantly under-report the total number of OHS incidents34 (ABS 2001; ASCC 2008c). Estimates suggest Australian outcomes may be as high as 4,500 work-related deaths and half a million new work-related incidents per year (ACTU 2005; ASCC 2008a; NOHSC 1999). These injuries, illnesses and fatalities not only impact the physical and emotional quality of life of the damaged individual, but can also have a substantial affect on interpersonal relationships with family, friends, colleagues, social networks and community groups. Indeed the potential for serious workplace injury and illness to cause immeasurable physical, emotional, family, social and recreational consequence is well recognised
(Johnstone 2003b; McDonald 2001, 2006). Together these outcomes underscore the urgent need to ensure the basic human rights of Australian workers.