New assessment of the cost of a poor work environment

Full assessment of the costs of poor working conditions in Sweden is hindered by a lack of data and the many regulations involved. In a report for the Swedish Work Environment Authority, researchers from the Institute of Social Research at Stockholm University have called for greater coordination of the different forms of insurance in order to ease bureaucracy but also to enable the full socioeconomic costs of work accidents to become more visible and thus quantifiable.

Accidents in the workplace constitute the major part of the cost to society of poor working conditions. However, the true costs are difficult to assess as the cost items related to the accidents are numerous and some are partially hidden.

In a recent report (in Swedish, 297kb PDF) published by the Swedish Work Environment Authority (AV), Gabriella Sjögren Lindquist and Eskil Wadensjö from the Institute for Social Research (SOFI) at Stockholm University offer a new assessment of the socioeconomic costs of work accidents.

Focus of study

While earlier research has focused on the costs of work accidents in insurance schemes such as unemployment insurance, health insurance, early retirement and retirement due to age, the new report focuses on the financial impact of work accidents on public finances. This includes:

  • costs of disbursements to compensate for loss of income;
  • costs of preventive efforts to avoid work accidents, health care and rehabilitation;
  • juridical costs;
  • loss of revenue through lower taxation.

Although the assessment of costs in the report is not a complete assessment, it covers costs that previously have been neglected by researchers.

Difficulty in calculating costs

According to the National Insurance Act, injuries due to work accidents are regarded as illnesses and are therefore covered by social security. In addition, work accidents are covered by the Law on Workers’ Compensation Insurance and, depending on the severity of the accident, can provide the right to an annuity for life. The compensation payments are administrated by the Swedish Social Insurance Agency (Försäkringskassan) but are not kept separate from other disbursements.

This diversity in insurances and benefits makes it difficult to calculate the exact cost to public finances of work accidents in Sweden. Nonetheless, the report estimates that the cost of the disbursements alone amounts to SEK 13,341 million (about €1.5 billion as of 1 February 2011). The aggregated cost for the public finances in 2008 is estimated to be SEK 15,715 million (€1.8 billion)). But as this value corresponds to a mere 0.5% of Sweden’s gross domestic product (GDP) and estimates of the total cost of work accidents in the former EU15 Member States lie within 2.6% and 3.8% of GDP, it is evident that there are gaps in the available data. For example, the cost of the loss of revenue due to lower taxation is one area that is difficult to calculate.

Recommendations for improvements

If the results are to be comparable with those of other countries, it is also crucial to use a common methodology with which to assess the societal costs of work accidents. The main obstacle to this is the lack of available statistical data on the costs of work accidents in Sweden. Sjögren Lindquist and Wadensjö propose that data collation should be the joint responsibility of AV and Statistics Sweden (SCB).

The study’s authors also propose reform of the compensation system for work accidents. They believe that the complex system of insurances connected to work accidents should be reorganised and coordinated to make it easier for injured workers to make claims as well as to facilitate data gathering.The report also states that there is a need to do more than merely making the costs visible, and that there must be incentives in place to reduce the number of work-related accidents. Sjögren Lindquist and Wadensjö propose that this can be done by simultaneously:

  • expanding the current Law on Workers’ Compensation Insurance to encompass more of the cost items (for example, early retirement and health expenses);
  • changing the responsibility for funding the insurance.

At the moment, the reimbursements are covered partly by a flat tax of 0.68% of the employee’s salary paid by employers, and partly by the Swedish Social Insurance Agency, which also funds early retirement. Health expenses are covered by the local authorities.

Commentary

The reformed Workers’ Compensation Insurance scheme proposed by Sjögren Lindquist and Wadensjö could be designed in various ways and the report makes a number of suggestions ranging from state responsibility to private insurance. However, the underlying need is to illuminate the full costs of a poor working environment, making it possible to identify and put pressure on dangerous workplaces to prevent accidents and thus lower these costs.

Reference

Sjögren Lindquist, G. and Wadensjö, E., Samhällsekonomiska kostnaderför arbetsmiljöproblem (296Kb PDF), Report 2010:2, Stockholm, Swedish Work Environment Authority, 2010.

Mats Kullander and Kristian Holmberg, Oxford Research

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