Study highlights costs of workplace accidents and occupational illnesses

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In early 2004, the Trade Union Confederation of Workers' Commissions (CC.OO) published a study examining the economic costs of industrial accidents and occupational illnesses in Spain. It puts the annual total cost at almost EUR 12 billion, equivalent to 1.72% of GDP. The report claims that the issue is not an urgent priority for Spanish employers, and a major reason is that a large part of the cost is met not by companies but by the public welfare system or the victims of accidents and illnesses.

Spain has the highest rate of accidents at work in the European Union, and the trend has been upward over most of the past decade (ES0202213F). In early 2004, the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO) published a study which seeks to provide 'An approximation of the costs of industrial accidents and illnesses in Spain' (Aproximación a los costes de la siniestralidad laboral en España)

The costs of industrial accidents

The authors of the CEOE study based their analysis on a series of indicators for 2002, divided into two main areas: 'explicit' costs and 'implicit' costs.

The explicit costs are those for which there are specific figures, and include:

  • the costs of lost working days (21,597,604 in 2002, according to figures from the Ministry of Labour and Social Affairs), amounting to EUR 1.489 billion; and
  • the costs of social security cover, which includes healthcare and sickness benefit. The cost is EUR 5,038 billion in payment of benefit to cover 'industrial accidents and occupational illnesses'.

The total of these explicit costs in 2002 was EUR 6.527 billion.

The implicit costs include:

  • the cost of accidents and illnesses suffered by self-employed workers (Spanish legislation reserves industrial accident and occupational illness benefit for employees, so self-employed workers are not included in the figures given above). The number of self-employed workers in Spain is 2,628,400, and the annual cost of their industrial accidents is estimated at EUR 1.288 billion;
  • the cost of accidents and illnesses suffered by workers in the 'clandestine' or 'underground' economy. The authors of the study calculated this item by estimating that 12% of workers are in this situation (ie 2,176,257 workers). Assuming that these workers suffer the same accident rate as legal employees, the cost of their industrial accidents is estimated at EUR 1.065 billion;
  • the cost of accidents and illnesses suffered by civil servants belonging to their special mutual insurance scheme (Mutualidad General de Funcionarios Civiles del Estado, MUFACE) - a total of 792,131 people who do not appear in the national statistics because their social security contributions for occupational contingencies are processed outside the general system. The cost of their industrial accidents and illnesses is estimated at EUR 388 million; and
  • the cost of industrial accidents and illnesses that are not declared as such, but are erroneously classified as 'common contingencies' and channelled through the public health system (which means that their cost is borne by the general health budget). Based on a study by the Pompeu Fabra University of Barcelona (Universidad Pompeu Fabra de Barcelona), the authors consider that 16% of the common complaints treated by the public health system are in fact work-related, and estimate their cost at EUR 2.617 billion.

The total of all these implicit costs is EUR 5.461 billion. Therefore, the sum of the explicit and implicit costs is put at EUR 11.988 billion. This represented 1.72% of Spanish GDP in 2002.

The authors also state that other variables that are hard to quantify but could have been included are: the costs resulting from the loss of expectations with regard to careers and productivity; the loss of human lives and human suffering and their consequences on individuals and their families; early retirement in jobs involving arduous physical work; the difficulty of finding work for accident victims and ill people; the opportunity cost of family care; and the impoverishment of homes due to loss of income.

Why should employers invest in risk prevention?

According to the conclusions of the CC.OO study, in the present circumstances investments in occupational risk prevention can be seen by employers as a low-priority direct cost. This is particularly clear if one takes into account that a large part of the cost is paid by the welfare system and by society in general.

This is possibly due to a structural factor, because the current regulations prevent many cases from being classified as 'industrial accidents' and 'occupational illnesses'. This is particularly true for illnesses, since the criteria for them to be classified as occupational illnesses are so restrictive that they exclude most cases, states the report. This has been repeatedly criticised by the trade unions and by institutions specialised in occupational risks, to the point that the National Commission for Health and Safety at Work (Comisión Nacional de Seguridad y Salud en el Trabajo) drew up a proposal in 1999 to change the regulations (so far with no success).

Furthermore, several years after the approval of the current regulatory framework for occupational risk prevention - the 1995 Occupational Risk Prevention Law (Ley de Prevención de Riesgos Laborales) (ES0301208F) - not all companies comply with the law (only 30% in 2000, according to the fourth National Survey of Working Conditions), and trade unions and the Labour Inspectorate (Inspección de Trabajo) have repeatedly stated that many companies comply only with the formalities. The body responsible for monitoring the fulfilment of these regulations is the Labour Inspectorate, but its lack of material and human resources makes it ineffective in this field, it is claimed. The authors of the study therefore consider that the Labour Inspectorate has little influence on employers, and argue that the total amount of penalties imposed for failure to comply with the regulations on occupational risk prevention in 2002 was only EUR 103 million, which bears no relation to the damage that is caused.

The employers' associations have for some time recognised the need to improve occupational risk prevention, though they tend to stress the lack of a culture of prevention in society in general, and call for greater flexibility and economic incentives by the public administration to foster progress in this area. Small and medium-sized enterprises tend to feel discriminated against because they find it more difficult than large companies to make the necessary investments, so they suggest the need for different regulations and economic incentives.

Public institutions such as the National Institute for Safety and Hygiene at Work (Instituto Nacional de Seguridad e Higiene en el Trabajo) try to convince employers that investing in hazard prevention is economically profitable. However, this argument is often difficult to sustain in the current socio-economic and legal context. A report issued some years ago by the European Foundation for the Improvement of Living and Working Conditions ('Economic incentives for the improvement of the working environment', 1995), estimated the loss of labour supply in Europe due to negative working conditions to be 5% per year. According to this report, companies did not see a need to increase safety because, despite these losses, production was not affected. The Spanish context seems to illustrate this situation well, because investments in risk prevention and improving working conditions are not considered to be a priority from the economic viewpoint.

Commentary

The fact that the cost of industrial accidents and occupational illnesses in Spain is around EUR 12 billion per year is not new. The Ministry of Labour made a similar estimate in 2001, and the National Institute for Safety and Hygiene at Work also mentioned the same amount in some of its publications in 2000. However, the new study by CC.OO specifies how these costs are subdivided, and places the subject once more on the political agenda. This is particularly important, because there seems to be a general acceptance of the situation, and though the state institutions with competences in this field have been aware of the cost of industrial accidents for some time, little progress has been made.

The CC.OO reflects the strictly defined costs of industrial accidents focusing on personal damage, but does not consider other costs that companies are forced to bear:

  • the 'direct personnel costs'- the working time lost per accident victim and by other workers who help the victims or depend on their work, the overtime necessary to recover production, the pay of the people replacing the victims, and the pay received by the victims and not covered by social insurance;
  • the 'material production costs'- damage to machinery, tools and other goods, products or raw materials, the rental of equipment while the damaged equipment is being repaired, the supplementary costs arising from the lack of experience of replacement staff, the supplementary costs arising from the fall in production during the period when the victims are recovering. and the loss of production while the machinery and equipment is idle; and
  • other 'general costs'- the time devoted to the accident by technical staff, workers' representatives, maintenance staff, medical service and administrative staff, the costs of materials used by the medical service, the costs of taking the victim to a health centre, the loss of orders and loss of market, penalties due to late delivery, the professional fees of lawyers, engineers, experts in accident investigation etc, and the costs of legal proceedings.

These costs inevitably affect the balance sheets of companies. Unfortunately, they are too often considered as 'normal running costs' and, rather than avoiding them, many employers prefer to maintain profits by limiting pay increases and demanding greater flexibility in dismissals. (Josep Espluga, Department of Sociology, Autonomous University of Barcelona)

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