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Costs of occupational accidents in the Nordic furniture industry (Sweden, Norway, FInland)
Journal of Occupational
Accidents,
12 (1990)
79-88
79
Elsevier
Costs of Occupational Accidents in the Nordic Furniture Industry (Sweden, Norway, Finland)* A. SijDERQVIST Institute
for Human Safety and Accident
Research,
Gatgatan 61, S-116 21 Stockholm,
Sweden
T. RUNDMO Science and Zndustrial Research Norway
at the Norwegian
Institute
of Technology
7034 Trondheim,
M. AALTONEN institute
of Occupational
Health,
Vantaa, Finland
ABSTRACT Siiderqvist, A., Rundmo, T. and Aaltonen, M., 1990. Costs of occupational accidents in the nordic furniture industry (Sweden, Norway, Finland). Journal of Occupational Accidents, 12: 79-88. An empirical study of the costs of occupational accidents was carried out during 1986-87 in 57 furniture companies in Finland, Norway and Sweden, employing 5,000 cabinet-makers. The sample covered 18 percent of the furniture manufacturing industry in the three countries. The main objective of this study was to increase safety management motivation. The layout of the study was identical in all three. A total of 460 accidents were investigated. The consequences of each accident were identified and analyzed. The costing is based on three costing models, called the market pricing model, the accounting model, and the spare-capacity model. The latter was developed within the project and tested in Norway and Sweden. Total costs calculated with the spare-capacity model were 4 times greater than costs calculated with the market pricing model. The accounting model reflects management perception of losses, but is not adequate to mirror the true accident costs. Using of the traditional market pricing model, monetary losses can easily be underestimated. The cost analyses indicate that the company costs for the sample of participating firms in Finland are 0.5%, in Norway 0.3% and in Sweden 0.2% of the total wages using the market pricing model. A substantial portion of the total costs were borne by other than the company. Owing to the differences of insurance rules, the costs that firms incur would appear to be about 63% in Finland, 44% in Norway and in Sweden only about 9% of costs for lost production time (n = 399).
1. INTRODUCTION
A run-through
of official
Nordic accident
statistics
reveals that the rate of
*Presented at the International Conference on Strategies for Occupational Accident Prevention, Stockholm, Sweden, 21-22 September 1989.
Elsevier Science Publishers B.V.
80
accidents at work in the furniture industry is not falling off in spite of steadily declining numbers of people employed in this sector. The Nordic Federation of Building- and Woodworkers (NBTF) wanted this project to create a model for describing and quantifying the economic consequences which are a result of accidents that have occurred. It was in this way that NBTF thought to show that the costs of accidents could make a powerful incentive towards the prevention of serious injuries. Economic motive have long been regarded as most important to prevail on decision-makers to take preventive measures (Heinrich, 1980; Levitt et al., 1981; Grimaldi and Simonds, 1984; Laufer, 1987; Klen, 1989). The general perception here was that providing better information about accidents and their costs could conduct to: (1) a more rational management of the accident risks; (2) more efficient use of the resources that are set aside for safety work; and (3) reduced costs of accidents both to firms and the community at large. Traditionally the costs of accidents are expressed in terms of direct cost and indirect cost, or in workdays lost. Indirect cost include workdays lost for personnel other than the victim. Several studies (among them Heinrich, 1980; Brody et al., 1987; Klen, 1989) have adverted to the direct-indirect costs relationship to explain the size of the true accident costs. Such a relationship has been shown to vary sharply depending on a number of factors such as research method, industries being studied, consequences of accidents that have occurred, component cost variables, the definitions of direct and indirect costs, and the insurance systems in force in each country. Grimaldi and Simonds (1984) included the terms insured and uninsured costs. Here the uninsured costs are classified into four categories according to accident severity. The latest approach to the study of accident costs is to separate the costs into controllable and uncontrollable costs flaufer, 1987; Uusi-Rauva et al., 1988). controllable costs includes all uninsured costs and the portion of the insured costs that are affected by the safety level of the enterprise.
2.1
Sample and participating firms
In each Nordic country (Finland, Norway, Sweden) a stratified sample was drawn of about 20 firms in the wooden furniture industry. The study encompassed a total of 57 furniture manufacturers employing 5,000 blue-collar workers or 18% of all the employees in this industry. Among the sampling criteria used for the study were size of firm, type of production and geographic area. The sample was drawn in partnership with the industrial relations parties and
81
in such a way as to permit generalization of the results to the wooden furniture industry in each country. In the course of one year 460 onsite accidents were registered and investigated: 399 of these led to sick leaves of one day or more (Table 1) . The economic consequences for business firms and society were analyzed with the aid of three different cost models, one of which was developed as part of the project. 2.2 Data collection The ability to compare the costs of accidents in different countries presupposes a common model for the identification, registration and evaluation of accidents and their consequences. Described below is the guiding principle of data collection in the three countries. Local adjustments were made where appropriate. Since information about all the harmful effects of accidents could not be obtained at one and the same point in time, information was collected on three occasions. The first one was immediately after the accident. Data on production time losses were recorded, as were the immediate effects on production. The second occasion, begun when the accident investigation had concluded, was concerned with value judgments of the production disturbances. On the third occasion, the victim had returned to work, making it possible to recapitulate the total injury effects. If a victim had been sick-listed for long, he/she would keep a diary recounting the medical treatment and rehabilitation he/ she had received. Interviews were conducted with about 90% of the victims. Information about harmful consequences was also taken from documents within the insurance system, from the report forms of insurers for filing of compensation claims and for giving notice of awards, from medical records kept by hospitals and similar institutions, etc. Foremen, supervisors and safety stewards proved to be key figures in the data-collection process. These and other contact persons in the companies were informed and trained, either in groups or individually, about the aims of the project, its research design and the need to do a meticulous job of documenting work related accidents and their consequences. 3. CALCULATION
MODELS
Three models have been used for calculating the accident costs. This is due to the fact that there is no single basis for calculating costs of occupational accidents. 3.1 Market pricing model When a company plants its capacity and the utilization of that capacity, it
82
proceeds from the assumption that the people in its employ can be kept busy to the full. In other words, the company disposes over 100% of an employee’s net worktime, which means that there will be no overmanning. The time that is lost due to accidents has thus been lost in its entirety and as such can be directly converted into money via unit costs. The same holds for the worktime lost by foremen and supervisors. If a foreman’s time did not have to be diverted by an accident, he would be able to devote the same amount of time to productive work. It follows that the worktime lost because of an accident must always be subtracted from productive work. We can call this calculation model the “market pricing model”. Up to now the market pricing model has underpinned a great many studies of firms’ injury costs. The market pricing model has thus beenused to calculate the costs of lost production time, where the time lost is multiplied by labour cost per hour at the going rate. As the market pricing model is herein constructed, it presupposes ideal market conditions and the prevalence of full employment. If these antecedents did not hold, the market value of one lost work-hour would be equal to zero. Failing this, the diminished output of one firm (or department, or employee) could rise to the increased output of another firm (or department/employee) which has the extra production capacity. The cost of all lost worktime, calculated with reference to total payroll, is equivalent to the firm’s costs on the occasion of every accident. Excluded from this calculation are the extra costs of overtime, outside labour and the like, which must be considered to compensate for the forgone production. 3.2 Accounting model The accounting experiences of the firms taking part in the study, were the basis for this model. Only the resource costs are evaluated as relevant. If losses of worktime do not cause any observable loss of production, the firm will not have any costs. On the contrary, it may happen that a cost reduction will appear. The estimate will of course be widely different from the estimate which is based upon the market pricing model. 3.3 Spare-capacity model A factor of crucial significance for the calculation of company costs is the extent to which observable effects can be noted. The firms’ visible costs, considered as a consequence of an accident that has occurred, are based on their internal cost changes and revenue reductions. Where labour costs are concerned, however, it should be noted that in certain situations (e.g., because of many absences and/or accidents at work) the
83
firm sometimes employs more than the normal complement of personnel. In that case, the costs of occupational accidents must be made to include those labour costs which are paid for periods with an extra reserve of personnel. Worktime lost due to an accident at work will not be visible when reserve personnel are on hand for this purpose. The proportion of cost attributable to this reserve personnel, or “spare capacity” as it were, can be figured out. Only the variable costs of every single accident form the basis for the calculation of company costs. Lost production and material damage costs enter into this model. Hence a temporary production cutback will not entail any cost unless there are concurrent revenue losses in consequence of the accident. The spare-capacity model is based on the presumption that there exists a hidden reserve capacity which can be tapped when production peaks or when short-term absences occur. This model is used whenever an accident does not lead to revenue losses. For instance, a rise in inventory levels or the hiring of supernumeraries can forestall the occurrence of temporary production losses which lead to revenue losses. The need for spare capacity can be figured out according to the size of the workforce, the frequency of accidents and the length of absence ensuring from every accident. Hence the model allows for the fact that forgone production seldom results in losses that appear in books of account (Matson, 1988). 3. REGISTRATION
Among the injury characteristics registered were type of injury and injured part of body. The identification of hazardous conditions was made to include employment at time of accident, how the injury arose, which work operations were performed, type of machine involved in the course of events, and the production department in which the accident occurred. The calculations pertain exclusively to the variable costs that resulted from particular accidents. The following cost variables were included in the calculations: (1) Lost worktime for the victim, other employees, foremen, and administrative personnel. (2) Losses of current assets such as raw materials, intermediates, and finished products. (3) Losses of fixed assets such as damage to machinery, lost transport capacity, etc. (4) Outlays having short-term effects, e.g., increased costs due to purchase of one-off services. (5) Lost revenues and other indirect costs. (6) Income from payment of indemnities on insurance policies. (7) Other consequences, such as effects on insurance premiums.
84
Utilization of health services, e.g., treatment costs, consultations, costs of health services, consumption of medicines, rehabilitation. (9) Consumption of public and private services such as transportation, job training, technical aids. Calculations of social costs (Ferraz-Nunes, 1988) have been based on losses of company productivity, expected production losses, increased consumption of public and private services, and of health and medical facilities. (8)
4. RESULTS
Results from the national projects are summarized in national reports (Aaltonen et al., 1988; Rundmo, 1988; Rundmo and Hovden, 1988; Sijderqvist and Persson, 1988). When comparing the countries for their accident characteristics (Table 1)) only small variations emerge (Siiderqvist, 1989a,b). However, this does not hold for the number of accidents registered per employee. The accident rate is greater in Finland than in Sweden and Norway. Natural differences of statistical variation cannot alone explain the differences. The differences also apply to comparisons of official accident statistics even if allowance is made for underreporting tendencies in the latter. Other possible explanations might be: (1) differences in the working environments and in the effect of safety measures, (2) there may be cultural differences in the understanding of occupational accidents, and (3) dissimilarities in the financing rules for accident-related injuries may be an influencing factor. A qualitative comparison of the injury pattern in the different countries shows that twelve accidents occurred in Sweden which led to permanent disability, and in two cases to retraining for other work. Three such accidents occurred in Norway. Two accidents, which led to fingertip amputation occurred in Finland. TABLE
1
Compilation and Sweden
of company
Number of firms Number of workers Share of industry (% ) Number of accidents (absent 1 day or more) Accidents/100 employees Days sick/accident
and accident data for one year at 57 furniture plants in Finland, Norway
Total
Finland
Norway
Sweden
57 5000 18 399
18 1482 13 186
20 1099 18-20 67
19 2419 25 146
8.0 14.3
12.6 10
6.7 14
6.0 20
85
A similar injury pattern recurs in the various countries. Summing up, we can say that: (1) the majority of injuries occurred in the machine departments. Remaining injuries were spread out among the other departments; (2) lacerations and contusions dominate in the injury picture, being a natural consequence of manual labour in the vicinity of machinery and rotating tools; and (3 ) fingers and hands are the most common body parts injured. The distribution of accidents by production time forgone is important to determine both the costs of individual injuries and the total cost. The distribution of lost time affects the corresponding distribution of costs. A comparison of the countries for worktime lost per accident (Table 2) shows that it amounts in Finland to 64 h, in Norway to 106 h while in Sweden 157 h. That is because of the very serious accidents which happened to occur at some of the Swedish furniture firms. Table 3 shows how the cost of lost production time per accident distributes among different categories of employees. This breakdown by lost “efficiency” shows how each country’s insurance rules affect the apportionment of costs TABLE
2
Total lost production time in hours in consequence furniture firms (1987)
of 399 occupational
Lost production time
Lost production time per accident
Number of accidents
Finland Norway Sweden
11,808 7,149 22,900
64 106 157
186 67 146
Total
41,857
105
399
TABLE
accidents
in 57 Nordic
3
Allocation
of costs (SEK)
in the Finnish,
Norwegian
per accident
for lost production
and Swedish furniture industry
time under the market pricing model (1987)
(1 US$ = 6.5 SEK)
Category
Finland
Norway
Sweden
The victim Other workers Foremen Administrative Total
4.300 170 110 170 4.750
7.400 180 175 160 7.915
14.000 100 110 55 14.265
staff
Controllable in-plant costs portion
(%)
63
44
9
86
between business and society. Owing to the differences of insurance rulesl, the company controllable costs would appear to be about 63% in Finland, 44% in Norway and in Sweden only about 9%. The in-plant controllable costs of the Swedish furniture industry comprise one-tenth of the total costs, whereas in Finland and Norway they amount to about half. The cost analyses (Table 4) indicate that the company controllable costs for the sample of participating firms in Finland are 0.5% of the total wages, in Norway 0.3% and in Sweden 0.2%. Over and above lost production time, which accounts for over 80% of the costs that companies incur for occupational costs, there are the costs of repairs, the costs of material lost and the costs of idle machine time. In Finland and Norway the costs of material losses and repairs respectively come to 1% and 4%) and in Sweden to 11%) according to the market pricing model. In Norway and Sweden these costs come to about 2% using the spare capacity model (Table 5 ) . 5. DISCUSSION
According to a commonly held attitude among company managements, the TABLE
4
Societal costs in SEK of occupational accidents under the market pricing model, and share of controllable costs for the furniture industry (1987) (1 US$ = 6.5 SEK) Norway
Sweden
6.400 6.0m
9.400 1.8m
18.300 1.7m
10.6m
3.8m
18.6m
Finland Total to society/case Total furniture industry Total society
TABLE
5
Societal
costs in SEK of occupational
98%
accidents
under the spare-capacity
model
Total
9.5m 33.0m
(service
level
1,and furniture industry’s share of these (1 US$ = 6.5 SEK)
Firms/case Society/case Total furniture industry Total society
Norway
Sweden
Total
12,000 28,700 6.5m 16.2m
14,000 30,000 14.3m 33.0m
20.8m 49.2m
‘Compensation of the victim of accident is: (1) in Finland, on insurance contract; (2) in (3) in Sweden the employer accident.
for which the employer pays in case of absence from work because full compensation in large firms, l-3 days in small firms depending Norway, full compensation up to 11th day after the accident; whereas pays full compensation for the accident for the rest of the day of
costs of accidents are no more than marginal. The study seems to verifies these statements, when company controllable costs are calculated according to the market pricing model. As a result, firms usually do not bother to investigate accidents. This in combination with the use of inferior safety equipment seems to be the main reason why there has been no decline in the industry’s accident rate. According to the spare-capacity model, however, the firms do incur substantial cost for extra labour. When one of the main problems is “low motivation”, it is easy to let the costs of safety activities come into the foreground. Resource-demanding decision criteria for assessment of constructive proposals to improve working environments and safety conditions can have a negative effect on this work. Time is a limiting factor here. Time and resource-demanding decision processes prevent prompt and practical remedial action at hazardous workplaces. Cost analyses of occupational injuries and work-related diseases can help make major problems visible, and in that way also create motivation to do something about them. Considered against this background, NBTF’s initiative to map out the costs of occupational accidents in the furniture industry betokens familiarity with the real substance of these problems. The big problem is not to choose from among alternatives, but rather to get the furniture industry to take occupational accidents in earnest. Economic value judgements and a sound system of cost allocation can be used here as effective instruments towards instilling a more realistic attitude. The study shows that a substantial portion of the costs are borne by others than the company. This is true of Sweden and Norway. The allocation of costs might be a motivating factor for preventive measures within the firms. Among the proposals now being discussed in these two countries, Sweden is to let the firms bear a greater share of the consequence costs. However, the transfer of a larger proportion of injury costs onto the firms should be done as one part of a strategy for preventive measures aimed at reducing the total costs, that is, both to business and society. Once again it has been possible to document that the riskiest machines are saws, millers and drills. Milling machines turn out to inflict the costliest and hardest-to-treat injuries. Among the preventive measures that can be implemented at once are better investigation of accidents, upkeep of machine guards, rules for material handling and improved safety regulations. The investigation accordingly shows that a similar injury picture obtains in the Nordic countries and that the societal costs are anything but immaterial. Given such a background, a joint initiative should be taken to improve the safety of those woodworking machines in most common use. For the past few years a task of greatly limited scope has mainly sought to improve machine guards for saws, but this is completely inadequate. Unless prompt measures are taken to reduce the number of injuries arising
88
from the use of these woodworking machines, nearly 1000 workers in the Nordic furniture industry a year will be grievously hurt. The prime targets for systematic safety work mean to increase understanding of secure working environments should be small and medium-sized firms. proposed measures should concentrate on reducing costs both to society and to individual business firms.
REFERENCES Aaltonen, M., Rlsanen, T., Saari, J., Uusi-Rauva, E., Antti-Poika, M., Vinni, K., Tamella, E. and Miettinen, J., 1988. Occupational Accidents and Costs in Finnish Furniture Industries. Institute of Occupational Health, Vantaa (in Finnish). Brody, B., Letourneau, Y. and Poirier, A., 1987. Revue de litterature sur les touts indirects des accidents du travail. Rapports let Memoirts de Recherche, Document 87-13, Montreal. Ferraz-Nunes, J., 1988. Method for calculating societal costs of occupational accidents. Consultant’s report, Gothenburg, unpublished (in Swedish). Grimaldi, J.V. and Simonds, R.H., 1984. Safety Management. RichardD. Irwing, Homewood, IL. Heinrich, H.W., 1980. Industrial Accident Prevention: A Safety Management Approach, 5th edn. McGraw-Hill, New York. Klen, T., 1989. Costs of occupational accidents in forestry. J. Saf. Res., 20: 31-40. Laufer, A., 1987. Construction accident cost and management safety motivation. J. Occupat. Accid., 8: 295-315. Levitt, E.R., Parker, H.W. and Samuelson, N.W., 1981. Improving construction safety performance: The user’s role. Prepared under Contract for the Business Roundtable Construction, Industry Cost Effectiveness Project Management Task Force, Safety Study Team, Department of Civil Engineering, Stanford University, 50 pp. Matson, E., 1988. Methods for calculating costs of occupational accidents. SINTEF Report STF83 A88007, Trondheim (in Norwegian). Rundmo, T., 1988. Costs of occupational accidents in the Norwegian furniture. Oppsumme ringsrapport, SINTEF report STF75 A88028, Trondheim (in Norwegian). Rundmo, T. and Hovden, J., 1988. Costs of occupational accidents in the Norwegian furniture industry - results. SINTEF report STF75 A88027, Trondheim (in Norwegian). Soderqvist, A. and Persson, I., 1988. Costs of accidents in Swedish furniture industry. IPSO Facturn 15, Stockholm (in Swedish). Siiderqvist, A., Rundmo, T. and Aaltonen, M., 1989a. Costs of occupational accidents in the Nordic furniture industry. IPSO Factum 16, Stockholm (in Swedish). Soderqvist, A., Rundmo, T. and Aaltonen, M., 198913.Costs of occupational accidents in the Nordic furniture industry. IPSO Factum 17, Stockholm. Uusi-Rauva, E., Aaltonen, M. and Saari, J., 1988. Methods for evaluation of accident costs in business firms. Report no. 105/1988/TETA, Helsinki University of Technology, Laboratory for Industrial Economics, Otnas (in Finnish).
Accidents,
12 (1990)
79-88
79
Elsevier
Costs of Occupational Accidents in the Nordic Furniture Industry (Sweden, Norway, Finland)* A. SijDERQVIST Institute
for Human Safety and Accident
Research,
Gatgatan 61, S-116 21 Stockholm,
Sweden
T. RUNDMO Science and Zndustrial Research Norway
at the Norwegian
Institute
of Technology
7034 Trondheim,
M. AALTONEN institute
of Occupational
Health,
Vantaa, Finland
ABSTRACT Siiderqvist, A., Rundmo, T. and Aaltonen, M., 1990. Costs of occupational accidents in the nordic furniture industry (Sweden, Norway, Finland). Journal of Occupational Accidents, 12: 79-88. An empirical study of the costs of occupational accidents was carried out during 1986-87 in 57 furniture companies in Finland, Norway and Sweden, employing 5,000 cabinet-makers. The sample covered 18 percent of the furniture manufacturing industry in the three countries. The main objective of this study was to increase safety management motivation. The layout of the study was identical in all three. A total of 460 accidents were investigated. The consequences of each accident were identified and analyzed. The costing is based on three costing models, called the market pricing model, the accounting model, and the spare-capacity model. The latter was developed within the project and tested in Norway and Sweden. Total costs calculated with the spare-capacity model were 4 times greater than costs calculated with the market pricing model. The accounting model reflects management perception of losses, but is not adequate to mirror the true accident costs. Using of the traditional market pricing model, monetary losses can easily be underestimated. The cost analyses indicate that the company costs for the sample of participating firms in Finland are 0.5%, in Norway 0.3% and in Sweden 0.2% of the total wages using the market pricing model. A substantial portion of the total costs were borne by other than the company. Owing to the differences of insurance rules, the costs that firms incur would appear to be about 63% in Finland, 44% in Norway and in Sweden only about 9% of costs for lost production time (n = 399).
1. INTRODUCTION
A run-through
of official
Nordic accident
statistics
reveals that the rate of
*Presented at the International Conference on Strategies for Occupational Accident Prevention, Stockholm, Sweden, 21-22 September 1989.
Elsevier Science Publishers B.V.
80
accidents at work in the furniture industry is not falling off in spite of steadily declining numbers of people employed in this sector. The Nordic Federation of Building- and Woodworkers (NBTF) wanted this project to create a model for describing and quantifying the economic consequences which are a result of accidents that have occurred. It was in this way that NBTF thought to show that the costs of accidents could make a powerful incentive towards the prevention of serious injuries. Economic motive have long been regarded as most important to prevail on decision-makers to take preventive measures (Heinrich, 1980; Levitt et al., 1981; Grimaldi and Simonds, 1984; Laufer, 1987; Klen, 1989). The general perception here was that providing better information about accidents and their costs could conduct to: (1) a more rational management of the accident risks; (2) more efficient use of the resources that are set aside for safety work; and (3) reduced costs of accidents both to firms and the community at large. Traditionally the costs of accidents are expressed in terms of direct cost and indirect cost, or in workdays lost. Indirect cost include workdays lost for personnel other than the victim. Several studies (among them Heinrich, 1980; Brody et al., 1987; Klen, 1989) have adverted to the direct-indirect costs relationship to explain the size of the true accident costs. Such a relationship has been shown to vary sharply depending on a number of factors such as research method, industries being studied, consequences of accidents that have occurred, component cost variables, the definitions of direct and indirect costs, and the insurance systems in force in each country. Grimaldi and Simonds (1984) included the terms insured and uninsured costs. Here the uninsured costs are classified into four categories according to accident severity. The latest approach to the study of accident costs is to separate the costs into controllable and uncontrollable costs flaufer, 1987; Uusi-Rauva et al., 1988). controllable costs includes all uninsured costs and the portion of the insured costs that are affected by the safety level of the enterprise.
2.1
Sample and participating firms
In each Nordic country (Finland, Norway, Sweden) a stratified sample was drawn of about 20 firms in the wooden furniture industry. The study encompassed a total of 57 furniture manufacturers employing 5,000 blue-collar workers or 18% of all the employees in this industry. Among the sampling criteria used for the study were size of firm, type of production and geographic area. The sample was drawn in partnership with the industrial relations parties and
81
in such a way as to permit generalization of the results to the wooden furniture industry in each country. In the course of one year 460 onsite accidents were registered and investigated: 399 of these led to sick leaves of one day or more (Table 1) . The economic consequences for business firms and society were analyzed with the aid of three different cost models, one of which was developed as part of the project. 2.2 Data collection The ability to compare the costs of accidents in different countries presupposes a common model for the identification, registration and evaluation of accidents and their consequences. Described below is the guiding principle of data collection in the three countries. Local adjustments were made where appropriate. Since information about all the harmful effects of accidents could not be obtained at one and the same point in time, information was collected on three occasions. The first one was immediately after the accident. Data on production time losses were recorded, as were the immediate effects on production. The second occasion, begun when the accident investigation had concluded, was concerned with value judgments of the production disturbances. On the third occasion, the victim had returned to work, making it possible to recapitulate the total injury effects. If a victim had been sick-listed for long, he/she would keep a diary recounting the medical treatment and rehabilitation he/ she had received. Interviews were conducted with about 90% of the victims. Information about harmful consequences was also taken from documents within the insurance system, from the report forms of insurers for filing of compensation claims and for giving notice of awards, from medical records kept by hospitals and similar institutions, etc. Foremen, supervisors and safety stewards proved to be key figures in the data-collection process. These and other contact persons in the companies were informed and trained, either in groups or individually, about the aims of the project, its research design and the need to do a meticulous job of documenting work related accidents and their consequences. 3. CALCULATION
MODELS
Three models have been used for calculating the accident costs. This is due to the fact that there is no single basis for calculating costs of occupational accidents. 3.1 Market pricing model When a company plants its capacity and the utilization of that capacity, it
82
proceeds from the assumption that the people in its employ can be kept busy to the full. In other words, the company disposes over 100% of an employee’s net worktime, which means that there will be no overmanning. The time that is lost due to accidents has thus been lost in its entirety and as such can be directly converted into money via unit costs. The same holds for the worktime lost by foremen and supervisors. If a foreman’s time did not have to be diverted by an accident, he would be able to devote the same amount of time to productive work. It follows that the worktime lost because of an accident must always be subtracted from productive work. We can call this calculation model the “market pricing model”. Up to now the market pricing model has underpinned a great many studies of firms’ injury costs. The market pricing model has thus beenused to calculate the costs of lost production time, where the time lost is multiplied by labour cost per hour at the going rate. As the market pricing model is herein constructed, it presupposes ideal market conditions and the prevalence of full employment. If these antecedents did not hold, the market value of one lost work-hour would be equal to zero. Failing this, the diminished output of one firm (or department, or employee) could rise to the increased output of another firm (or department/employee) which has the extra production capacity. The cost of all lost worktime, calculated with reference to total payroll, is equivalent to the firm’s costs on the occasion of every accident. Excluded from this calculation are the extra costs of overtime, outside labour and the like, which must be considered to compensate for the forgone production. 3.2 Accounting model The accounting experiences of the firms taking part in the study, were the basis for this model. Only the resource costs are evaluated as relevant. If losses of worktime do not cause any observable loss of production, the firm will not have any costs. On the contrary, it may happen that a cost reduction will appear. The estimate will of course be widely different from the estimate which is based upon the market pricing model. 3.3 Spare-capacity model A factor of crucial significance for the calculation of company costs is the extent to which observable effects can be noted. The firms’ visible costs, considered as a consequence of an accident that has occurred, are based on their internal cost changes and revenue reductions. Where labour costs are concerned, however, it should be noted that in certain situations (e.g., because of many absences and/or accidents at work) the
83
firm sometimes employs more than the normal complement of personnel. In that case, the costs of occupational accidents must be made to include those labour costs which are paid for periods with an extra reserve of personnel. Worktime lost due to an accident at work will not be visible when reserve personnel are on hand for this purpose. The proportion of cost attributable to this reserve personnel, or “spare capacity” as it were, can be figured out. Only the variable costs of every single accident form the basis for the calculation of company costs. Lost production and material damage costs enter into this model. Hence a temporary production cutback will not entail any cost unless there are concurrent revenue losses in consequence of the accident. The spare-capacity model is based on the presumption that there exists a hidden reserve capacity which can be tapped when production peaks or when short-term absences occur. This model is used whenever an accident does not lead to revenue losses. For instance, a rise in inventory levels or the hiring of supernumeraries can forestall the occurrence of temporary production losses which lead to revenue losses. The need for spare capacity can be figured out according to the size of the workforce, the frequency of accidents and the length of absence ensuring from every accident. Hence the model allows for the fact that forgone production seldom results in losses that appear in books of account (Matson, 1988). 3. REGISTRATION
Among the injury characteristics registered were type of injury and injured part of body. The identification of hazardous conditions was made to include employment at time of accident, how the injury arose, which work operations were performed, type of machine involved in the course of events, and the production department in which the accident occurred. The calculations pertain exclusively to the variable costs that resulted from particular accidents. The following cost variables were included in the calculations: (1) Lost worktime for the victim, other employees, foremen, and administrative personnel. (2) Losses of current assets such as raw materials, intermediates, and finished products. (3) Losses of fixed assets such as damage to machinery, lost transport capacity, etc. (4) Outlays having short-term effects, e.g., increased costs due to purchase of one-off services. (5) Lost revenues and other indirect costs. (6) Income from payment of indemnities on insurance policies. (7) Other consequences, such as effects on insurance premiums.
84
Utilization of health services, e.g., treatment costs, consultations, costs of health services, consumption of medicines, rehabilitation. (9) Consumption of public and private services such as transportation, job training, technical aids. Calculations of social costs (Ferraz-Nunes, 1988) have been based on losses of company productivity, expected production losses, increased consumption of public and private services, and of health and medical facilities. (8)
4. RESULTS
Results from the national projects are summarized in national reports (Aaltonen et al., 1988; Rundmo, 1988; Rundmo and Hovden, 1988; Sijderqvist and Persson, 1988). When comparing the countries for their accident characteristics (Table 1)) only small variations emerge (Siiderqvist, 1989a,b). However, this does not hold for the number of accidents registered per employee. The accident rate is greater in Finland than in Sweden and Norway. Natural differences of statistical variation cannot alone explain the differences. The differences also apply to comparisons of official accident statistics even if allowance is made for underreporting tendencies in the latter. Other possible explanations might be: (1) differences in the working environments and in the effect of safety measures, (2) there may be cultural differences in the understanding of occupational accidents, and (3) dissimilarities in the financing rules for accident-related injuries may be an influencing factor. A qualitative comparison of the injury pattern in the different countries shows that twelve accidents occurred in Sweden which led to permanent disability, and in two cases to retraining for other work. Three such accidents occurred in Norway. Two accidents, which led to fingertip amputation occurred in Finland. TABLE
1
Compilation and Sweden
of company
Number of firms Number of workers Share of industry (% ) Number of accidents (absent 1 day or more) Accidents/100 employees Days sick/accident
and accident data for one year at 57 furniture plants in Finland, Norway
Total
Finland
Norway
Sweden
57 5000 18 399
18 1482 13 186
20 1099 18-20 67
19 2419 25 146
8.0 14.3
12.6 10
6.7 14
6.0 20
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A similar injury pattern recurs in the various countries. Summing up, we can say that: (1) the majority of injuries occurred in the machine departments. Remaining injuries were spread out among the other departments; (2) lacerations and contusions dominate in the injury picture, being a natural consequence of manual labour in the vicinity of machinery and rotating tools; and (3 ) fingers and hands are the most common body parts injured. The distribution of accidents by production time forgone is important to determine both the costs of individual injuries and the total cost. The distribution of lost time affects the corresponding distribution of costs. A comparison of the countries for worktime lost per accident (Table 2) shows that it amounts in Finland to 64 h, in Norway to 106 h while in Sweden 157 h. That is because of the very serious accidents which happened to occur at some of the Swedish furniture firms. Table 3 shows how the cost of lost production time per accident distributes among different categories of employees. This breakdown by lost “efficiency” shows how each country’s insurance rules affect the apportionment of costs TABLE
2
Total lost production time in hours in consequence furniture firms (1987)
of 399 occupational
Lost production time
Lost production time per accident
Number of accidents
Finland Norway Sweden
11,808 7,149 22,900
64 106 157
186 67 146
Total
41,857
105
399
TABLE
accidents
in 57 Nordic
3
Allocation
of costs (SEK)
in the Finnish,
Norwegian
per accident
for lost production
and Swedish furniture industry
time under the market pricing model (1987)
(1 US$ = 6.5 SEK)
Category
Finland
Norway
Sweden
The victim Other workers Foremen Administrative Total
4.300 170 110 170 4.750
7.400 180 175 160 7.915
14.000 100 110 55 14.265
staff
Controllable in-plant costs portion
(%)
63
44
9
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between business and society. Owing to the differences of insurance rulesl, the company controllable costs would appear to be about 63% in Finland, 44% in Norway and in Sweden only about 9%. The in-plant controllable costs of the Swedish furniture industry comprise one-tenth of the total costs, whereas in Finland and Norway they amount to about half. The cost analyses (Table 4) indicate that the company controllable costs for the sample of participating firms in Finland are 0.5% of the total wages, in Norway 0.3% and in Sweden 0.2%. Over and above lost production time, which accounts for over 80% of the costs that companies incur for occupational costs, there are the costs of repairs, the costs of material lost and the costs of idle machine time. In Finland and Norway the costs of material losses and repairs respectively come to 1% and 4%) and in Sweden to 11%) according to the market pricing model. In Norway and Sweden these costs come to about 2% using the spare capacity model (Table 5 ) . 5. DISCUSSION
According to a commonly held attitude among company managements, the TABLE
4
Societal costs in SEK of occupational accidents under the market pricing model, and share of controllable costs for the furniture industry (1987) (1 US$ = 6.5 SEK) Norway
Sweden
6.400 6.0m
9.400 1.8m
18.300 1.7m
10.6m
3.8m
18.6m
Finland Total to society/case Total furniture industry Total society
TABLE
5
Societal
costs in SEK of occupational
98%
accidents
under the spare-capacity
model
Total
9.5m 33.0m
(service
level
1,and furniture industry’s share of these (1 US$ = 6.5 SEK)
Firms/case Society/case Total furniture industry Total society
Norway
Sweden
Total
12,000 28,700 6.5m 16.2m
14,000 30,000 14.3m 33.0m
20.8m 49.2m
‘Compensation of the victim of accident is: (1) in Finland, on insurance contract; (2) in (3) in Sweden the employer accident.
for which the employer pays in case of absence from work because full compensation in large firms, l-3 days in small firms depending Norway, full compensation up to 11th day after the accident; whereas pays full compensation for the accident for the rest of the day of
costs of accidents are no more than marginal. The study seems to verifies these statements, when company controllable costs are calculated according to the market pricing model. As a result, firms usually do not bother to investigate accidents. This in combination with the use of inferior safety equipment seems to be the main reason why there has been no decline in the industry’s accident rate. According to the spare-capacity model, however, the firms do incur substantial cost for extra labour. When one of the main problems is “low motivation”, it is easy to let the costs of safety activities come into the foreground. Resource-demanding decision criteria for assessment of constructive proposals to improve working environments and safety conditions can have a negative effect on this work. Time is a limiting factor here. Time and resource-demanding decision processes prevent prompt and practical remedial action at hazardous workplaces. Cost analyses of occupational injuries and work-related diseases can help make major problems visible, and in that way also create motivation to do something about them. Considered against this background, NBTF’s initiative to map out the costs of occupational accidents in the furniture industry betokens familiarity with the real substance of these problems. The big problem is not to choose from among alternatives, but rather to get the furniture industry to take occupational accidents in earnest. Economic value judgements and a sound system of cost allocation can be used here as effective instruments towards instilling a more realistic attitude. The study shows that a substantial portion of the costs are borne by others than the company. This is true of Sweden and Norway. The allocation of costs might be a motivating factor for preventive measures within the firms. Among the proposals now being discussed in these two countries, Sweden is to let the firms bear a greater share of the consequence costs. However, the transfer of a larger proportion of injury costs onto the firms should be done as one part of a strategy for preventive measures aimed at reducing the total costs, that is, both to business and society. Once again it has been possible to document that the riskiest machines are saws, millers and drills. Milling machines turn out to inflict the costliest and hardest-to-treat injuries. Among the preventive measures that can be implemented at once are better investigation of accidents, upkeep of machine guards, rules for material handling and improved safety regulations. The investigation accordingly shows that a similar injury picture obtains in the Nordic countries and that the societal costs are anything but immaterial. Given such a background, a joint initiative should be taken to improve the safety of those woodworking machines in most common use. For the past few years a task of greatly limited scope has mainly sought to improve machine guards for saws, but this is completely inadequate. Unless prompt measures are taken to reduce the number of injuries arising
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from the use of these woodworking machines, nearly 1000 workers in the Nordic furniture industry a year will be grievously hurt. The prime targets for systematic safety work mean to increase understanding of secure working environments should be small and medium-sized firms. proposed measures should concentrate on reducing costs both to society and to individual business firms.
REFERENCES Aaltonen, M., Rlsanen, T., Saari, J., Uusi-Rauva, E., Antti-Poika, M., Vinni, K., Tamella, E. and Miettinen, J., 1988. Occupational Accidents and Costs in Finnish Furniture Industries. Institute of Occupational Health, Vantaa (in Finnish). Brody, B., Letourneau, Y. and Poirier, A., 1987. Revue de litterature sur les touts indirects des accidents du travail. Rapports let Memoirts de Recherche, Document 87-13, Montreal. Ferraz-Nunes, J., 1988. Method for calculating societal costs of occupational accidents. Consultant’s report, Gothenburg, unpublished (in Swedish). Grimaldi, J.V. and Simonds, R.H., 1984. Safety Management. RichardD. Irwing, Homewood, IL. Heinrich, H.W., 1980. Industrial Accident Prevention: A Safety Management Approach, 5th edn. McGraw-Hill, New York. Klen, T., 1989. Costs of occupational accidents in forestry. J. Saf. Res., 20: 31-40. Laufer, A., 1987. Construction accident cost and management safety motivation. J. Occupat. Accid., 8: 295-315. Levitt, E.R., Parker, H.W. and Samuelson, N.W., 1981. Improving construction safety performance: The user’s role. Prepared under Contract for the Business Roundtable Construction, Industry Cost Effectiveness Project Management Task Force, Safety Study Team, Department of Civil Engineering, Stanford University, 50 pp. Matson, E., 1988. Methods for calculating costs of occupational accidents. SINTEF Report STF83 A88007, Trondheim (in Norwegian). Rundmo, T., 1988. Costs of occupational accidents in the Norwegian furniture. Oppsumme ringsrapport, SINTEF report STF75 A88028, Trondheim (in Norwegian). Rundmo, T. and Hovden, J., 1988. Costs of occupational accidents in the Norwegian furniture industry - results. SINTEF report STF75 A88027, Trondheim (in Norwegian). Soderqvist, A. and Persson, I., 1988. Costs of accidents in Swedish furniture industry. IPSO Facturn 15, Stockholm (in Swedish). Siiderqvist, A., Rundmo, T. and Aaltonen, M., 1989a. Costs of occupational accidents in the Nordic furniture industry. IPSO Factum 16, Stockholm (in Swedish). Soderqvist, A., Rundmo, T. and Aaltonen, M., 198913.Costs of occupational accidents in the Nordic furniture industry. IPSO Factum 17, Stockholm. Uusi-Rauva, E., Aaltonen, M. and Saari, J., 1988. Methods for evaluation of accident costs in business firms. Report no. 105/1988/TETA, Helsinki University of Technology, Laboratory for Industrial Economics, Otnas (in Finnish).