Report on economic importance of health and safety measures

 

Although there is an increasing role played in policy making by economic impact assessments which are one form of economic instrument, they are not the over-riding influence. Moral, social and human considerations are predominant when it comes to deciding on preventive measures both on the national and the company level.  

 

As part of the Agency's survey, the costs to society of work-related injuries and ill-health were reported by the majority of Member States in the form of an estimation of percentage of Gross National Product. Although varying methods of calculation exist in different Member States, as a general rule, these estimates ranged from 2.6% to 3.8% of GNP. This would indicate a total cost of between €185 billion and €270 for the EU as a whole. (These figures are comparable to the estimated GDP for 1999 of Austria and Belgium of €198 billion and €214 billion respectively). Commenting on these figures, Mr Flynn stated that "while they served to highlight the financial cost to society, they should not overshadow the even greater cost in deaths and injuries to workers".  

 

In addition, the report gives information on the various economic tools which are being used to encourage Good Safety and Health Practice at the Company level. Almost all Member States are presently using financial incentives to assist companies in making improvements, financial sanctions as enforcement measures, incentives in social insurance schemes and, in some Member States, the selection of contractors on the basis of safety and health criteria.  

 

The economic impact, and more specifically the estimating of the costs and benefits of occupational safety and health, has become an important issue in most Member States of the European Union and the attention paid to it is still increasing.  

 

In Member States different financial incentives and instruments are used in occupational safety and health policy. Cost-benefit analysis (CBA) is the best known tool at the moment. However, other incentives such as the use of subsidies and financial sanctions are also important.  

 

In some Member States the assessment of the economic impact is one of the standard pieces of information used in political decision-making. However, the way economic assessments influence decision-making varies from one Member State to another  

 

Although Cost-benefit analysis is seen as an important part of the decision-making process on new measures in most Member States, the impression is that ethical considerations are still predominant.  

 

In many Member States Cost-benefit analysis before a measure is taken is often routine, and is sometimes even mandatory. Other measures such as campaigns etc. are assessed much less frequently.  

 

Cost-benefit analysis is carried out after implementation of an OSH measure in only a few Member States.  

The way assessments are performed varies from one country to another and may also vary according to the nature of the measure. Estimating the benefits proves particularly difficult. Social aspects are usually to some extent included.  

 

Member States indicate that there are many problems involved in estimating the benefits, including a lack of reliable data, difficulties in isolating relevant factors, and the fact that benefits often become apparent only after some time.  

 

Some Member States have estimated the cost of work-related illness as a percentage of Gross National Product. Reported percentages range from 2.6 to 3.8 (with a variety of cost factors included). For other Member States estimates were based on the total of the reported cost data as a proportion of GNP. Percentages ranged then from 0.4 to 4.0.  

 

The methods of estimating the costs of work-related illness as a percentage of GNP vary too greatly to permit strict comparison between Member States. Nonetheless, it is believed that the range of indications of the costs of work-related risks gives an approximation of the real costs involved.  

 

For individual enterprises it is more important to know if specific investment in OSH measures will lower their costs. In most Member States instruments exist, or are being developed, which give support to enterprises in evaluating the costs and benefits of measures. Small and medium-sized enterprises often lack the financial and personnel resources to apply these methods appropriately.  

 

Subsidies that promote the development, sale or purchase of safe and healthy products, production methods, work organisation, machines etc. exist in a majority of Member States. However, only in a few Member States are the effects of measures undertaken as a consequence of subsidy evaluated.  

 

Regarding the future of subsidy arrangements, there seem to be a number of different trends in Europe. In some Member States subsidy funds are under pressure; while in others new measures are being taken.  

 

The Member States have well-developed systems for the imposition of financial penalties and administrative fines on individual enterprises. Nonetheless, they seem to be applied in a rather moderate way. Compliance with the legislation is the main objective of enforcement.  

 

Some Member States indicate that the level of financial sanctions is too low to work as a deterrent and that they have therefore taken initiatives to increase them. Furthermore, there seems to be an increasing interest among administrations in using administrative fines themselves instead of, or in addition to, bringing offenders to court.  

 

In a small majority of the European Member States financial incentives form part of mandatory social insurance schemes for occupational diseases and accidents. They report a variety of incentives. Differentiation of premium is the most common incentive.  

 

Smaller firms are especially affected by the fact that financial incentives in premium policy are usually more related to sector-wide experience of claims than to assessment of the effectiveness of the individual organisation's health and safety arrangements.  

 

A rather new and different approach to promoting occupational safety and health in enterprises involves public organisations - in their capacity as private entities selecting contractors or suppliers of products, goods and services on the basis of their performance regarding safety and health at work.  

 

Many Member States recognise the need to exchange information about estimating the cost and benefits of measures. Many Member States stress the importance of a methodology to assess the impact of EU directives.  

 

A further development of instruments to be used at company level is suggested. Some Member States stressed the importance of simple models for cost-benefit analysis, that can be used by SMEs in their day-to-day practice.