The Economic Consequences of Accidents at Work
| DOI | http://doi.org/10.1111/obes.12358 |
| Published date | 01 October 2020 |
| Author | Gabriele Mazzolini |
| Date | 01 October 2020 |
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©2020 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 82, 5 (2020) 0305–9049
doi: 10.1111/obes.12358
The Economic Consequences of Accidents at Work*
Gabriele Mazzolini
Universit´a of Milano-Bicocca, Piazza dell’Ateneo Nuovo, 1, Milano 20126, MI, Italy.
(e-mail: gabriele.mazzolini@unimib.it)
Abstract
This paper investigates the economic consequences of workplace accidents in the British
labour market. For the empirical analysis, I use data on employment and earnings from
the British Household Panel Survey and exploit fixed effects estimators to control for
time-invariant unobserved workers’ characteristics. I provide evidence that accidents at
work negatively affect both job opportunities and workers’ earnings. First, employment
probabilities following a state of injury are significantly lower. This effect persists over
time and is stronger in those regions where unemployment rate is higher. Second, a serious
workplace accident also results in significant delayed wage penalties, which increase with
the accident’s seriousness.
I. Introduction
Accidents at work are critical eventsthat negatively affect the health status of workers, who
may experience illnesses, disabilities and, in the most serious cases, death. Although most
of workplace accidents result in minor injuries with only limited health consequences,1
in several cases injured workers suffer from long-term health problems or permanent dis-
abilities. The costs associated with accidents at work are both direct and indirect. Direct
costs are related to medical and rehabilitation care and income losses, namely the loss of
gross earnings because of absence from work net of replacement income.2Indirect costs,
which are more difficult to measure, include a higher probability of unemployment due to
the inability to work in heavy-duty jobs or for long hours. Moreover, accidents can also
JEL Classification numbers: J28, J71, J17.
*I am grateful to Claudio Lucifora for insightful suggestions and continual guidance in undertaking this project.
I thank Alex Bryson, Elena Cottini, Annalisa Cristini, Federica Origo, Michele Pellizzari, Sara Pinoli, Elena
Verdolini and seminar participants at the Economic and Social Implications of Health and Safety at Work con-
ference, Thessaloniki and the XXVI ConvegnoNazionale di Economia del Lavoro, Universit´a Cattolica, Milano for
helpful comments.
1Statistics provided by Health and Safety Executive, referring to 2009/2010, report the occurrence of around
700,000 occupational accidents in UK, 400,000 of which caused a minor injury (<4 days absence from work)in UK.
Eurostat (2004) indicates that prolonged sick leave (one month or more) was reported by 22% of workerswho had
suffered an accident at work; while only 1.8% of injuries entailed disabilities for more than one year following the
accident.
2Net replacement of income consists of sick pay and state benefits. Statistics provided by the Health and Safety
Executive estimate health and rehabilitation care at £124 million and losses in income at £803 million in 2009/2010.
Accidents at work and their costs in 2009/2010 1069
have effects later in the worker’s life cycle. This can result in lower chances of returning
to the labour market, slower career advancement, and reduced wage-earning capacity.
This paper focuses on the labour market in Great Britain and estimates the economic
costs of accidents at work on labour-market outcomes. This analysis is motivated by a
general lack of evidence with respect to this issue. With the exception of a number of
analyses focusing on the US, this issue has been largely ignored by the empirical literature
on risk at work and occupational accidents. The aim of the paper is to fill this gap. It shows
that the presence of labour-market failures may justify the intervention of policy-makers
with the twofold aim of increasing safety-at-workstandards and avoiding the occurrence of
indirect costs for injured workers in the case of accident.The focus of policy-making inter-
vention should then be to support the return to work of injured workers and an appropriate
post-injury match between worker and job.
In the years 2009–10, the total costs associated with workplace injuries in Great Britain
were estimated at £5.4 billion (Health and Safety Executive, 2012). More than half of
these costs were borne by the victims, but the employer and society at large also shared
the burden.3The costs associated with serious accidents were particularly high. Minor
occupational injuries represented the majority of accidents, but they accounted for only
2.12% of the total economic costs (Fig. 1). Conversely, more serious accidents were less
frequent, but they accounted for 93.25% of the estimated economic cost.4This justifies
further investigation of the economic consequences of accidents giving rise to long-lasting
or permanent injuries.
Despite the considerable economic consequences associated with serious accidents at
work, only fewstudies have dealt with this topic. Focusing on the US labour market, Boden
and Galizzi (1998, 1999, 2003a), Reville (1999), Reville and Schoeni (2001) and Reville,
Schoeni and Martin (2002), Biddle (1998) and Woock (2009) identified substantial earn-
ings losses in the short term but indicated a partial recovery in the long term, generally due
to stable post-injury employment. Similar findings have been reported by Butler, Baldwin
and Johnson (2006) and Crichton, Stillman and Hyslop (2011), who investigated the con-
sequences of an occupational accident in Canada and New Zealand, respectively. No study
is available for any European country. By focusing on the labour market in Great Britain,
this paper is thus the first contribution to filling an important gap in the literature.
Several examples of the negativerelationship between occupational injuries and labour-
market outcomes can be found in the theoretical literature. During the recovery period after
a severe injury, workers may experience a reduction in job-specific human capital which
may result in earnings penalties (Reville and Schoeni, 2001).This is par ticularlythe case if
the employer and the local labour marketcannot offer alternative jobs suited to the worker’s
reduced abilities. Workers may also experience a decrease in their labour productivity due
3For the employer, an accident entails sick pay payments, higher insurance premiums, production disturbance
costs, administrative and legal costs, and loss of resources that may be difficult to monetize. For the society, an
accident entails costs arising from loss of earnings to the individual (benefits payments, reduction in tax and national
insurance receipts), medical treatment and rehabilitation costs, and administration and legal costs.
4Serious accidents wererelatively rare events: 1.6% of total accidents entailed a 15% disability level, 0.2% resulted
in 100% disability, and 0.1% in a fatal injury. Nevertheless, they accounted for the largest part of the total labour
costs: injuries causing 15% disability accounted for 32.7% of the total labour costs, 100% disability for 27%, and fatal
accidents for 8%. These statistics highlight the importance, in terms of labour costs, of accidents causing long-lasting
or permanent injuries or with fatal consequences (Eurostat, 2004).
©2020 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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