The Impact of Economic Changes on Safety Performance

occupational injuries

COVID-19 has impacted almost every facet of people’s lives since the WHO declared a pandemic in March 2020. One of the areas that has seen a drastic impact is the economy. Global markets have seen a drop in GDP far more severe than the Global Financial Crisis (GFC) of 2008, which saw a sharp decrease of over 10% of GDP, and many economies were still recovering eight years later from the fallout. 

The International Labour Organization estimates that globally, 6,300 workers die every day as a result of occupational injuries or diseases. Annually, this translates to 144 deaths in Australia, 147 in the UK, and 5,250 in the US due to occupational injuries. While globally, the occupational injury rate is dropping, there is room for improvement, specifically when looking at maintaining an effective safety management system that is resilient to changes in external factors such as COVID-19. 

The impact of the economy on safety performance can be immediate – seen by a sharp reduction in workforce or a lagged impact such as a change in safety culture in response running a lean company. Organisations need to determine if their safety management systems are resilient enough to account for the influence of economic changes.

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Research I have conducted demonstrates that there is more to injury prevention than just organisational culture but also external factors such as the economy which must be considered. ISO 31000 Risk Management – Guidelines highlights the importance of an organisation being dynamic and also references the importance of examining external factors when designing a framework for risk management. 

I have undertaken an investigation into the impact of economic changes on safety performance as part of my PhD research. I reviewed 577,778 occupational injuries from 2003 – 2019 in the Western Australian mining, manufacturing, construction, and agriculture industries and found that occupational injuries increased as the economy grew and decreased during a recession

Why Occupational Injuries Decreased During a Recession

One reason why occupational injuries decreased during a recession may be because there are fewer workers employed in high-risk industries such as mining and construction during a recession. If high-risk industries lay off more employees during a recession this will lead to lower accident rates. Some researchers suggest the phenomena of a “natural selection,” whereby older, more skilled workers are maintained and thus are less likely to be injured.

As organisations are increasing the number of employees that are being laid off or made redundant in response to a drop in GDP, many workers fear losing their job and may not report an occupational injury. From studies on the impact of occupational injury rates in the US post the GFC, as many as 20% of workers fear harassment and risk of dismissal when reporting occupational injuries during periods of recession. As many as 21% of injured employees lost their job after filing an occupational injury claim during a recession and 25% of employees were discouraged by their employer to submit a claim. If workers do not feel safe in reporting occupational injuries this can result in providing organisations with a false sense of security in their actual safety statistics – resulting in surprise when injuries occur. 

Research has shown economic cycles can influence safety performance by the acute removal of funds from an organisation’s income during economic recession. As a reduction in resources result in the removal of people from the workforce during a recession period, organisations that are reliant on administrative controls, PPE, and supervisors to control risk will be putting their workforce at an increased level of risk. Reductions in safety performance have the potential to significantly add to an organisation’s liability and can result in very high financial penalties.

Why Occupational Injuries Increased During Periods of Economic Growth

During periods of economic growth there is more work being done which increases the likelihood of injuries. Additionally, increased hiring of new, unskilled workers and increased demand for goods and services leads to less maintenance of equipment which can lead to an increase in the risk of injuries. As the pace of work is slower during recession there is more time to train and upskill workers during employment which decreases the risk of injury.

The Importance of a Strong Workplace Safety Reporting Culture

Creating workplace environments where workers are safe to report occupational injuries is the responsibility for all organisations. Working in an environment with reduced manpower is stressful and can have an impact on safety reporting culture. If employees are feeling vulnerable, they may fail to report an occupational injury for fear of dismissal.  Providing easy-to-use technology like mobile EHS solutions that can engage workers to report injuries in a confidential manner is important. The expectation of workplace health and safety regulations is that workplaces are a safe place of work at all times.

Learn More

To learn more about the impact of economic change on occupational injuries and safety performance, read An Investigation of the Influence of Economic Cycles on Safety Performance in Western Australia in Safety Science.