In this economy, smaller health and safety budgets are to be expected. But don’t be surprised if your CEO reassures you that budget cuts won’t really hurt because safety incidents actually decline in a recession. Where in the world would a CEO get such a crazy idea? There’s actually some statistical evidence to support this position. Of course, those statistics are completely misleading. Still, CEOs are likely to grasp at this straw to rationalize budget cuts in the safety program. So to defend your safety budget, you need to be prepared to counter this argument.

The Argument that Recessions Reduce Incidents

The numbers do seem to provide evidence of a rough correlation between incident rates and macro-economic conditions. Statistics from industrialized nations around the world document that reported incidents actually increase in times of economic prosperity. For example, countries such as Denmark, France, Italy, Portugal and Spain all experienced higher incident rates when their national economies were strong.

The correlation also works in reverse. For example, the increase in unemployment rates in the early 1990s in Canada, Finland and Sweden was accompanied by a major drop in workplace incident rates. And the European countries mentioned above that had higher incident rates in economic upturns saw their incident rates decline during economic downturns.

What’s behind these correlations? The rise in incident rates during economic upswings seems illogical. After all, companies tend to spend more on health and safety when the economy is strong. One theory is that companies overwork their workers when times are good and demand increases. The additional pressure makes workers sloppy and apt to cut corners. In good times, companies also tend to hire new workers who generally are more likely to be involved in safety incidents, especially if they’re inexperienced.

Logically, the argument could be made that the converse is true—that is, that workers work more slowly and safely when companies aren’t struggling to meet high consumer demand, thus reducing the number of safety incidents. But until 2003, no one had made a careful study of the statistics to determine whether this argument actually explains why incident rates decline when the economy dips.

The Tilburg Study

That’s why the Tilburg study is so important. The researchers’ hypothesis was that the apparent decreases in the number of safety incidents during economic downturns aren’t a result of safer workplaces or work practices but instead reflect workers’ reluctance to report safety incidents to their employers for fear of getting fired.

To prove this theory, the researchers analyzed the unemployment rates and the number of workplace safety incidents from 1975 to 2000 in 16 countries in the Organisation for Economic Co-Operation and Development (OECD): Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, The Netherlands, Portugal, Spain, Sweden, Switzerland, the U.K. and the U.S. Although workplace safety incidents are common in all of these countries, there are differences in how each country defines “workplace incident.” For example, some countries count incidents that occur while commuting to work while others don’t consider such incidents as taking place “in the course of work.” There are also regulatory differences in the reporting requirements for workplace incidents. In addition, different countries have different unemployment benefit schemes, with some providing better benefits than others. The researchers took these differences into account when they analyzed the data.

The Study’s Results

The researchers concluded that there was a relationship between unemployment rates and the reporting of safety incidents. They also concluded that whether workers report a safety incident seems to depend on two factors:

Likelihood of being fired. Workers will consider the likelihood of being fired before they report an incident. The perception is that reporting an incident is a blot on workers’ records, the study explains, making them more vulnerable to termination. When the economy is booming, a company is unlikely to get rid of workers simply because they reported safety incidents (although it may discipline such workers in another way). But when the economy is poor and companies are looking to lay off workers for financial reasons, reporting an incident may make a worker an attractive layoff target. Why? The company may conclude that workers who report incidents are more “accident-prone” than other workers. So if the company has to cut its workforce due to economic conditions, it’s more likely to let go those workers who have reported incidents than those who’ve never had a safety incident. Such concerns aren’t unique to recessions, of course. However, when national unemployment is high and the prospects of finding a new job are poor, workers’ fears of reprisals for reporting incidents sharply increase.

Consequences of being fired. Workers will also consider the consequences of being fired. Of course, getting fired always carries adverse consequences, even in the best of times.  But when unemployment is high, the consequences of termination grow, especially in countries with poor unemployment benefits. So the relationship between unemployment and incident reporting is even stronger in those countries than in countries with high unemployment benefits.

Finally, the researchers concluded that the fluctuations in the number of workplace incidents that correspond to national economic conditions don’t reflect changes in workplace safety conditions or practices. If the fluctuations in the number of workplace incidents were based on safety conditions in the workplace, then both fatal and non-fatal incidents would fluctuate similarly during recessions. But fatal incidents don’t fluctuate like non-fatal incidents. In fact, fatal incident rates aren’t influenced by economic conditions at all. So there must be some other factor at work.

The explanation is the difference in workers’ reporting behavior with respect to fatal and non-fatal injuries. Workers generally have a choice about whether or not to report non-fatal incidents. In fact, a company may not know about a non-fatal incident if workers don’t report it, especially if the incident was minor or a “near miss.” In contrast, workers don’t have a choice about reporting a workplace fatality. They know that the company will find out about it even if they don’t report it. Consequently, they don’t gain any advantage by failing to report the incident.

Thus, fluctuations in the overall number of safety incidents reported result entirely from fluctuations in the number of non-fatal incidents reported. And workers’ willingness to report a non-fatal incident is likely to decline in a recession when workers are most worried about layoffs and unemployment.

Conclusion

Recessions aren’t good for workplace safety; rather, they actually negatively impact workplace safety by lulling everyone into thinking that the workplace has gotten safer when that’s not the case at all. So don’t let your CEO con you—or the rest of senior management—into believing that the current economy will actually benefit the workplace’s safety record and thus you don’t need as much money to run its OHS program.

SOURCE: “Are Recessions Good for Workplace Safety?” Boone and van Ours, Tilburg University, The Netherlands, Institute for the Study of Labor, www.iza.org/index_html?lang=en&mainframe=http%3A//www.iza.org/en/webcontent/events/izaseminar_description_html%3Fsem_id%3D638&topSelect=events&subSelect=seminar.

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