Address: Via Filippo Civinini 85, 00197 Rome
Country: Italy
Phone: 39 6 807 8131
Past position(s): Director General, ENPI, Rome; Advisor in Health and Safety to International Labour Office and International Social Security Association, Geneva
Education: Dr Ing, 1929, Politecnico, Milan, Italy
Areas of interest: Health and safety at work and at large
Workers who are the victims of work-related accidents suffer from material consequences, which include expenses and loss of earnings, and from intangible consequences, including pain and suffering, both of which may be of short or long duration. These consequences include:
Workers who become victims of accidents frequently receive compensation or allowances both in cash and in kind. Although these do not affect the intangible consequences of the accident (except in exceptional circumstances), they constitute a more or less important part of the material consequences, inasmuch as they affect the income which will take the place of the salary. There is no doubt that part of the overall costs of an accident must, except in very favourable circumstances, be borne directly by the victims.
Considering the national economy as a whole, it must be admitted that the interdependence of all its members is such that the consequences of an accident affecting one individual will have an adverse effect on the general standard of living, and may include the following:
One of the functions of society is that it must protect the health and income of its members. It meets these obligations through the creation of social security institutions, health programmes (some governments provide free or low-cost medical care to their constituents), injury compensation insurance and safety systems (including legislation, inspection, assistance, research and so on), the administrative costs of which are a charge on society.
The level of compensation benefits and the amount of resources devoted to accident prevention by governments are limited for two reasons: because they depend (1) on the value placed on human life and suffering, which varies from one country to another and from one era to another; and (2) on the funds available and the priorities allocated for other services provided for the protection of the public.
As a result of all this, a considerable amount of capital is no longer available for productive investment. Nevertheless, the money devoted to preventive action does provide considerable economic benefits, to the extent that there is a reduction in the total number of accidents and their cost. Much of the effort devoted to the prevention of accidents, such as the incorporation of higher safety standards into machinery and equipment and the general education of the population before working age, are equally useful both inside and outside the workplace. This is of increasing importance because the number and cost of accidents occurring at home, on the road and in other non-work-related activities of modern life continues to grow. The total cost of accidents may be said to be the sum of the cost of prevention and the cost of the resultant changes. It would not seem unreasonable to recognize that the cost to society of the changes which could result from the implementation of a preventive measure may exceed the actual cost of the measure many times over. The necessary financial resources are drawn from the economically active section of the population, such as workers, employers and other taxpayers through systems which work either on the basis of contributions to the institutions that provide the benefits, or through taxes collected by the state and other public authorities, or by both systems. At the level of the undertaking the cost of accidents includes expenses and losses, which are made up of the following:
In addition to affecting the place where the accident occurred, successive losses may occur at other points in the plant or in associated plants; apart from economic losses which result from work stoppages due to accidents or injuries, account must be taken of the losses resulting when the workers stop work or come out on strike during industrial disputes concerning serious, collective or repeated accidents.
The total value of these costs and losses are by no means the same for every undertaking. The most obvious differences depend on the particular hazards associated with each branch of industry or type of occupation and on the extent to which appropriate safety precautions are applied. Rather than trying to place a value on the initial costs incurred while incorporating accident prevention measures into the system at the earliest stages, many authors have tried to work out the consequential costs. Among these may be cited: Heinrich, who proposed that costs be divided into “direct costs” (particularly insurance) and “indirect costs” (expenses incurred by the manufacturer); Simonds, who proposed dividing the costs into insured costs and non-insured costs; Wallach, who proposed a division under the different headings used for analysing production costs, viz. labour, machinery, maintenance and time expenses; and Compes, who defined the costs as either general costs or individual costs. In all of these examples (with the exception of Wallach), two groups of costs are described which, although differently defined, have many points in common.
In view of the difficulty of estimating overall costs, attempts have been made to arrive at a suitable value for this figure by expressing the indirect cost (uninsured or individual costs) as a multiple of the direct cost (insured or general costs). Heinrich was the first to attempt to obtain a value for this figure and proposed that the indirect costs amounted to four times the direct costs—that is, that the total cost amounts to five times the direct cost. This estimation is valid for the group of undertakings studied by Heinrich, but is not valid for other groups and is even less valid when applied to individual factories. In a number of industries in various industrialized countries this value has been found to be of the order of 1 to 7 (4 ± 75%) but individual studies have shown that this figure can be considerably higher (up to 20 times) and may even vary over a period of time for the same undertaking.
There is no doubt that money spent incorporating accident prevention measures into the system during the initial stages of a manufacturing project will be offset by the reduction of losses and expenses that would otherwise have been incurred. This saving is not, however, subject to any particular law or fixed proportion, and will vary from case to case. It may be found that a small expenditure results in very substantial savings, whereas in another case a much greater expenditure results in very little apparent gain. In making calculations of this kind, allowance should always be made for the time factor, which works in two ways: current expenses may be reduced by amortizing the initial cost over several years, and the probability of an accident occurring, however rare it may be, will increase with the passage of time.
In any given industry, where permitted by societal factors, there may be no financial incentive to reduce accidents in view of the fact that their cost is added to the production cost and is thus passed on to the consumer. This is a different matter, however, when considered from the point of view of an individual undertaking. There may be a great incentive for an undertaking to take steps to avoid the serious economic effects of accidents involving key personnel or essential equipment. This is particularly so in the case of small plants which do not have a reserve of qualified staff, or those engaged in certain specialized activities, as well as in large, complex facilities, such as in the process industry, where the costs of replacement could surpass the capacity to raise capital. There may also be cases where a larger undertaking can be more competitive and thus increase its profits by taking steps to reduce accidents. Furthermore, no undertaking can afford to overlook the financial advantages that stem from maintaining good relations with workers and their trade unions.
As a final point, when passing from the abstract concept of an undertaking to the concrete reality of those who occupy senior positions in the business (i.e., the employer or the senior management), there is a personal incentive which is not only financial and which stems from the desire or the need to further their own career and to avoid the penalties, legal and otherwise, which may befall them in the case of certain types of accident. The cost of occupational accidents, therefore, has repercussions on both the national economy and that of each individual member of the population: there is thus an overall and an individual incentive for everybody to play a part in reducing this cost.
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