Safety and behavioral economics: making choices and decisions in the workplace.

AuthorMcKay, Brian
PositionSPECIAL SECTION: Building Alaska

A discussion on the economics of safety could go many ways. One could, for example, discuss the enormous financial and societal costs of occupational injuries and illnesses in the United States. According to J. Paul Leigh, in his work on the "Economic Burden of Occupational Injury and Illness in the United States" published in The Milbank Quarterly in 2011, approximately $250 billion is spent on occupational injuries and illnesses in the United States annually. This study is, arguably, one of the most comprehensive available on the subject as it is difficult to get accurate metrics on the counts, occurrences, and money spent by industry on occupational injuries. The thing is, occupational injuries are often times underreported to the Occupational Safety and Health Administration, either maliciously through purposeful omission or through human error. Occupational illnesses are notoriously underreported to both industry and the Occupational Safety and Health Administration because in some cases extensive lag periods between exposure and occurrence of disease makes a link back to occupational exposure difficult.

Leigh's work is one of the most inclusive and takes into consideration at least nine factors, including cost of medical services, Bureau of Labor Statistics, workers' compensation claims, cost of injuries, cost of fatal injuries, and sensitivity analysis, to name a few. His data reveals that of the $250 billion spent annually, about $191 billion is spent on injuries and about $57 billion is spent on illnesses. For injuries, about $46 billion is spent on direct medical costs and $145 billion is spent on indirect costs for injuries. For illnesses, about $20.83 billion is spent on direct medical costs and $37 billion on indirect costs. Direct medical costs are those associated with the medical care such as ER visits, occupational health, clinic costs, and outpatient care associated with medical care. The indirect costs include lost production, wage loss, replacement costs, insurance premiums, turnover costs, and loss of primary wages for the injured personnel. This $250 billion is higher than the GDP of 151 out of 194 nations on the planet. It's a big number and certainly worthy of discussion, but it is not today's topic. The economics that I am thinking of involve choice.

Behavioral Economics

There are a few ideas related to behavioral economics relating to safety management. The typical behavioral economic analysis will investigate humans as they make choices related to consumer purchases or their experience in games to investigate what factors influence decisions. The role of behavioral economics in safety is new; however, these techniques are now being utilized at the government level in many countries including the United States and the UK where behavioral economics are being used to influence (i.e., nudge) personal choices related to healthy behavior.

Economics, in and of itself, is a social science that attempts to understand human behavior through analysis and study of how we use scarce resources (classical...

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