the economic and social costs of occupational disease...

N O H S A C T E C H N I C A L R E P O R T 4

A C C E S S E C O N O M I C S

L Y N N E P E Z Z U L L O

A N T H O N Y C R O O K

IN NEW ZEALAND

THE ECONOMIC AND SOCIAL COSTS OF

OCCUPATIONALDISEASE AND INJURY

AUTHORS

Access Economics

Lynne Pezzullo

Anthony Crook

NOHSAC MEMBERS

Neil Pearce (Chair)

Centre for Public Health Research, Massey University

Evan Dryson

Occupational Medical Specialists Ltd, AucklandCentre for Public Health Research, Massey University

Anne-Marie Feyer

Director, Health Advisory Practice.PricewaterhouseCoopers, Sydney.Adjunct Professorial Research Fellow, Department ofPreventive and Social Medicine, University of Otago

Philippa Gander

Sleep/Wake Research Centre, Massey University

Selwyn McCracken

Injury Prevention Research Unit, University of Otago

NOHSAC SECRETARIAT

Mark Wagstaffe (Project Manager)

Stephanie Kerruish (Administrative Support Officer)

ACKNOWLEDGEMENTS

This work was funded by NOHSAC with assistancefrom the Accident Compensation Corporation.

Access Economics acknowledges with appreciationthe comments, prior research and expert input from:

• Andrew Burton of Actuarial Services,Accident Compensation Corporation

• Darren Evans of the Injury Statistics team,Statistics New Zealand

• Mark Wagstaffe, Project Manager,NOHSAC Secretariat.

NOHSAC

Telephone: (04) 915 4463 Fax: (04) 915 4329Email: [email protected]: www.nohsac.govt.nzPostal address: PO Box 3705, Wellington

ISSN 1177-2239

ISBN 0-478-28036-X

This document is available on NOHSAC’s website www.nohsac.govt.nz. It can be freely quoted, copied and circulated withappropriate acknowledgement. The suggested citation is: Access Economics. The economic and social costs of occupational

disease and injury in New Zealand: NOHSAC Technical Report 4: Wellington, 2006.

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Table of Contents

List of Tables iii

List of Figures v

Glossary of Acronyms vi

Executive Summary ix

1. Introduction 1

2. Literature and Methodology 3

2.1 PreviousNewZealandwork 4 2.1.1 2004TechnicalReport 4 2.1.2 The2002“Aftermath”Report 5 2.1.3 OtherseminalworkfromNewZealand 8 2.2 Majorinternationalwork 13 2.2.1 UnitedStates 13 2.2.2 UnitedKingdom 15 2.2.3 Australia 16 2.3 Costingissues 19 2.3.1 Compensatedanduncompensatedcases 19 2.3.2 Timedimensionsforanalysis 19 2.3.3 Costclassifications 21 2.3.4 Valuinglifeandhealth 24 2.3.5 Otherissues 283. Compensation Data 31

3.1 ACCdatasetissues 33 3.1.1 Coverageofincidents 33 3.1.2 Yearofincident,yearofregistration 33 3.1.3 Matchingcostperiods 33 3.1.4 Typesofcosts 33 3.1.5 Otherdataissues 35 3.2 Datainterrogationmethodology 36 3.3 Compensatedincidentsandcosts 38 3.3.1 Bydemographicgroups 39 3.3.2 Byseveritycategories 41 3.3.3 Bytypesofcost 43 3.3.4 Byindustriesandcauses 44 3.3.5 Bydiseaseandinjurytype 454. Total Cost Estimates 49

4.1 Uncompensatedcasesandthe“N”matrix 50 4.2 Totalcostelements 52 4.2.1 Productiondisturbancecosts(PDC) 52 4.2.2 Humancapitalcosts(HKC) 59 4.2.3 Healthandrehabilitationcosts(MEDC) 62 4.2.4 Administrativecosts(ADMINC) 65 4.2.5 Transfercosts(TRANC) 68 4.2.6 Othercosts(OTHERC) 72 4.2.7 Costsofsufferingandprematuredeath(SUFFC) 74

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4.3 Summaryoftotalcosts 75 4.3.1 Thecostmatrix–typeofcostbybearer 76 4.3.2 Severitycategories 78 4.3.3 Costsbydisease/injurytype 81 4.3.4 Costsbyindustry 85 4.3.5 Costsbycause 89 4.3.6 Costsbyethnicity 91 4.3.7 Costsbyagegroup 92 4.3.8 Costsbygender 935. References 95

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List of Tables

Table2.1 CostsofworkinjuriesanddiseaseinNewZealand,1995 8

Table2.2 CostsofinjuryandillnessintheUS,1992 13

Table2.3 Occupationalattributablefractionsofconditions 14

Table2.4 EstimatesofVSL,variousyears,US$,A$andNZ$ 27

Table3.1 Schemaforcostclassification 34

Table3.2 ACCcausecodes 36

Table3.3 Summaryofcategoriesfordatacross-tabulations 37

Table3.4 Compensatedincidentsandcosts,2001–02to2004–05 39

Table3.5 Compensatedincidentsandcosts,byage,2004–05 40

Table3.6 Compensatedincidentsandcosts,bygender,2004–05 40

Table3.7 Compensatedincidentsandcosts,byethnicity,2004–05 41

Table3.8 Compensatedincidentsandcosts,byseverity,2004–05(andallyears) 42

Table3.9 Compensatedincidentsandcosts,bytypeofcost,2004–05 43

Table3.10 Compensatedincidentsandcosts,byindustry,2004–05 44

Table3.11 Compensatedincidentsandcosts,bycause,2004–05 45

Table3.12 Compensatedincidentsandcosts,byICD-10category,2004–05 46

Table3.13 Compensatedincidentsandcosts,bydisease/injurygroup,2004–05 47

Table4.1 Conceptualframeworkforestimatingthenumberofincidents 51

Table4.2 Estimatedworkplaceincidents,byseverityanddisease/injury,2004–05 52

Table4.3 PDCcosts,byseverityandcompensationstatus,2004–05($m) 55

Table4.4 Employerexcesspaymentsbyseverityanddisease/injury,2004–05($m) 57

Table4.5 Sickleavebyseverityandcompensationstatus,2004–05($m) 57

Table4.6 PDCbyseverityandbearerofcost,2004–05($m) 59

Table4.7 HKCbyseverityandbearerofcost,2004–05($m) 61

Table4.8 Healthandrehabilitationcostsbornebyworkers,byseverity,2004–05($m) 63

Table4.9 Healthandrehabilitationcostsbornebysociety,byseverity,2004–05($m) 64

Table4.10 MEDC,byseverity,disease/injuryandbearerofcost,2004–05($m) 65

Table4.11 Legalcosts,byseverity,2004–05($m) 66

Table4.12 Travelcosts,byseverity,2004–05($m) 67

Table4.13 Administrativecosts,byseverity,2004–05($m) 68

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Table4.14 Taxationandcompensationtransfers,byseverity,2004–05($m) 69

Table4.15 Welfaretransfers,byseverityandcompensationstatus,2004–05($m) 71

Table4.16 Deadweightlossesfromtransfers,byseverityandinjury/disease,2004–05($m) 72

Table4.17 Othercosts,byseverity,2004–05($m) 73

Table4.18 Disabilityweightsusedforestimatingcostsofsuffering 74

Table4.19 Grossandnetcostofsuffering,byseverity,2004–05($m) 75

Table4.20 Summaryofcosts,bytypeofcostandbearer,2004–05($m) 77

Table4.21 Totalannualcosts,byseverity,disease/injuryandtypeofcost,2004–05($m) 79

Table4.22 Costspercase,byseverity,disease/injuryandtypeofcost,2004–05($) 80

Table4.23 Financialandtotalcostpercase,byICD-10category,2004–05($) 82

Table4.24 Financialandtotalcost,byICD-10category,2004–05($m) 84

Table4.25 Financialandtotalcostpercase,byindustry,2004–05($) 86

Table4.26 Financialandtotalcost,byindustry,2004–05($m) 88

Table4.27 Financialandtotalcostpercase,bycause,2004–05($) 90

Table4.28 Financialandtotalcost,bycause,2004–05($m) 90

Table4.29 Financialandtotalcostpercase,byethnicity,2004–05($) 91

Table4.30 Financialandtotalcost,byethnicity,2004–05($m) 92

Table4.31 Financialandtotalcostpercase,byagegroup,2004–05($) 92

Table4.32 Financialandtotalcost,byage,2004–05($m) 93

Table4.33 Financialandtotalcostpercase,bygender,2004–05($) 94

Table4.34 Financialandtotalcost,bygender,2004–05($m) 94

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List of Figures

Figure2.1 Summaryofstateof(andpotentialtoimprove)informationoncostsofinjury 10

Figure2.2 Incidencecf.prevalenceapproachestoincidentsandcosts 20

Figure2.3 Costsofincidentsinvolvinghumansandproperty 28

Figure3.1 Compensatedcostspercase,paidandultimate,2001–02to2004–05 39

Figure4.1 Valueofproductionpathways 53

Figure4.2 Costs,bycompensationshareoftotal,2004–05(%) 76

Figure4.3 Costs,bytype,shareoftotal(%) 76

Figure4.4 Costs,bybearer,shareoftotal,2004–05(%) 78

Figure4.5 Costpercase,byseverityoftheincident,2004–05($) 78

Figure4.6 Totalannualcost,byseverityoftheincident,2004–05($m) 79

Figure4.7 Financialcostpercase,byseverityandinjury/disease,2004–05($) 81

Figure4.8 Costpercase,byICD-10category,2004–05($000) 83

Figure4.9 Totalannualcost,byICD-10category,2004–05($m) 85

Figure4.10 Costpercase,byindustry,2004–05($000) 87

Figure4.11 Totalannualcost,byindustry,2004–05($m) 89

Figure4.12 Costpercase,bycause,2004–05($000) 90

Figure4.13 Totalannualcost,bycause,2004–05($m) 91

Figure4.14 Costpercase,byethnicity,2004–05($000) 91

Figure4.15 Totalannualcost,byethnicity,2004–05($m) 92

Figure4.16 Costpercase,byage,2004–05($000) 93

Figure4.17 Totalannualcost,byage,2004–05($m) 93

Figure4.18 Costpercase,gender,2004–05($000) 94

Figure4.19 Totalannualcost,bygender,2004–05($m) 94

Glossary of Acronyms

ABS AustralianBureauofStatistics

ACC AccidentCompensationCorporation

ADMINC administrativecosts(legal,investigation,travelandfuneralcosts)

AEMC costsofaids,equipmentandhomemodifications

AWE averageweeklyearnings

AWOTE averageweeklyordinarytimeearnings

BERL BusinessandEconomicResearchLimited

CARERC costsofcarers

CPS compensationpaymentsintheshortrunforproductivity

CPMED compensationpaymentsformedicalandhospitalcosts

CPREHAB compensationpaymentsforrehabilitationcosts

CPL compensationpaymentsinthelongrunforproductivity

DALY disability-adjustedlifeyear

DOL DepartmentofLabour

DWL deadweightloss(associatedwithtransferpayments)

EAI earningsafterincident

EBI earningsbeforeincident

EEP employerexcesspayment

FUNC funeralcosts

GAPW gappaymentsforhealthservicespaidforbyworkers

GDP grossdomesticproduct

HKC humancapitalcosts

HSE HealthandSafetyExecutive(UnitedKingdom)

ICD-10 InternationalClassificationofDiseaseandInjury,TenthRevision

ILO InternationalLaborOrganization

INVESTC investigationcosts

IPRU InjuryResearchPreventionUnit(OtagoUniversity)

LEGALC legalcosts

MEDC healthandrehabilitationcosts

MOH MinistryofHealth

MSD MinistryofSocialDevelopment

NOHSAC NationalOccupationalHealthandSafetyAdvisoryCommittee

NOHSC NationalOccupationHealthandSafetyCommission(Australia)

NZ NewZealand

NZHIS NewZealandHealthInformationService

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OASCC OfficeoftheAustralianSafetyandCompensationCouncil(Australia)

OECD OrganizationforEconomicCo-operationandDevelopment

OHS occupationalhealthandsafety

OSH OccupationalSafetyandHealthService(DepartmentofLabour)

OTHERC othercosts(carers,aids,equipmentandhomemodifications)

OTP overtimepremium

PDC productiondisturbancecosts

PHIETC healthandrehabilitationcostsnotincludedelsewhere,paidbysociety

PPP purchasingpowerparity

PUBHOSP publichospitalcostsforoccupationalinjuryanddisease

PV presentvalue(ofafuturefinancialflow)

QALY quality-adjustedlifeyear

SL sickleave

REHABW rehabilitationcostspaidforbyworkers

RETA averageretirementage

RTWA ageofaveragereturntowork

STC staffturnovercosts

SUFFC costsofsufferingandprematuredeath

TAXS taxationtransfersintheshortrun

TAXL taxationtransfersinthelongrun

TRANSC transfercosts

TRAVELC travelcosts

UK UnitedKingdom

US(A) UnitedStates(ofAmerica)

VLY valueofalifeyear

VOP valueofproduction

VSL valueofastatisticallife

WHO WorldHealthOrganization

WLPI weekslostperincident

WPS welfarepaymentsintheshortrun

WPL welfarepaymentsinthelongrun

YLD yearsofhealthylifelostduetodisability

YLL yearsoflifelostduetoprematuremortality

Note: $ means New Zealand dollars unless otherwise indicated.

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T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D � x

Thisreportprovidesquantitativeestimatesoftheeconomicandsocialcostsofoccupationaldiseaseandinjuryin

NewZealand.

Suchacosting is importantsince thereare fundamental flaws inextrapolating information fromcompensation

datatoafullcostingofoccupationalincidentsorasabasisforpolicydecisions.Compensationdoesnotcoverthe

full numberofworkplace incidentsand, for those compensated,notall costsare covered.Moreover, thepoor

coverage is not uniform, so incidents that aremore severe, or peoplewith certain diseases that are lesswell

compensated,maysufferundulyifpolicydecisionsaremadeonthebasisofonlycompensatedcosts.Toachieve

sociallyoptimaloutcomes,particularly in relationtoOHSpreventionefforts, it is thustimely toundertakethis

analysis.

F INDIN gS

The investigation found that only 2% of the full costs of occupational disease and injury in New Zealand

($20.9 billion in 2004–05) are compensated.

• Thefullcostsincludeavaluationofsufferingandprematuredeath($16.0billion).

• These aside, less than 10% of the financial costs of occupational disease and injury in New Zealand

($4.9billion)arecompensated($480millionin2004–05).

C OS T OF SUFFERIN g AND PREMATURE DEATH

Thiscostestimateisbasedonmeta-analysisofwillingnesstopayestimatesfromwage-riskandotherstudiesof

thevalueofastatisticallife.Thelargecontributionofsufferingandearlydeath(threequartersoftotalcosts)isin

linewiththefindingsofleadinginternationalstudies.

• ItisbasedonthevalueofalifeyearinNewZealandof$184,216,derivedfromthevalueofastatisticallifeof

$3.9millionandadiscountrateof3.8%over40years.

• Sincetheunderlyingconceptsandtheirmeasurementarestillpotentiallycontroversial, it issuggestedthat

thiscostitembeseparatelyidentified.

Executive Summary

2%

Compensated financial costs

21%

77%

Total 2004–05 = $20.9 billion

Uncompensated financial costs Suffering (uncompensated)

Costs, by compensation share of total, 2004–05 (%)

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F IN AN CIAL C OS T S

ThefinancialcostofoccupationalinjuryanddiseaseinNewZealandin2004–05of$4.9 billion (3.4% of GDP)is

categorisedintosixconceptualgroups,consistentwiththethrustoftheliterature.Withineachgrouptheremay

beflowsbetweenthe“burden-bearers”–employers,workersandsociety.Calculationofeachitemdependson

theavailabledata,knowingthat,foreachitem,theidentitymustbesatisfiedthatthetotalequalsthesumofthe

parts. This provides integrity within the system, as well as cross-checks. The conceptual groups are outlined

below.

• Production disturbance costs – PDC ($573 million) – comprise the value of production lost between the

incidentandwhenaworkereitherreturnstoworkoris(fullyorpartially)replaced,aswellasthestaffturnover

costs“broughtforward”.TheemployerbearsasignificantproportionofthePDCburden($237million)through

overtimepremiumpayments,sickleave,thestaffturnovercostsandemployerexcesspayments.

• Human capital costs – HKC ($3.05 billion)–arethemostimportantsingleitem,reflectingthelostproductive

capacityoftheworkeroverthelongerterm–untilretirementage.Weestimatethat$1.88billionofthiscost

isbornebyworkersthroughlowerincomes,while$1.17billionisbornebysocietythroughwelfarepayments

($393million),taxationlosses($671million)andcompensationpayments(around$104million).

• Health and rehabilitation costs – MEDC ($694 million)–coverthehealthand‘returntowork’expensesofthe

worker.Ofthese,mostarebornebysocietythroughcompensationpayments($220million),publichospital

costs ($99million)andothercostsbornebyprivatehealth insurers, thegovernmentand thenot-forprofit

sector($298million).Theworkerbearsonly$35million,mainlyin“gap”payments,whiletheemployerbears

$42million.

• Administration costs – ADMINC ($55 million in total)–includelegalcosts(negligible),thecostofinvestigating

claimsandadministrationofthecompensationsystem($32million),travelcostsforworkers($23million)and

thecostofbringingforwardfunerals(negligible).

• Transfer costs – TRANC ($238 million) –are thedeadweightcostofadministering thewelfaresystemand

othergovernmenttransfers,togetherwiththeefficiency lossesassociatedwiththeneedtofundadditional

welfarepaymentsandreplacelostincometaxfollowingoccupationalincidents.

• Other costs – OTHERC ($293 million)–comprisetherealcostsofcarers($223million)andofaids,equipment

andhomemodifications($70million)thatmayberequiredbyworkerswhodevelopdisabilitiesasaresult

ofincidents.

12%

62%

14%

Costs, by type, share of total (%)

1%5%

6%

PDC HKC MEDC ADMINC TRANSC OTHERC

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WHO bEARS THE C OS T S?

Threegroupswereidentifiedasbearingthecosts–employers,workersandsociety.Inallocatingcosts,weutilised

theimportantdistinctionbetweenrealeconomiccosts(thatuserealresources)andtransferpayments(financial

flows)toavoiddouble-counting.

In2004–05,employersboreanestimated$287million(5.9%)ofthetotalfinancialcosts.Workersborearound

$2.28billion (46.4%)andsociety–primarily through thecompensationsystemandgovernmentsector–bore

$2.34billion(47.7%).

• However, it is important tonote thatemployersalsopay theworkers’compensationpremiums fromwhich

societymeetsinpartitslion’sshare.Wereweadoptingan“exante”measurementapproachratherthanan

“expost”one,thecommunitysharewouldbelower(around38%)andtheemployersharewouldbehigher

(around16%),since$480millionextrawouldbebornebytheemployers.

• Ifthevalueofsufferingandprematuredeathisincludedandattributedtoworkers,thentheirestimatedshare

ofthecostsofworkplaceinjuryanddiseaseis87.4%,with11.2%bornebysocietyand1.4%byemployers.

C OS T S bY SEvERIT Y OF THE IN CIDENT

Severitywasclassifiedintosevencategoriesas:(1)absenceoflessthansevendays;(2)morethansevendaysbut

witha full return towork; (3)stagedreturn; (4)partial return; (5)permanent incapacitation; (6) fatalities;and

(7)“other”.

• Costsofincidentswithastagedreturncompriseoverhalfofthetotalfinancialcosts($2.6billion).

• The financialcostper case ishighest forpermanentdisabilities ($1.1million),while the totalcostpercase

(includingsuffering)ishighestforfatalities($3.3million).Averagecostspercasewere$16,066and$68,437

respectively.

Cost per case, by severity of the incident, 2004–05 ($)

<7 days

Full return

Average

Staged return

Partial return

Other

Permanent

Fatal

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000

Financial Suffering

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C OS T S bY INJURY OR DISEASE T YPE

$15.8 billion (76% of the total annual cost) is due to occupational injuries and $5.1 billion (24%) is due to

occupationaldisease.Offinancialcosts,$3.8billion(77%)isduetoinjuriesand$1.1billion(23%)todisease.

• Humancapitalcostspercaseforoccupationaldiseasearesomesixtimesthenextlargestcostitem,atover

$44,500.

• Financialcostspercaseforcancerarenearly$700,000,withtotalcostspercase(includingsuffering)of$2.9

million,farhigherthananyothercategory.

Total annual cost, by severity of the incident, 2004–05 ($m)

Permanent

Partial return

<7 days

Full return

Other

Fatal

Staged return

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

Financial Suffering

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Cost per case, by ICD-10 category, 2004–05 ($000)

0 500 1,000 1,500 2,000 2,500 3,000

Financial Suffering

05 Diseases of blood& blood forming organs

04 Endocrine, nutritional, metabolic& immunity disorders

10 Diseases of the oral cavity,salivary glands & jaws

14 Diseases of the skin& subcutaneous tissue

22 Injury & poisoning

21 Sprains & strains

All ICD-10 categories

07 Diseases of the nervoussystem & sense organs

06 Mental disorders

Other

15 Diseases of themusculoskeletal system

20 Dislocations

18 Symptoms, signs& ill-defined conditions

11 Diseases of thedigestive system

02 Infectious & parasitic diseases

19 Fractures

12 Diseases of thegenitourinary system

01 Medical & surgical procedures

09 Diseases of therespiratory system

08 Diseases of thecirculatory system

03 Neoplasms

Sprainsandstrainscostmostintotal,at$1.8billioninfinancialcostsand$7.6billionintotalcosts(36%ofthe

totalcostsin2004–05).

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C OS T S bY INDUS TRY

Costsinthetransportandstorageindustry(mostcostlyatnearly$24,000percase)areoverthreetimesthosein

governmentadministrationanddefence(leastcostlyatunder$7,000percase).Agriculture,forestryandfishing;

construction;andmanufacturingranksecond,thirdandfourthmostcostlyrespectively,intermsofcostspercase.

Costsarerelativelybestcompensatedintheminingindustry,butevenso,thisonlyextendstocover4.6%oftotal

costs.Asashareoftotalcosts,manufacturingislargestat$1.3billioninfinancialcostsand$5.4billionintotal

costs(onequarterofthetotalforallindustries).

Total annual cost, by ICD-10 category, 2004–05 ($m)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Financial Suffering







06 Mental disorders

03 Neoplasms



Other conditions


07 Diseases of the nervous system& sense organs

20 Dislocations

19 Fractures

15 Diseases of the musculoskeletalsystem & connective tissue



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Cost per case, by industry, 2004–05 ($000)

0 10 20 30 40 50 60 70 80 90 100

Financial Suffering

Z Classification unknown

M Government administration & defence

J Communication services

N Education

K Finance & insurance

Q Personal & other services

P Cultural & recreational service

All industries

L Property & business services

D Electricity, gas & water supply

B Mining

H Accommodation, cafes & restaurants

F Wholesale trade

G Retail trade

O Health & community services

C Manufacturing

E Construction

A Agriculture, forestry & fishing

I Transport & storage

Total annual cost, by industry, 2004–05 ($m)

0 1,000 2,000 3,000 4,000 5,000

Financial Suffering



B Mining



N Education




F Wholesale trade





G Retail trade


E Construction

C Manufacturing

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Ethnicity

FinancialandtotalcostspercaserespectivelywerehighestforNZMaoripeople($17,816and$76,037)andlowest

forPacificIslandpeople($14,561and$62,078).CostsforNZEuropeanswere,reflectingtheirpopulationshare,

thelargestcostcomponentat$3.4billioninfinancialcostsand$14.7billionintotalcosts(70%ofthetotal).

C OS T S bY C AUSE, ETHNICIT Y, AgE AND gENDER

Therearelessdifferenceswithintheothersub-strata.

Financialandtotalcostspercaserespectivelyarehighest for lossofbalanceorpersonalcontrol ($17,775and

$77,878)andlowestforfireorexplosion($9,399and$34,980).Lossofbalanceorpersonalcontrolisalsolargest

overall,with$1.9billioninfinancialcostsand$8.3billionintotalcosts(approaching40%ofthetotal).

Cause

Cost per case, by cause, 2004–05 ($000)

0 10 20 30 40 50 60 70

Financial Suffering

3Fireorexplosion

9Other

4Collapse,overturnorinundation

2Lossofcontrolofvehicle

5Workpropertyorcharacteristics

Allcauses

6Lifting/carrying/strain

1Lossofbalanceorpersonalcontrol

Total annual cost, by cause, 2004–05 ($m)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Financial Suffering

3 Fire or explosion

2 Loss of control of vehicle

4 Collapse, overturn or inundation

9 Other

5 Work property or characteristics

6 Lifting/carrying/strain

1 Loss of balance or personal control

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D x v � �

Age

Financialandtotalcostspercaserespectivelywerehighestforpeopleaged45–64years($18,403and$79,288)

andlowestforpeopleaged15–24years($11,953and$49,143).However,costsforworkersaged25–44yearswere

largestat$2.2billioninfinancialcostsand$9.5billionintotalcosts(over45%ofthetotal).

Cost per case, by ethnicity, 2004–05 ($000)

0 10 20 30 40 50 60 70

Financial Suffering

3 Pacific Islands

4 Asian

5 Other

1 NZ European

All ethnicities

2 NZ Maori

Total annual cost, by ethnicity, 2004–05 ($m)

0 5,000 10,000

Financial Suffering

4 Asian

3 Pacific Island

5 Other

2 NZ Maori

1 NZ European

Cost per case, by age, 2004–05 ($000)

0 10 20 30 40 50 60 70

Financial Suffering

15–24

65 plus

All ages

25–44

45–64

Total annual cost, by age, 2004–05 ($m)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Financial Suffering

65 plus

15–24

45–64

25–44

x v � � � T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

Gender

Financialandtotalcostspercaserespectivelywerehigherformales($16,280and$69,212)andlowerforfemales

($15,407and$66,061).Costsformaleswere$3.7billioninfinancialcostsand$15.9billionintotalcosts(76%of

thetotal).

METHODOLO gY AND DATA

• An“incidenceapproach”isusedtomeasurenewcasesofoccupationaldiseaseandinjuryfromend-March

2004toend-March2005(2004–05).

– Anincidenceapproachassessesthecostsassociatedwiththenumberofnewcasesofoccupationalinjury

anddiseaseeachyear,whileaprevalenceapproachassesses thecostsassociatedwith thenumberof

peoplewhohaveanyoccupationalinjuryordiseaseinayear,withtheincidentpotentiallyoccurringinthe

currentorpastyears.

– TheACCcompensationdatathatunderlieaspectsoftheanalysisarefarmoreamenabletoanincidence

approach,andpotentialweaknessesinthedata(eg,duetodelaysinreporting)wereovercomebyusingan

“ultimatecost”(futureexpectedcosts)approachonthebasisoftheACCStatisticalCaseEstimateModel,

aswellasbycomparingwithaveragehistoricaldatatosmooththeimpactofanyanomalies.

• Wedonotutilisetheunhelpfuldistinctionbetweendirectandindirectcosts,nordoweincludeconceptually

differentcosts,suchaspropertydamage,lossofgoodwillorpreventivecosts,ratherusinganex-posthuman

costpercaseapproach.

• Literatureanalysisandconsultationinformedthemethodology,matrixclassification,analysisandfindings.

Cost per case, by gender, 2004–05 ($000)

0 10 20 30 40 50 60

Financial Suffering

Females

All persons

Males

Total annual cost, by gender, 2004–05 ($m)

0 5,000 10,000 15,000

Financial Suffering

Females

Males

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D x � x

NUMbER OF IN CIDENT S

FromtheACCdataandkeyliterature(particularlyDriscolletal,1thenumberofcasesofoccupationaldiseaseand

injurywasestimatedfor2004–05as305,150(256,894to353,407),a16%margineachsidebasedonlowandhigh

scenariosregardingcompensationaccessibility).

• Ofthese,253,812(83%)arecompensatedand51,338(17%)uncompensated.

• Some239,894(94%)areduetoinjuriesand13,918(6%)areduetodisease.

WhiletheestimatesfromDriscolletal1arethebestcurrentlyavailable,itshouldbenotedthattheyappearvery

conservative,andthusinourviewthereisconsiderableriskthatthenumberandproportionofuncompensated

cases (particularly for disease) inNew Zealand is, in fact, higher than the estimates presented in this report.

Assuch,theassociatedcostestimatesarelikelytobeconservative.

Access Economics

6 March 2006

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N Dx x

SECT IONSECTION ONE

INTRODUCTION


� T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

Access Economics was commissioned by the National Occupational Health and Safety Advisory Committee

(NOHSAC)toprovidequantitativeestimatesoftheeconomicandsocialcostsofoccupationaldiseaseandinjury

inNewZealand,drawingoninformationcontainedwiththeNOHSACreportThe burden of occupational disease

and injury in New Zealand: Technical Report.1

The National Occupational Health and Safety Advisory Committee (NOHSAC) is responsible for providing

independentadvicetotheMinisterofLabouronoccupationalhealthandsafetyissuesinNewZealand.NOHSAC

playsakeyrole inprovidinganindependentassessmenttotheMinisteronthemajoroccupationalhealthand

safetyissuesfortheNewZealandworkforce,ofadvisingonthemeasuresthatwoulddeliverthegreatestbenefit

for the prevention of occupational injury and disease, and in developing an evidence-based approach to

occupationalhealthandsafetyissues.InadditiontotheCommitteeandMinister,thisreportisintendedtoinform

theAssociateMinisterofLabour,policyanalysts,researchersandhealthandsafetyprofessionals.

ThestructureofthereportwasagreedinconsultationwithNOHSACandaimstohighlightknowledgegapsaswell

aswhatisknown.Methodologicalspecificationsfortheprojectincludedthefollowing.

• Use of an “incidence approach” to measure new cases of occupational disease and injury in a jointly

determinedreferenceyear,oraprevalenceapproachifanincidenceapproachprovedtoodifficult.

• Examinationofamatrixofeconomicandsocialcosts,takingintoaccount:

– severityofthediseaseorinjury,distinguishingfatalities,permanentincapacitationandatleastthreeother

categoriesoflesssevereincidents

– “direct”and“indirect”costs,includingcompensatedcosts,medicalandrehabilitationcosts,investigation

costsandfines,lostproductivityfromcurrentandfutureearnings,andothercostsofassistance

– estimatesofpain,sufferingandearlydeath,usinginternationallyacceptedmeasurementmethods.

• Presentationofestimatesby:

– industry

– gender,ethnicityandagegroups

– severity

– cause

– diseaseandinjurytype.

• Identification and description of appropriatemethodologies, review of relevant literature and consultation

withrelevantagenciesandorganisations,includingconsiderationofexistingreportsandreviewsdescribing

theeconomicandsocialcostsofoccupationaldiseaseandinjuryinNewZealand.

• Discussionoflimitationsofthecostinganalysis.

Compliancecostsforemployersarenotwithinthescopeofthereport.

L I T E R A T U R E A N D

MeThODOlOgy

2SECT ION T WO



Thissectionsummarisestheliteraturereviewthatinformsthereport,aswellasoutliningbroadmethodological

issues.

�.� PREvIOUS NEW ZEAL AND WORK

�.�.� �00 � TEC HNIC AL REPOR T

The burden of occupational disease and injury in New Zealand: Technical Report1waspreparedbyNOHSAC to

provideunderstandingofthestateofoccupationalinjuryanddiseaseinNewZealandandanevidencebasefor

decisionsbyNOHSACandtheMinisterregardingfutureactivitiesandpriorities.

Methods

Theinformationinthereportwasbasedonpublishedliteratureandotherrelevantinformationfromgovernment

reports, online sources and other appropriate sources. For each condition, information was presented on

exposures,occupationsandindustriesknownorsuspectedtobeassociatedwithincreasedrisk.Thisinformation

wasbasedonNewZealandandinternationalliterature,butinmostcasestheavailableNewZealandinformation

wasnotcomprehensive.Whereinternationalinformationwasused,reviewarticleswererelieduponasmuchas

possible,butindividualstudieswerealsoincludedwhererelevant.

All conditions for which there was considered to be reasonable evidence of causation related to work were

included,onthebasisoftworecentreviewarticles,identifiedliteratureandconditionsofparticularrelevanceto

NewZealand.

Thereportincludesquantitativeestimatesoftheannualnumberofdeathsfromoccupationaldiseaseandinjury,

andtheannualnumberofnewcasesofwork-relateddiseaseandinjuryinNewZealand.

Results

Thereportfoundthattherearealargenumberofoccupationalexposuresandactivitiesthatcarryanincreasedrisk

ofdiseaseorinjury.Theseincludeanumberofrecognisedcausesofoccupationalcancer(particularlylungcancer,

mesothelioma,prostatecancer,bladdercancer,stomachcancer,coloncancer,pancreaticcancerandhematologic

cancers),respiratorydisease(particularlyasthma,chronicobstructivepulmonarydiseaseandpneumoconioses),

diseasesofthenervoussystem(includingperipheralneuropathyandchronicsolvent-inducedtoxicencephalopathy),

vascular diseases (particularly ischaemic heart disease), musculoskeletal conditions (including upper limb

disordersandlowbackpain),noise-inducedhearingloss,vibrationdisorders,andvariouscausesoffatalandnon-

fatalinjury(particularlyinagriculture,forestryandfishing,mining,constructionandtransport).

ThereportestimatedthateachyearinNewZealandthereare:

• about 700–1,000 deaths fromoccupational disease, particularly cancer, respiratory disease and ischaemic

heartdisease

• about100deathsfromoccupationalinjury

• 17,000–20,000newcasesofwork-relateddisease

• about200,000occupational accidents resulting inACC claims, abouthalf ofwhich result indisability, and

about6%inpermanentdisability.


Thereportconcludedthatwork-relateddiseaseandinjuryisresponsibleforconsiderablemorbidityandmortality

inNewZealand, requiring abalancedapproach inwhichboth thepreventionofwork-relateddiseaseand the

preventionofwork-relatedinjuryreceiveappropriateattentionandresourcesfromtheOccupationalSafetyand

HealthServiceandothergovernmentagencies.

• Formortality,diseaserepresentsaconsiderablygreater(ten-fold)burdenthandoesinjury;aboutone-third

ofthework-relateddeathsareduetocancer,andsubstantialproportionsareduetorespiratorydiseaseand

ischaemicheartdisease.

• Ontheotherhand,work-relatedaccidentsandinjuriesrepresentagreaterburdenofmorbidity.

Finally,thereportconcludedthatthedevelopmentofeffectiveandcomprehensiveNewZealandsystemsforthe

surveillanceofwork-relateddiseaseandinjuryisapriority,inparticulartoredressthelackofinformationonwork-

related morbidity and mortality in women, Ma-ori and Pacific people, and work-related injuries and disease

sustained by bystanders, aswell as further research required on costs. (This current reportwill contribute in

relationtothelatterresearch.)

�.�.� THE �00� “AFTERMATH” REPOR T

Amoving2002reportbasedoncasestudyresearchwasinitiatedbytheOccupationalSafetyandHealthService

(OSH)oftheDepartmentofLabourwiththeAccidentCompensationCorporation,titledAftermath: The social and

economic consequences of workplace injury and illness.2

Thereportnotedthat,whilesomecostsofworkplaceinjuryorillnessarewelldocumented,thefullextentand

distributionofsuchcostsandconsequencesareoftennotmeasuredorrecorded.Employeeswhoareharmed,and

their family and friends/colleagues, inevitably bearmuch of the burden,much of which is “intangible” in an

economicsense.

Theexperienceofbeingharmedatworkcanbedevastating,withprofoundemotionalconsequencesforall

thoseinvolved.Peoplemaybecomeisolated,estrangedfromtheircommunityanddepressed.Isolationand

estrangementcanbecomepermanent.Thewidowinthestudyexpressedtheprofoundandlastingimpactof

herhusband’sinjuryonher:“Therewasneverapointtosaygoodbyetoamarriageandthatofallthingsof

thewholelotIfeelIhavelost.Ihavelostmymarriage...IalwaysfeelIliveintheshade,Inolongerliveinthe

sun.”(Ian’swife)2

Methods

Thestudyaimedtogainanunderstandingofthefullrangeofconsequencesofworkplaceillnessandinjuryby

examining the costs through the experiences of the affected participant, their family, friends, colleagues,

employersandsupervisors.Themethodologycentredonfourresearchquestions:

1 Identifyingthemainsocialconsequencesandhowtheycanbeavoided.

2 Theirkeycharacteristics(gender,ethnicity,age,familystatus,injuryorillnesstypeandlocation).

3 Thenatureandvalueoffinancialcosts(lossofincome,medicalcosts).

4 Thelinksbetweensocialconsequencesandeconomiccosts.

Theapproachusediterativequantitativeandqualitativemethods,triangulatingdatafromanumberofsources,

includingexistingACCandOSHresearch,analysisofstakeholderviews,andinterviewswiththeaffectedperson,

their family,workmates,and, ifappropriate,OSHandotherhealthprofessionals. Fifteen“serious”caseswere

selected,ofwhichallbutonehadbeenthesubjectofanOSHinvestigation.Economiccostswerecategorisedas:


• unknowneconomiccosts–costswhosedollarvalueswerenotknown

• knowneconomiccosts–specificdollarcosts.

Whoborethecostswasderivedfrombothdocumentedandsecondarysources.Socialconsequenceswerenot

givenadollarvalue.

Findings

Theresearchproducedsevenprincipalfindingsfromanalysisofthecasestudies:

1 Minor mistakes cause big consequences–Workplaceinjuryorillnessoftenresultedfromminoroversights,

failuresorassumptionsinsystemsorpractices.i

2 The consequences ripple out–Injuryorillnesshadhugeconsequences,notjustfortheemployeebutfortheir

family,workplaceandcommunity.

3 Costs were enormous, non-recoverable and ongoing – Quantifiable and unquantifiable costs continue to

compoundlongaftertheinjuryorillnesseventandarenotcompensatedinmanycases.

4 In spite of common characteristics between cases, consequences varied greatly – Overlapping personal,

social,organisationalandenvironmentalvariablesallaffectedtheconsequencesoftheinjuryorillness.

5 Relationship between cause and consequence–Ifacompanyhadgoodhealthandsafetysystemsintegralto

theworkenvironment,theirsupportsystemsforinjuredorillemployeeswerealsobetter.

6 Over-arching cost determinants – Inter-dependent cost determinants included isolation, suffering,

responsibility, blame,power andunderstanding,which influenced the recovery and copingability of those

affected.

7 Support – Better support resulted in better rehabilitation outcomes and an easier return to working and

communitylife.

Thefindingswerealsosegmentedforfiveareasofsociety–theparticipant,theirfamilyandfriends,theworkplace,

themedicalsectorandthegovernment.Keyfindingsrelevanttothispresentstudyarepresentedbelow.

• Injuredemployeesbearabout30%ofthetotalcosts.

• The share of costs borne by injured employees rises sharply with severity while the share borne by the

employerfalls.

• Intangible losses were of health, intimacy, security and lifestyle, while financial losses included ongoing

medicalcosts,directincomeloss,transportcosts,legalcostsandlossesrelatedtolifestylechanges.

• Documented costsborneby the 15participants themselves and their immediate familywere$56,952 (not

including“potential”incomelossconsideredtoodifficulttoquantify).

• Inallthecases,thefamilysufferedemotionally,mentallyandfinancially,withamajorimpactbeingtheamount

offollow-upcareprovidedforthepersonaffected,orassumingtheirnormalresponsibilitieswhentheywere

unabletoperformthem.

• Majorworkplacecostswereinrelationtolostproductionandmorale,extrahealthandsafetycompliancework,

damagetoplantandequipment, lossofbusinessduetopublicodium, legalcostsresultingfromfinesand

prosecutions(includingpreparingforcases)andstaffcosts–thelatercomprisedofhiringandtrainingnew

staff,payingoutredundancyand“over-employment”(creatinganewjobwhiletheworkerrecovered).Less

tangiblecostsincludedthelossofafriendandcolleague,theimmeasurableimpactoffeelingresponsiblefor

aninjuryorillnessorfatalityandpossibleanimositytowardstheinjuredorillemployee.

i Thetotallosscontroltheoryofaccidents,firstdevelopedbyHeinrichinthe1950s,aimstoexpressaruleofdistributionoftheconsequences

ofaparticulartypeofworkaccident.Heinrichanalysed1,500enterprisesin1931andconcludedthattheinvisiblepartofaccidentswasfour

times thevisiblepart.Thus,behindonevisiblecaseofmajor injury, therewere29casesofminor injuriesand300“no injury”accidents.

Numerousresearchershavesubsequentlyarguedfordifferentratiosbasedonthesametriangularmodel.


• Thetotaldocumentedcoststothefifteenworkplacesinthestudywas$477,830.78plussixmonths,twodays,

and12hoursofcompanytime(notcosted).Thisdidnotincludeundocumentedcosts,suchaslostproduction,

whichwouldaddconsiderablytothetotal.

• Withalltheoccupationalillnesscases,therewasconsiderabledebateanddelayoverdiagnosisandwhether

theillnesswaswork-related,becauseenforcementorcompensationwasinvolved.Avisibleinjurywasmore

readilyacceptedandthework-relationshipindisputable.

• Delaysledtoincreasedpain,delayedrecovery,adversepsychologicalandemotionalreactions,andmedical

complicationsbecauseofdelaysintreatmentforparticipants.Overall,thecasesrevealedtherewasalackof

knowledgeandresourcesinrelationtooccupationalhealthmedicine.

• Direct impacts for government covered such actions as enforcement, investigation and payment of

compensation/rehabilitation, while indirect impacts included education and prevention programmes,

infrastructureandservices,andprovisionof the justicesystem,suchas courtsand thecollectionof fines.

Therewerecoststotheeconomythroughthelossofpaidandunpaidwork,andthegovernmentlosttaxation

revenue.

• ACC’scostswerewide-ranging,fromthefundingofacutehealthcaretorehabilitation,toincomereplacement

and the costs of administration.ACCpays formost public health costs of injuredemployees throughbulk

paymentstotheMinistryofHealth.ThetotalcostofentitlementclaimsforACCdoesnotrepresentthetotal

costofACC’sfinancialcontributiontoinjury.

• OSH’squantifiableeconomiccostsarosefrominvestigations,assignedaccordingtohoursworkedbasedon

staffsalaries(overheadswerenotincluded).Socialcostsinadministeringlegislationwerenotincluded(eg,

stressandfatigueoccasionedthroughhavingtodealwithfatalities,seriousinjuries,catastrophicsituations

anddistressedandinjuredpeople).

• Documented costs for the government (excluding ACC), including OSH costs and sickness benefits, were

$46,488.89,plusover390hoursofinspectortime.Thisdidnotincludeundocumentedgovernmentcosts.

• The documented costs for ACC and the private insurer for the 15 cases in the study were $585,400.17.

The cost of medical treatment or public health acute services received under ACC’s bulk funding of the

healthsectorwereestimated(not includingtimeoradministrationcosts)–projectedfuturecostsforthese

casesareexpectedtobe$3,985,989.

• Thetotaldocumentedcostsforthese15caseswas$1,167,471.84.

• ThetotalprojectedfuturecostsofthesevencasesthatwerestillreceivingACCandprivateinsurancepayments

wasexpectedtobe$3,985,989.

• TheseestimatesdonotincludethetimeofOSHinspectors,ACCcasemanagers,workplaces,individualsand

theirfamilies.Italsodoesnotincludethelossofincomebornebyindividualsandtheirfamiliesasaresultof

theirinjuryorillness.

Tounderstandthetotalsocialandeconomicconsequencesrequiresgoingbeyondstatisticsandrecording

economiccosts.Gainingahumanperspectiveofcostsincurredallowsustounderstandthenon-economic

“costs”andthecomplexinter-relationshipbetweeneconomicandnon-economicconsequences.

Understanding how the social and economic consequences apply increases our understanding of the

impactsonpeopleofpolicyandlegislation.Butimportantly,italsocontributestoourunderstandingofhow

tominimisetheaftermathofoccupationalinjuryandillnessandplanappropriatepreventativemeasures

and support systems. The fifteen case studies illustrated common experiences of employers, working

peopleand their families,but theyalsoshowedhowcertain factorsare likely toalter theoutcome ina

positiveornegativeway.Thisstudyhighlightsthedebilitatingeffectofnotminimisingworkplaceinjuryand

illness; for the injured or ill worker, their friends and family, workplace, and the substantial costs to

governmentanditsagencies.2


�.�.� OTHER SEMIN AL WORK FROM NEW Z EAL AND

1998 Victoria University Study

AnearlystudyfromVictoriaUniversity,“ThedirectandindirectcostsofworkinjuriesanddiseasesinNewZealand”,3

estimatedcostsfortheyear1995.Areviewoftheinternationalliteraturereviewledtoataxonomyofindirectcosts

looselybasedonthatof theAustralian IndustryCommission’s1995study,4withfurthersub-categorisation into

community, employer and employee costs. Cost estimates were derived primarily from data supplied by the

Accident Rehabilitation, Compensation and Insurance Corporation, the Department of SocialWelfare and the

DepartmentofLabour.Indirectcostsdidnotincludelostleisure,lowself-esteem,reducedsocialinteraction,care

by family members, lost educational investment, travel concessions for disabled workers, increased use of

communityservicesnorthereplacementandrepairofcapitalandmaterialdamagedinaworkinjuryordisease

incident.However,thestudydidincludecostsomittedfromtheIndustryCommission’sstudy,suchasrecruitment,

selectionandtrainingcostsandlegalpenalties.

Directcosts,definedasthosepaidbytheACCEmployers’Accountandfinancedbyemployerpayrollpremiums,

wereestimatedtocost$912.7million. Indirectcosts,definedasallotherestimatedcoststhatwerenotdirect,

wereestimatedas$314.7million,aratioof1:2.9relativetodirectcosts,muchlowerthanotherstudies.Thegrand

totalwasthusestimatedin1995as$1.23billion,withcomponentelementssummarisedinTable2.1.

T A b L E � . � Costs of work injuries and disease in New Zealand, 1995

D I R E C T C O S T E L E M E N T $ 0 0 0 I N D I R E C T C O S T E L E M E N T $ 0 0 0

Injury prevention 1,968 Indirect community costs

Rehabilitation benefits AccidentinvestigationsbyOSH 6,342

Vocationalrehabilitation 4,152 Socialwelfarebenefits 40,263

Socialrehabilitation 22,141 46,605

Medicaltreatment 51,281 Indirect employer costs

Hospitaltreatment 9,081 Lostlabourtime 25,199

Publichealthcare 36,693 Accidentinvestigations 6,342

Dentaltreatment 2,011 Legalpenalties 1,022

Travel 4,948 Recruitmentselectionandtraining 42,033

Miscellaneousbenefits 3,183 74,596

133,490 Indirect employee costs

Compensation benefits Healthandmedicalservices 29,013

Weeklycompensation 571,054 Partiallossofearnings 149,063

Independenceallowance 3,818 Fulllossofearnings 15,419

Lumpsums 78,989 193,495

Deathbenefits 27,743

681,604

Other payments

Researchgrants 1,141

CollectionfeespaidtoInlandRevenue 15,196

Interestonborrowing 3,962

20,299

Share of operating costs 75,335

Totaldirectcost 912,696 Totalindirectcosts 314,696

Source:HeadandHarcourt3(50-51).


Methodologicalweaknesses in the IndustryCommissionapproacharediscussed indetail inAccessEconomics

report,5which ledtothemethodological improvementsof thatreport.TheVictoriaUniversitystudy itselfnotes

thedisparitieswithinternationalfindingsandpostulatesthatsomeofthereasonsforthedifferencesmayinclude

thefollowing.

• DirectcostsinNewZealandincludewhatmaybeindirectcostsinothercounties(eg,ACCfundingofhealthand

medicaltreatment),sothattheratioofindirecttodirectcostsisnecessarilysmaller.(Inmoststudies,indirect

costsaregenerallysomemultipleofdirectcosts.)

• ACCentitlementsarebelieved tobemoregenerous,widelyavailableandeasilyaccessible inNewZealand

thanoverseas,encouragingmorepeopletoclaimlargerbenefits.

InAustralia,forexample,only45%ofvictimsfileclaimsforcompensation(WorksafeAustralia,1994:ix)

whereastheACCmaintainsthatnearlyall injuredworkersinNewZealanddoso.Inaddition,Australian

compensationisinmanycaseslimitedtosmalllumpsumpaymentsratherthan,asinNewZealand,weekly

compensationuntilretirement.3

• Inaddition,severaldirectcostsmayhaveanadditionalindirectcomponent,becauseofinsufficientfundingby

theACC,eg,the“tiny”independenceallowancesforpainandsufferingorrehabilitation,andmedicalortravel

(eg,ambulance)expensesbornebytheemployeeortheiremployerthatarenotclaimed,partiallyreimbursed

orrejected.

• Theannualindirectcostscouldbelargerthanthetotalcostestimatedinthestudy,becausesomanycosts

wereomittedorunderestimatedduetotheabsenceofreliabledata.Thiswasparticularlytrueforthecostof

recruitment,selectionandtraining,forlostlabourtimeandforfullandpartiallossesofearnings.

2000–2001 research

In2001,theDepartmentofLabourandtheAccidentCompensationCorporation(ACC)undertookresearchintothe

effectiveness of health and safety legislation through case studies. This followed earlier (2000) New Zealand

researchthatfocusedonthepotentialcoststothebusinesssectorarisingfromcomplyingwiththeHealthand

Safety in Employment Act 1992 (HSEAct). It found that these costswere hard to identify and quantify.Other

researchbytheMinistryofEconomicDevelopmentexaminedtheeffectofthecostsofcomplianceonemployers.

Althoughthesecostswereseenaspartofbusiness,therewereconcernsabouttheirnatureandextent,particularly

forsmall-tomedium-sizeenterprises,andtheirimpactoncompetitiveness,innovationandinvestment.However,

thisresearchhasprovidedonlyindirectinsightintothesocialconsequencesofinjuryandillnessintheworkplace,

focusingmoreoncompliance.

Costs of Injury Project

TheCostsofInjuryProject,initiatedbytheMinistryofResearch,Science,andTechnologyin2002–2004,involved

two phases. The first phase in 2002 reviewed alternative cost methodologies, undertaken by Business and

Economic Research Limited (BERL) in 2002 and also reviewed agencies’ costs of injury information needs,

undertakenbytheDepartmentofLabour,aswellasaCostsofInjurySymposiumin2002.

ThekeymessagethatemergedfromtheSymposiumwasthatacleardirectionneededtobesetfortheproject

overthenext5–10years.

Thesecondphaseoftheproject,therefore,involvedthedevelopmentofaCostsofInjuryStrategy.ACostsofInjury

Framework was identified as an achievable output for the strategy. To assist with refining this framework, a

stock-take was commissioned in 2003 from BERL, and an investigation of a method to estimate the cost of

inpatientcarewascommissioned in2003 fromthe InjuryResearchPreventionUnit (IPRU)atOtagoUniversity.

Thesecondphaseofthecostsofinjuryprojectculminatedinthepreparationofareportjointlyundertakenand

supportedbytheDepartmentofLabour,AccidentCompensationCorporation(ACC),NZHIS,LandTransportSafety

Authority(LTSA),theMinistryofTransport,andStatisticsNewZealand.6Thisreportissummarisednext.

�0 T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

2004 Measuring the costs of injury in New Zealand6

The DOL report was premised on the fact that information on the costs of injury is necessary to assist with

managingtheincidenceandseverityofinjuriesinNewZealand,andthatthecostsofinjuryprovideanimportant

andreadilyinterpretableinsightintotherelativeimpactofinjuriesonNewZealanderstoinformdecision-making

suchas:

• decidingwhethertoinvestininjuryprevention,rehabilitationandcompensationinitiativesand,ifso,howmuch

• settingandevaluatingoutcomesandprioritiesforallocatingresourcesbetweendifferentinjuries

• decidingwhoshouldbearthecostsofinjury.

ACostsofInjuryFrameworkwasusedtoexplorethecurrentstateofinformation,basedoncostcategoriesand

perspectives.Costcategoriesincludedresourcecosts(costsrelatingtotreatmentandrehabilitationandlossof

outputorproductivity)andhumancosts.Costperspectivesrefertowhobearsthecostsinthefirstinstance,and

includeindividualsandtheirfamilies,employers,governmentandsociety.Aseriesofkeystatisticsandindicators

wereidentifiedfromkeypolicyquestionsinthereporttosupporteachcostcategory-perspectivecombinationin

theframework.

Thisreportexploredinformationonconsequentialcostsofinjuryonly(ie,notpreventivecostsandnotdisease).

Thereportfoundthatcurrentinformationformeasuringtheresourcecostsofinjurytogovernmentisnoticeably

betterthanforindividuals,employersandsociety.Incontrast,currentinformationformeasuringthehumancosts

toindividualsisnoticeablybetterthanforemployersandgovernment,butisnotcompleteorconsistentacross

injurysectors,althoughthereisscopetoenhancethiswiththeaidofdata-integrationoreconomicmodelling.For

example,amonetaryvalueofastatisticallife(VSL)isusedinsomesectors(eg,transport),whilequalitativecosts

havebeenidentifiedforworkplaceinjuries.(Thiscurrentreportwillhelpinthisrespect.)

Figure 2.1 summarises the findings on the current state of information in respect of each of the different

combinationsofcostcategoriesandperspectivesand(inbrackets)thepotentialforimprovingthatinformation.

Thispotentialwasratedlow,mediumorhightoreflecttheexpectedcostandeffortofimprovinginformationand

quality of and need for improved information. Areas of real potential to improve information are bolded. The

shadedareasrepresentareasthatwereconsiderednotworthexploring,eitherbecausetheexpectedcostand

effortofimprovinginformationisconsideredtoogreat,orbecausetheinformationisunlikelyordoesnotneedto

beimprovedtoasignificantextent.

Careneedstobetakenwithmeasuringtotalcosts(eg,totalcoststosociety)becauseofissueswithaggregation

acrossdifferentcostcategoriesandperspectives.

F I g U R E � . � Summary of state of (and potential to improve) information on costs of injury

C O S T P E R S P E C T I v E S :

C O S T C AT E g O R I E S I N D I v I D U A L S A N D FA M I LY E M P L OY E R S g Ov E R N M E N T S O C I E T Y

T R E AT M E N T A N D

R E H A b I L I TAT I O N C O S T S Poor(Medium) Poor(Low) Good(Medium) Poor(Medium)

O U T P U T A N D

P R O D U C T I v I T Y C O S T S Poor (High) Poor(Medium) Good(Low) Poor(Medium)

H U M A N C O S T S Moderate(Medium) Poor(Low) Poor(Low) Moderate*(Medium)

T O TA L C O S T S Poor(Medium) Poor(Low) Poor (High) Poor(Medium)

* Aggregate measure is used

Source:DepartmentofLabour.6

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D ��

A range of further work was identified to produce the cost information identified. This work includes new or

improved data collection, data integration, economic modelling, proper research of the pros and cons of

internationally-recognised measurement approaches, and consideration of the applicability of overseas cost

estimates.

Complexissuessurroundingcostmeasurementaffecttheabilitytoproducesomeofthekeystatistics,including

technicalfeasibility,privacyanddatasecurity,benefit-costoptimisationandthepossibleneedforadditionalbase

dataoranalyticalmodels.TheexpectationisthatStatisticsNewZealand,intheirnewroleasInformationManager,

willberesponsibleformanagingthiscostdataaspartoftheinjurydatabasetheyaredevelopingofintegrated

ACCandNZHISdata.

Theprimary sourceof cost information is administrativedata from theACC. Someuseful cost statistics could

readilybeproducedbyACC,including:

• individuals’lossofpre-injuryearningsfrominjuriesthatarecompensatedbyACC(alsoaproxyfortotalloss

ofpre-injuryearnings)

• treatmentandrehabilitationcostsofinjuriestoACCandothergovernmentagencies(bothactualandlifetime

costs).

AdministrativedatafromtheNewZealandHealthInformationService(NZHIS),InlandRevenueDepartment(IRD),

and the Ministry of Social Development (MSD) also provide substantial insights into costs associated with

treatmentandrehabilitationandlossofoutputandproductivity.

LinkingACCdatawiththeseotherdatasourcesoffersthemostpotentialformeasuringthesecosts—particularly

ataconfidentialisedunitrecordlevel,whichisnecessarytogenerateaverageinformationacrossarangeofinjury

and population groups. Themain areas of potential are improved information about hospital inpatient costs,

comparison of pre- and post-injury incomes and potential incomes to individuals, and indicators of severity/

incapacity of injury, including improved “volume” estimates of loss of life and life expectancy. Statistics New

Zealand has recently confirmed that ACC andNZHIS data can be integrated to a suitable level of quality and

confidentiality.

Bywayofcontrast, thesurvey-basedestimateof theNewZealandvalueofastatistical life (VSL) for transport

injuriesistheonlycurrentsourceofinformationonhumancosts.

Qualitative information on human costs exists for workplace injuries from recent case study research by the

DepartmentofLabourandACC,includingindividual,familyandemployercosts.

ArangeofcoststatisticscouldbeproducedfromlinkingACCwithotheradministrativedata. Inadditiontothe

statisticsproducedfromACCdata,orfromlinkedACCandNZHISdata,thefollowingstatisticsandindicatorscould

alsobeproducedfromavailableadministrativedata,butwouldrequireasignificantinvestmentinresourcesand

expertise,andthecollaborativeeffortofmanyindividualsandagencies:

• Individuals’actuallossofpre-injuryearningsfrominjuries.

• Individuals’lossofpotentialearningsfrominjuries.

• Individuals’pre-injuryandpotentialearningsfrominjuriesthatarecompensatedbyMSD.

• Employers’actuallossofrevenueand/orprofitfrominjuries.

• Lifetimetreatmentandrehabilitationcoststogovernmentagenciesfrominjuries.

• Individuals’levelofpermanentimpairmentfrominjuries.

• Totalcostsofinjuriestogovernment.

• Total costs of injuries to society (an amalgamated estimate from available administrative data and the

NewZealandVSL).

�� T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

Thereportidentifiedthatsignificantinformationgapswouldstillremain.Thesegapsareinrespectofthecostsof

outpatientandemergencyservicestogovernment,mosttreatmentandrehabilitationcoststoindividuals,friction

coststoemployersandhumancoststoindividuals.Inthemain,surveyinformationoffersthebestpotentialto

address these gaps. Future developments in hospital outpatient and emergency department administrative

databasesarealsoapossibility.

There is also a significant information gap in terms of human costs to society outside the transport sector.

Athoroughreviewofdifferentmethodologiesformeasuringthesecostsisrequiredbeforeanapproachcanbe

selected.

Othercostindicatorscouldbeproducedtoaddressthesegaps.Thefollowingindicatorsrequiresubstantialwork,

whichmayoverlapwithworkagenciesarealreadyundertaking(notnecessarilyinrelationtoinjuries).Development

oftheseindicatorsmaybestbeundertakenbyanindependentworkinggrouportaskforceanditisrecommended

thattheyarescopedproperlybyinterestedagenciesandadditionalfundingsought:

• Humancostsofinjuriestosocietyfornon-transportsectorsincluding,butnotlimitedto,investigationofthe

following:

– Willingness topay-basedVSL,eitherusingcontingentvaluation (eg, theNewZealandVSL)or revealed

preferencetheory(eg,wage-riskanalysis).

– Potentialtomonetisehealthoutcomemeasuressuchasquality-ordisability-adjustedlifeyears(QALYs

andDALYs)orlifeyearslosttoinjury(LLIs).

• Treatmentandrehabilitationcoststoindividualsfrominjuries.

• Frictioncoststoemployersfrominjuries.

• Totalcostsofworkplaceinjuriestoemployers.

The following indicator is unlikely to be reliably or efficiently measured, therefore a “go slow” approach is

recommended:

• Humancostsofinjuriestosocietyfornon-transportsectors:

– Developmentofproxiessuchastherateofdivorceandchangeinaccommodationorareaofliving.

– Descriptionof individuals’ experiencesof injuries, and their family and friends’ associatedexperiences

(eg,aspartoffuturecase-studies).

– Investigationofhappinessmeasures.

A“modular”approachwasrecommendedforpopulatingtheCostsofInjuryFramework.Thismeansthatamixof

administrativeandsurveydataandanalyticalapproacheswouldbeused toproduce the injury cost statistics.

A modular approach also requires that there be a process in place to ensure common understanding and

agreementastowhereindependentlydevelopedmeasuresmaptotheframework.

This approach is considered preferable to developing a singlemethodology formeasuring costs for twomain

reasons. First, a solid information base exists and there is considerable scope to use this information better.

Second,agencieshavediverse informationneedsandasinglemethodology formeasuringcosts isunlikely to

adequatelycaterforthisdiversity.

The main advantage of this approach is that it is pragmatic. Different agencies could take responsibility for

producingdifferentpartsoftheframework,accordingtotheircomparativeadvantagewithinjurycostinformation,

existingworkcommitmentsandspecificareasofinterest.

Themaindisadvantageisthatasinglecomprehensivedatabaseofinjurycostswouldnotbeproducedandthat,

withoutactiveandeffectivecoordination,theapproachcouldbecomeadhoc,ratherthanmodular.


� .� MAJOR INTERN ATION AL WORK

Anumberofauthorssince the1950shavestudied thecostsofwork injuriesanddiseases–most focusingon

particular industries, although others have attempted economy-wide analysis. The difficulties of estimating

indirectcostsarewelldocumented,and,ingeneral,methodologiesaresodiversethattheresultsarenotstrictly

comparable.Thatsaid,theWorldHealthOrganization(WHO)andInternationalLaborOrganization(ILO)surmise

thatinternationalestimatesofthecoststogrossdomesticproduct(GDP)ofinjuryandillnessatworkliebetween

threeandfivepercent.7

�.� .� UNITED S TATES

AlandmarkstudyundertakenbyRiceetal8entailedareporttotheUSCongressonthecostofinjuryintheUnited

States.ItwasthefirstextensivecostingtobeundertakenonallinjuriesforallUScitizens.Thework,however,did

notdistinguishbetweenworkandnon-workrelatedincidents.Overadecadelater,Leighetalproducedareport

titledCosts of occupational injuries and illnesses.9This,plusanearlier studybyMiller (1997), “Estimating the

costsofinjurytoUSemployers”,10aretwoofthemostcomprehensiveandcitedstudiescarriedoutinrecentyears

intheUScoveringwork-relatedinjuriesandillnesses.AlthoughsomeofthemethodsaresimilartotheRiceetal

study,itisthesetwolaterstudiesthatarediscussedhere.

Leigh et al (2000)9

TheLeighetalworkisparticularlyrelevant.Thestudywasanattempttoestimatethetotalcostsofoccupational

injuries and illnesses using national data. It claims to be the first to use this data to present estimates of the

incidence, prevalence and costs of workplace-related injuries, illnesses and deaths in the US for 1992. It was

estimatedthatthetotaldirectandindirectcostsassociatedwithinjuriesandillnessesintheUSwasUS$155.5billion.

Thisequatestonearly3%ofUSGDP.Inestimatingcosts,thehumancapitalmethodwasemployed;theauthorsstate

that the costs of pain and suffering could add at least anotherUS$350 billion to the total. Dorman11 of the ILO

considerstheLeighstudytobeconservativeinitscostestimates,andindicatesthattotalcostscouldeasilyhave

been25–50%higher.Table2.2detailsthecostsofinjuryandillnessasestimatedbyLeighetal.

Somepointsofinterestincludethefollowing.

• 91%ofallinjuries/illnessesarenon-fatalinjuries;8%areillnessesand1%deaths.

• Injuriesgenerate85%oftotalcosts,anddiseases15%.

• Directcostsareroughlyonethirdofthetotalandindirect,twothirds.

T A b L E � . � Costs of injury and illness in the US, 1992

C O S T S ( U S $ b I L L I O N ) P E R C E N TA g E S

D I R E C T I N D I R E C T T O TA L D I R E C T I N D I R E C T T O TA L

Injuries 38.4 94.3 132.8 29% 71% 100%

Deaths 0.2 3.7 3.9 5% 95% 100%

Nonfatal 38.2 90.6 128.9 30% 70% 100%

Illnesses 13.4 9.4 22.8 59% 41% 100%

Deaths 8.8 6.3 15.1 58% 42% 100%

Morbidity 4.6 3.1 7.7 60% 40% 100%

Total 51.8 103.7 155.5 33% 67% 100%

Deaths 9 10 19 47% 53% 100%

Nonfatal/morbidity 42.8 93.7 136.6 31% 69% 100%

Note: Totals may not add due to rounding.

Source:Leighetal.9


Intermsofassigningcoststothenumberofinjuryandillnesses,Leighetalclassifydirectcostsasthosewherea

monetarypaymentwasmade,suchasmedicalexpenses forhospitals,physicians,drugsandhealth insurance

administrationcosts.Indirectcostsweredefinedasallothercostsincludinglossofwages,costsoffringebenefits,

loss of home production (such as childcare), employee retraining andworkplace disruption costs. Direct cost

estimatesweregenerallysourcedfromcompensationrelateddata,whileindirectcostswerebasedonavarietyof

sources, including those contained in other literature. Indirect costs for fatalities were discounted to present

values.

AmixofprevalenceandincidenceisusedintheUSstudy.Theincidenceapproachisusedfornon-fataldiseases

andconditions(asitisfornon-fatalinjuries).Theprevalenceapproachisusedforcountingandmeasuringdirect

costs for the six disease categories identified. For indirect costs, the incidence approach is used, as data are

availableforbothfatalitiesandnon-fatalillnesses.Themixofapproachesisconsistentwithotherliteraturecited

byLeighetal,suchasMarkowitzetal12andFahsetal.13

The Leigh et al study is important due to its comprehensive nature, andmany aspects of how the studywas

undertakenwillbedrawnuponandexplainedfurtherinothersectionsofthisreport.Leighhasalsoundertaken

similarstudiesforotherstateswithintheUSusingthesamecostingapproach(Leighetal14,15).

Miller (1997)10

Miller (1997) is theothermajor pieceofwork comingout of theUS.Whilemanyearlier studies assessed the

societal costsofoccupational injuries,Miller’s focuswasonassessingcosts to theemployer.Millerestimated

thatbothonthejobandoffthejobinjuriescostemployersaroundUS$200billioneachyear–orroughlyUS$1,700

peremployee.Ofthis,occupationalinjuriescostemployersthree-quartersofthetotal–roughlyUS$155billion,

orUS$1,400perinjury.

Millerseparatesoutthecostsofinjurytoemployersintothefollowingcategories:

• Medicalpayments–thiscoversemployer-sponsoredhealthinsuranceplanswhichhelppayformedicalcare

fortheinjuredworkerand,potentially,theirdependents.

T A b L E � . � Occupational attributable fractions of conditions

C O N D I T I O N P E R C E N T

Cancer 6–10

Coronaryheartdisease 5–10

Cerebrovasculardisease 5–10

Chronicobstructivepulmonarydisease 10

Renaldisorders 1–3

Nervoussystemdisorders 1–3

Source:Leighetal.9

In termsof theirmethodology, Leigh et al firstly determined the number of injuries and illnesses in particular

categories,andthenmultipliedthesebytheiraveragecosts.Oneofthemajordifficultiesinthisprocesswasthe

determinationofthenumberofoccupationaldiseasesarisingduetooccupationalfactors.Sixdiseasecategories

wereassessed:cancer,cardiovascularandcerebrovasculardisease,chronicrespiratorydisease,pneumoconioses,

nervoussystemdisordersandrenaldisorders.Totalcasesforeachofthesecategorieswerethenmultipliedbya

factor thatexplains theproportionofdiseasesanddeaths towhichoccupationalexposureshavecontributed.

These“attributablefractions”weretakenfromresearchandstudiesundertakenintheUS(seeTable2.3).Withthe

exceptionofpneumoconioses,whichwereassigned100%asanoccupationalcausationfactor,allothercategories

wereassignedafactoroflessthan10%.


• Taxpayments–taxeshelppayinjurycostsforpublicsectoremployees(suchaspolice,firebrigade,etc),as

wellasforotherassistedgroups.

• Wagereplacement–thiscoversemployer-fundedworkers’compensationsschemesthatcoverwagelossfor

work-relatedinjury,sickleaveandotherlong-termdisabilityinsuranceprovidedbythecompany.

• Otheradministrativeandlegalcosts–thiscoverscompensationprogrammeadministration,claimsprocessing,

injuryinvestigationandreporting.

• Motor-vehicleandotherthird-partyliabilityinsurance.

• Workplacedisruptionandlostproductivity.

• Wagepremiumsforrisktaking–thiscoverstheneedtopayhigherwagestoattractemployeesintothemore

riskyjobs.

• Propertydamage–Millerestimatesemployerpropertydamagecostsformotorvehiclescrashes.Howeverhe

indicatesthat,“propertydamageresultsfrommishapsthatmaynotproduceinjuries.Property-damagecosts

arenotinjurycosts”.

Millerestimatesworkplaceinjurycostswithatop-downapproachusingnationalexpendituredata.Wheresuch

costswerenotavailable,otherassumptionsaremade.Specificapproachestotheseemployercostcategoriesare

discussedfurtherinlatersections.

�.� .� UNITED KIN gDOM

IntheUnitedKingdom(UK)anumberofassessmentsofthecostofaccidentsanddiseaseshavebeencarriedout.

Themostrecentandcomprehensiveisthatundertakenin1999byDaviesandTeasdale.16Thestudysetsoutto

“estimatethecoststoindividuals,employersandsocietyofworkplaceinjuriesandnon-injuryaccidentsandof

work-relatedillhealthforBritain”.Thefollowingestimateswerecalculated:

• Thetotalcostofallworkplaceinjuriesandwork-relatedillhealthin1995–96wasestimatedtobeintherange

ofUK£2.9–4.2billion.Thisexcludesnon-injuryaccidentsandpainandsufferingestimates.

• Thetotalcost,includingnon-injuryaccidents,wascalculatedtobeUK£4.4–8.6billion,in1995–96.

• Includingpain,griefandsufferingincreasesthetotalcoststotheBritishsocietytoUK£9.9–14.1billion.Thisis

equivalentto1.4%and2%oftheBritishGDP.

• IncludingthenetpresentvalueofcostsinfutureyearsincreasesthetotalcosttotheeconomytoUK£9–12.6

billion, and total costs to society to UK£14.5–18.1 billion. This equates to around 1.3%–1.8% of GDP, and

2.1%–2.6%ofGDPrespectively.

ItshouldbehighlightedthattheUKstudyassessesbothinjuryincidentsaswellasnon-injuryincidents.Assuch,

propertydamagecostsare included in their calculations,whichdiffersmarkedly fromotherstudies.Costsare

calculatedas losses incurred in1995–96,but theyalso“attempt toestimate... the losses insubsequentyears

caused by working conditions in 1995–96”. This does not include all future illness/injury related-costs. For

example,whereaworkerisforcedtoretirefromtheworkplacein1995–96,thenasfaraspossibleanestimateof

the resource costs over their remainingworking lives is included (discounted to a net present value). TheUK

approachisaprevalence–basedapproach.

Costsderivedaregenerallymultipliedbytheprevalenceofinjuryorillnesstoderivetotalcosts.TheHSEbreaks

costsdownintoindividualcosts,employercostsandsocietycosts.

Theindividualisassumedtoincurthefollowingcosts:

• Financialcosts(lossofincomeand“extraexpenditure”).TheHSEincludeextraexpenditurecostssuchasthe

purchaseofmedicines,traveltothehospitalfortreatmentandincreasedshoppingbills.

• Human costs or loss of quality of life. Awillingness-to-pay approach is used and a figure of UK£766,000


(1995–96price)isusedasthehumancostofafatality(ie,aVSL).Valuesarealsoderivedfornon-fatalinjuries

usingdifferentapproaches.

Theemployerisassumedtoincurthefollowingcosts:

• Employeeabsencecosts(includingthecostofmaintainingoutput,sickpayandadministrativecosts).

• Replacementofpersonnel.

• Materialsandequipmentdamage.

• Compensationandinsurance.

Societyisassumedtoincurthefollowingcosts:

• Lossofoutput.

• Otherresourcecosts(damage,administration,medicalandinvestigationcosts).

• Humancosts.

TheHSEdoesnotdistinguishbetweendirectandindirectcosts.Theyareconcernedwithcalculatingtotalcosts

foreachofthethreegroups(ie,individual,employerandsociety).Transferpaymentsfromthevarioussectorsof

thecommunityarediscussedandincludedtoensurethatdoublecountingofcostsisnotundertaken.Manyofthe

societycoststhereforearederivedasresidualsfromothercomponents.

Generally,theUKHSEmethodologyusesestimatesofthenumberofinjuriesandillnessfor1995–96.Assumptions

aremade regarding the number of working days lost, which are thenmultiplied by the individual cost items

mentionedabove.Manyassumptionsaremadewithrespecttothecostcalculations,primarilybasedonUK-based

work.SomeofthecalculationmethodsusedbytheHSEarediscussedinthefollowingsections.

�.� .� AUS TRALIA

TheIndustryCommissionreport4mentionedinSection2.1.3wasasignificantreportwhosemethodswereusedby

HeadandHarcourt3toundertakeasimilarcostingforNewZealandand,untilrecently,alsoformedthebasisfor

AustralianestimatesbytheformerNationalOccupationalHealthandSafetyCommission(NOHSC),nowtheOffice

oftheAustralianSafetyandCompensationCouncil(OASCC).

TheothersignificantAustralianpieceofworkwasundertakenbytheMonashUniversityAccidentResearchCentre

withareporttitledThe cost of injury to Victoria.17Theaimofthisstudywastodescribetheepidemiologyofinjury

acrossallseveritylevelsandtoestimatethetotallifetimecostsofinjurytotheVictoriancommunity.Itassesses

the lifetimecostof injury forallworkandnon-workrelatedcase incidents in1993–94usingthehumancapital

approach.Resultsindicatethat,in1993–94:

• totallifetimecostswere$2.583billion

• ofthis,29%weredirectcostsand71%indirect

• mortalitycostsaccountedfor45%oftotalindirectcosts,andmorbidityaccountedfor55%

• ofallinjuriesinVictoria,11%wereestimatedtobework-related.

Direct costs were identified as those relating to actual injury-related expenditure such as medical bills,

rehabilitationandtreatmentcosts.Indirectcostsincludedlostoutputduetodecreasedproductivity(morbidity)

andprematuredeath(mortality),lossoffutureproduction,theunpaidcontributionofvictimstotheirhousehold

andtheproductivetimelostbycare-giversofchildinjuryvictims.

TheirhumancapitalapproachfollowsworkdonebyRiceetal.8


Access Economics (2004) report for NOHSC

Inearly2004,AccessEconomicsundertookanalysisforNOHSCtoreviewtheearlier1995IndustryCommission

methodology,leadingtothedevelopmentofanewmethodologyforcostingoccupationalinjuryanddiseaseand

arevisedestimatefortheyear2000–01.5,18

The NOHSC Office had developed a preliminary estimate of the cost of workplace injury and disease to the

Australian economy in 2000–01 of around $35 billion, based on methodology developed by the Industry

Commissionin1995.AccessEconomicsreviewedthemethodologyanddataonwhichthatestimatewasbased,in

light of the international andAustralian literature, and identified strengths andweaknesses.The reportmade

some suggestions for enhancing and extending the methodology, and resolving some key issues in areas of

interest. Implementing these suggestions, a revised estimate was calculated of $33.2 billion (5.0% of GDP).

If,basedonrecentmethodologicaladvances,anestimateofthecostofpainandearlydeathisadded,thetotal

costtotheeconomywouldincreasebyatleast$57billion.Thelargecontributionofpainandearlydeathisinline

withthefindingsofleadinginternationalstudies.

Thereviewconfirmedthat it issensibletouseanincidenceapproach(ie,toattributethewhole-of-lifecostsof

eachworkplaceincidenttotheyearinwhichitoccurs).Italsorecommendeddistinguishing:

• compensatedfromuncompensatedcases

• injuryfromdisease

• (five)differentseveritycategories

• typesofcosts

• whobearsthecost(employer,workerorsociety).

Itsuggestedthat:

• thedistinctionbetweendirectandindirectcostsisnotparticularlyhelpful

• more work could be done in refining some of the estimates for uncompensated workers, where blanket

assumptionsaresometimesused,forexample,inrelationtotheaverageweekslostperincident.Casestudies

mayassistinthisarea,asitisasignificantdriverofsomecostitems.

Thereportrecommendedamorestructuredcategorisationofcoststhatdistinguishedrealeconomiccostsfrom

financialtransfers.Thisisimportantsincethetotaleconomiccostisthatoftherealresourcesthatareusedwhen

thereisanoccupationalincident,whilethetransfersarefinancialflowsthatimpactonwhobearsthecost,butnot

itsoveralllevel.Thisavoidspreviousdouble-countingandmisallocation,forexample:

• includingbothhumancapitalcostsandlifetimelostearnings,wheretheformerisarealcostwhilethelatter

isthecomponentbornebytheworker

• includingwelfarepaymentsandtaxationlossesaspartoftotalrealcosts,whentheyareinfacttransfersfrom

societytotheworker.

Thereportalsorecommendedusingalowerrealdiscountrate(1.55%),whichincreasesthepresentvalueoffuture

coststreams,offsettingtheremovalofthedouble-countingeffectmentionedabove.

Thereportidentifiedsixconceptualcostgroups,consistentwiththethrustoftheliterature,whereeachgroupcan

beviewedascontributingatotalnetcosttoAustralia.Withineachgrouptheremaybeflowsbetweenthe“burden-

bearers”–employers,workersandsociety.Howeachitemiscalculatedwillthendependontheavailabledata,

knowingthat,foreachitem,theidentitymustbesatisfiedthatthetotalequalsthesumoftheparts.Thisprovides

integritywithinthesystem,aswellascross-checks.Theconceptualgroupsareoutlinedbelow.

• Production disturbance costs (A$1.4 billion)comprisethevalueofproductionlostbetweentheincidentand

whenaworkereitherreturnstoworkoris(fullyorpartially)replaced,aswellasthestaffturnovercosts.Staff


turnovercostistreatedasacost“broughtforward”,andalowerestimateofthiscostissuggestedthanNOHSC

(6months’ rather than a full year’swages).The employer bears a significant proportionof theproduction

disturbance cost burden (A$600 million) through overtime premium payments, sick leave and employer

excesspayments.UseoftheAustralianBureauofStatistics(ABS)averageweeklyearnings(AWE)andaverage

weeklyordinarytimeearnings(AWOTE)measureswererecommended(NOHSChaddevelopedmorecomplex

measures),andanupdatedon-costpremiumof12.5%wasusedratherthantheformer25.4%.

• Human capital costs (A$25.7 billion)arethemostimportantsingleitem,reflectingthelostproductivecapacity

oftheworkeroverthelongerterm–untilretirementage.A$11.7billionofthiscostisbornebyworkersthrough

lowerincomes,whileA$14billionisbornebysocietythroughwelfarepayments($4.8billion),taxationlosses

($4.3billion)andcompensationpayments(around$4.8billion).

• Medical costs (A$2.0 billion),includingrehabilitationcostsofA$1billion,coverthehealthand“returntowork”

expensesoftheworker.Thesemaybeunderstatedsinceitisuncleartheextenttowhichthecompensation

data are capturing unbilled transactions, such as treatment at public hospitals, as well as private health

insuranceclaimsorothergaps.Theseamountsmaybelarge,soitcouldbeusefultodomoreworktorefine

thisitem,sincetheonlywaytoestimatethetotalisasthesumofthepartsbornebytheemployer,workerand

society.

• Administration costs (A$1.4 billion in total) include legal costs (A$454m), thecostof investigatingclaims

andadministrationofthecompensationsystem(A$524m),travelcostsforworkers(A$419m)andthecostof

bringingforwardfunerals(A$8m).Theseitemstendtobesmaller,andtheNOHSCmethodologywasretained

inmostcases,withonlyminorrefinements.

• Transfer costs (A$1.5 billion in total)arethedeadweightcostofadministeringthewelfaresystem(A$257m)

and the efficiency losses associated with the need to fund additional welfare payments and replace lost

incometax(A$1.1billion)followingoccupationalincidents.

• Othercostsresultfromchangestothescopeoftheestimates:

– Costs of damage to propertyareconceptuallydifferentandoutsideofthescopeofmeasuringthecosts

ofoccupationalincidentsthatresultininjuryorillnesstohumans.Itmay,however,beusefultocostthese

itemsinadifferentcontext.Similarly,theloss of goodwillconsequentoninjuryordiseasewasconsidered

unlikelytobesubstantialorreadilymeasured.

– Recommendedforinclusion,however,wasthereal costs of carers (A$895m) and of aids and modifications

(A$281m) that canbe requiredby formerworkerswhodevelopdisabilities as a result of occupational

incidents.Variousdatasourcesweresuggestedforthiscostitem.

– Themajor recommendationof the reportwas to includeanestimateof the cost of suffering and early

death,utilisingwillingness-to-paymethodologyandtheconceptofthevalueofastatisticallife(VSL).This

producesresultsinlinewiththosefromamajorrecentstudyintheUS,inthatthiscostitemissubstantially

higherthanalltheothercostitemsputtogether,rangingfrom$57billiontoasmuchas$126billion.Since

theunderlyingconceptsandtheirmeasurementarestillsomewhatcontroversial, itwassuggestedthat

thiscostitembeseparatelyidentified.

The report accepted the existent approach of identifying the numbers of people in each sub-category and

multiplyingbytheaveragecostforeachsub-category.Itisthusimportanttohaverobustestimatesfor“N”,the

numberofpeople ineachsub-category.Theseweresourced from theNOHSCNationalDatasetandAustralian

BureauofStatistics(ABS)data.

• NOHSCwasrightlyconcernedaboutpotentialunderstatementofdiseasecases.Whencross-checkedagainst

averyconservativeestimateusingattributablefractions(theproportionoftotaldiseaseincidenceattributable

to occupational exposures), the number of disease cases appeared to be understated by at least a third.

However,relativetothetotalincludinginjury,thisisamuchmoreminorunderstatement(4%),althoughitwas

notedthattherangeisbroad(upto48%)andmoreworkneedstobedoneinthisarea.


• Offsetting this increase, the estimate of the number of uncompensated injury cases in the least severe

categorywasreducedby17,300peoplewhostatedintheABSSurveythattheydidnotreceivecompensation

fortheirinjurybecausethey“feltitwasinconvenientorinvolvedtoomucheffortorpaperwork”.

• Overallitwasestimatedtherewerejustunder350,000occupationalincidentsin2000–01,alittlelowerthan

NOHSC’sestimateof353,000,butstillaround3.8%oftheworkforce.Thisestimateincludedaslightlylower

proportionofpeopleintheleastseverecategory.

EmployersboreanestimatedA$1billion(3%)ofthetotalcosts.WorkersborearoundA$13.7billion(41%)and

society– through thecompensationsystemandgovernmentsector–boreA$18.5billion (56%).However, it is

importanttonotethatemployersalsopaytheworkers’compensationpremiumsfromwhichsocietymeetsinpart

itslion’sshare.Werean“exante”measurementapproachadoptedratherthanan“expost”one,thecommunity

sharewouldbelower(around35%)andtheemployersharewouldbehigher(around24%),sinceoverA$7billion

extrawouldbebornebytheemployers.Employers,inturn,maypassonthehigherpremiumsinhigherprices,or

mayusethemtonegotiateloweroverallwageandsalarypayments.Thus,ingeneralequilibrium,thecompensation

costsarespreadacrosstheeconomy.

�.� C OS TIN g ISSUES

It isworth identifyinga fewkeydefinitionalandconceptual issuesup front,since theedgesof the taskmight

otherwisebefuzzy.First,itisthecostofworkplaceincidentsinvolvinginjuryorillnessofhumansthatissought.

Thusinjuriesorillnessesprimarilydevelopedoutsidetheworkplaceareexcluded.

Itshouldalsobestatedupfrontthatnotallincidentsrelatetodeficienciesbytheemployer.Employersmaymeet

allguidelines,butincidentscanstilloccurthroughpersonalnegligenceorforotherreasons–“actsofGod”–as

theydoathomeorelsewhere.

�.� .� C OMPENSATED AND UN C OMPENSATED C ASES

Forincidentsthatarecompensated,thereisaclearlegalbasisforinclusioninthecostestimates.However,notall

incidentsleadtoaformalcompensationclaim,althoughmanyofthesemaywarrantinclusion.Forexample:

• injuriesorillnessoftheself-employed,whoarenotpartofacompensationscheme

• informationorculturalasymmetrieswhereaworkerortherelativesofaworkerareunawareoftherightto

claimorprosecute,orunawareoftheepidemiologicallinkagesbetweentheirconditionandriskfactorsfrom

theirworkplace

• choicesnottoclaimorprosecuteforpersonalorotherreasons

• incidentsinvolvingbystanders

• conditionsthatareonlyuncoveredsometimelater,andtherelevantfirmoremployernolongerexists.

�.� .� T IME DIMENSIONS FOR AN ALYSIS

Thetimingofwhen injuriesoccurandwhen illnesses/diseasesarediagnosed,andtheallocationof thesetoa

periodofanalysis, isoneof the first issues tobe resolvedby researchers.Forexample,an illnessmaynotbe

diagnosedatthetimeoftheinitialonsetofthedisease,andisunlikelytobelinkedtoaworkplacecauseatthe

time of diagnosis. In addition, costs associated with a particular illness/diseasemay be incurred prior to its

diagnosis. As stated by Weil,19 “the diagnosis of an illness may not signal the beginning of the economic

consequencesassociatedwiththatillness”.

� 0 T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

Similarly,accidentsorinjuriesoccurringinoneyearmaynotbereporteduntilalaterdate,particularlywhereclaims

forcompensationtaketimetoprepare.Freemanetal20foundthat,intheUS,99%ofinjuriesand86%ofclaimed

illnesseswerenotreportedtotheappropriateauthoritiesuntiltheendofthesecondyearfollowinganincident.

Therearetwoapproachesidentifiedintheliterature19,20dealingwithwaysofmeasuringcompensatedoccupational

injuriesandillnesses:

• Incidence approach – This approach assesses the number of people entering the workers’ compensation

system in a particular year. It generally assesses the number of accidents and illnesses diagnosed for a

particularyearandtheassociatedcosts(bothcurrentandexpectedfuturecosts)areassignedtothatyear.

Thisisdescribedasa“bottom-up”approachtotheallocationofcosts.

• Prevalence approach–Thisapproachassessesthenumberofpeople“withinthesystem”atagivenpointintime,

regardlessofwhentheinjuryoccurredorillnesswasdiagnosed.Costsaregenerallyallocatedinatop-down

manner,wheretotalexpendituresforagivenyearareproportionedacrossthecategoriesofinjury/illness.

Incidenceandprevalenceapproachescanalsoconceptuallyapplytototal(includinguncompensated)incidents

andcosts,notjustthoseinthecompensationsystem.

Untilmorerecently,theprevalenceapproachwasgenerallyusedtoallocatetotalknowncostsforagivenyear.

Miller10 is one example of the top-down prevalence-based approach to allocating national expenditure data.

TheUKHSEwork16isanotherprevalence-basedapproach,althoughitthenusesamixoftop-downandbottom-up

approachestodeterminingcosts.Leighetal9usetheincidenceapproach.Theliteratureprovideslittleguidance

astowhatapproachshouldbeadopted.Thereappears tohavebeenamoveawayfromtheprevalence-based

approachandtotheuseoftheincidenceapproach(ifdataallows)inthemorerecentandcomprehensivearticles

such as the Leigh et al study. The distinction between the incidence and prevalence approaches becomes

particularlyrelevantwhenassessingdiseasecosting.Asstatedearlier,Leighetaluseamixofapproaches.

There isaneed tochoosebetweenan incidenceandprevalenceapproach,and then to refine theapproach to

ensurethatcostsareallocatedconsistentlytothecorrectyear.Forourbaseyear,wecanchoosetoattributecosts

onthebasisthatthiswastheperiod:

• whenthepersonenteredthecompensationsystem(directincidenceapproach)

• whenanincidentoccurred/wasregistered(totalincidenceapproach)

• whenapersonwasinthecompensationsystem(directprevalenceapproach),or

• whenapersonwassufferingfromawork-relatedinjuryorillness(totalprevalenceapproach).

TheACCdatatrackboththedateoflodgementofaclaimandthedateofoccurrence.Thedatasourcesthuslend

themselvestoutilisationofanincidenceapproachtomeasurementofcosts,asdepictedinFigure2.2foragiven

baseyear.

F I g U R E � . � Incidence cf. prevalence approaches to incidents and costs

PA S T b A S E Y E A R F U T U R E

Prevalencecosts=A+B+C;Incidence=C+presentvalueofC*

AA*

B*

C

B**

C*

B


ConsiderpersonA,whowasinjuredinthepast(say,1990)andenteredthecompensationsystemin1991,was

compensated and off work for ten years and died during the base year (say, 2004–05). Although in the

compensation system in 2004–05, he and his associated costs over the whole period (A + A*) would not be

countedforthebaseyearusinganincidenceapproach.PersonBdevelopedawork-relatedillnessbetween1990

and2004–05andreducedwork,althoughwasnotcompensatedfortheillness,retiringin2010.Sheandhercosts

(B+B*+B**)alsowouldnotbecountedusinganincidenceapproach,althoughshetoowouldhaveincurredcosts

during2004–05.PersonCwasinvolvedinanincidentin2004–05,andhencehiscosts(C+C*)wouldbeincluded,

includingthepresentvalueoffuturecosts(C*).Ifaprevalenceapproachhadbeenused,costswouldequateto

thesumoftheareasAplusBplusC,whereastheincidenceapproachyieldsthesumofcostsCplusC*.

�.� .� C OS T CL ASSIF IC ATIONS

Manystudieslookintotheaspectofclassifyingspecificcostsrelatingtoworkplaceinjuriesandillnesses,without

actually measuring those costs. Examples of classifications include direct versus indirect costs, fixed versus

variablecosts,andinsuredversusuninsuredcosts.

Theclassificationsystemusedisparticularlyimportanttoensurethatastructureexistssuchthatdouble-counting

ofbroadtypesofcostsisavoided.Itisnecessarytodistinguishrealcostsfromtransfercosts.Realcostsuseup

realresources,suchascapitalorlabour,orreducetheeconomy’soverallcapacitytoproducegoodsandservices.

Transfer costs involve payments from one economic agent to another and do not use up real resources, for

example,a legal fineorpenalty isacost incurredbytheemployerbuttransferredbacktothecommunity.This

important economic distinction is pivotal in avoiding double-counting, yet the literature reviewed (except for

Australia)isfairlysilentonthematter,particularlywithrespecttotransfercosts.Itiswhencostsareclassifiedinto

different categories (such as the employer/employee/community split) that the potential for double-counting

occurs,particularlywhenusinganincidenceapproach.TheUKstudyconsideredtransfercostsinordertoensure

double-countingdidnotoccurbetweentheclassificationofcoststoemployers,employeesandthecommunity.16

The system of classifying costswill depend upon the purpose of carrying out the study. The ILO highlights a

numberofclassificationsystems.11

Economic versus non-economic costs

EconomiccostsareclassifiedbyDormanasthosethatcanbecalculatedinsomemanner.Theyencompass“loss

of goods and services that have a price in themarket or that could be assigned an approximate price by an

informedobserver”.Non-economiccostsincludetheemotionalcosttothevictimandtheirfamilyandthedamage

tosocialvalues.

Dorman’sdefinitionofeconomiccostsleavessomeroomforinterpretation,relatingmoretofinancial,measurable,

calculableortangiblecosts.Inapuristsense,economiccostsneednotbetangible/calculable,butnonetheless

reflectwhat is given up in order to gain something else (opportunity costs). Thus, inNew Zealand,Head and

Harcourt3andDOL6rightlytreat lossofwellbeingasa(socio)economiccost,andthenmakeafurthercomment

relating tomeasurability.Moreover, asmethodologies evolve to bettermeasure socioeconomic costs such as

wellbeing,thisdistinctionbecomesabitofamovingfeast.

Fixed versus variable costs

Thisapproachdifferentiatesbetweenthosecoststhatremainconstant,irrespectiveofthelevelofseverityofan

injury/illness,andthosethatvarywithseverityorincidence.Here,overheadcostsforinsuranceandregulation

systems are allocated to the fixed category, while variable costsmight include insurance rates thatmay vary

becauseofachangeinclaims.Thesignificanceofthisclassificationisthatitcanaidinthedeterminationofthe


economicincentiveformanagerstoreducethelikelihoodofincidents.Thatsaid,itisnotparticularlyrelevantto

thisanalysisandnotfurtherdiscussed.

Ex ante versus ex post costs

Yetanotherdistinctionisbetweenexanteandexpostcosts.Thisdistinctionprovidestwowaysofmeasuringthe

samething.Forexample,anexantecostmightbeworkers’compensationpremiumsascomparedtotheexpost

costofworkers’compensationpayments.Theexpostversiontendstobemorecommonformeasuringworkers’

compensation,duetogreatereaseofdatacollection,however,eithercouldconceptuallybeusedtomeasurethe

non-compensated,orindirect,costs.Theconceptualissueisnottoincludebothmeasuresanddoublecount.

Someclassificationsaremorecommonthanothersandthesearediscussedbelow.

Direct and indirect costs

Generally,thedistinctionismadeintheliteraturebetweendirectandindirectcosts.Typically,specificcostsare

identified as direct costs, and all others are indirect. The cost lists, however, vary between different studies,

makingcomparisonsofresultssomewhatdifficult.

Leighetal9identifydirectcostsasmedicalcosts(includingpaymentstodoctors,hospitalsanddrugcompanies)

and insurance administration. Insurance administration costs cover overheads for running either an insurance

agencyorequivalentgovernmentagency.Directcoststhereforerepresentactualdollarsspentoranticipatedtobe

spentonprovidingmedicalcareandadministeringtheinsurancesystem.Indirectcostsconsistprimarilyoflost

wageswhileworkerscannotwork,pluscostsoffringebenefits,retrainingandworkplacedisruption.

Dorman11alsooutlinesadirectversusindirectclassificationofcosts.Heclassifiesdirectcostsasthosethatare

identifiable, costed and attributed to a firm’sOHS system, that is, the costs that aremeasured and allocated

throughafirm’sroutineaccountingsystem,forexample,legalcostsandinsurancepremiums.Allothercostsare

indirect. The significance of this classification is that is helps to determine whether a manager will actually

perceivetheeconomicincentivesthatactuallyexist.

Bradyetal21publishedastudyaimingtoinformmanagementonhowtodefine,measureandpredicttheirtotal

healthandsafety costs.Theyuseadirectversus indirect cost categorisation.Costsareclassifiedby (1)direct

costs, (2) indirectcosts related toaspecific illnessor injury,and (3) indirectcosts related tootherhealthand

safety requirements, but not related to a specific illness or injury. Brady et al conclude that, based on their

literaturereview,itbecameclearthat“directhealthcarecostscanbedefinedandmeasuredmorereadilythan

indirectcosts”andthat“[their]studyrevealedconsiderablevariationinthedefinitionofindirectandtotalhealth

andsafetycosts”.Itisinterestingtonotethattheystate,andweconcur(andhencetheadoptionofthispractice

inAustralia), that it ismore important to includeanestimateofall costs, than todefine themaseitherdirect

orindirect.

Whilemoststudiesdefinedirectcostsasthosethatinvolveaformofactualmonetarypayment,indirectcostsare

moredifficulttodefine,varyconsiderablybetweenanalysesandgenerallydonotincludeestimatesofpainand

suffering.Weconcludefromthisthatthedistinctionbetweendirectandindirectcostsisnotnecessarilyauseful

distinctiontobemade,particularly ifcomparisonstoothercountriesarerequired.Amoreusefuldistinction is

likelytobecompensatedversusuncompensated,whichismorereadilydefinable.

Classification by who pays

Bergeretal22arguethatvaluingindirectcostsisa“matterofperspective”betweentheindividual,societyandthe

employer:

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D � �

• Froman individual/worker’sperspective, indirectcostsarethoseassociatedwith lostor impairedabilityto

workorengageinleisureactivities,aswellascoststodependants.

• Fromsociety’sperspective (which is themorecommonperspective takenwhenresearchersassess indirect

costs),themeasurementofcostsisbasedonthevalueofanindividual’sworkandtheircontributiontosociety.

Thisisgenerallymeasuredintermsofaperson’spotentialincomegeneration,whichcanthenbeclassified

intomortalitycosts(thepresentvalueofforgonefutureincome)andmorbiditycosts(measuredaslostincome

frommissedwork).

• Fromtheemployer’sperspective,thevalueofmorbidityandmortalityshouldonlyincludethosecostsincurred

bytheemployer.Forexample,worklosscostsmightincludehigherwages,lostproduction,idleassetsand

othernon-wagecosts.Withmortality,costsmightincludethecostofrehiringandretraining.Thisdiffersfrom

thesocietalperspectiveinthatitexcludesthepresentvalueoffutureearnings.

Internal versus external costs

Dorman11discussesafurtherclassificationofcostsonthebasisofinternalversusexternalcosts.Thisdistinction

ismadedependingupon“whether thecost ispaidby theeconomicunit thatgenerates it”, inwhichcase it is

classifiedasaninternalcost,otherwiseitisanexternalcost.

Thesignificanceofthisclassificationisthatitassessesthegapbetweentheeconomicincentivesoftheemployer

andsociety to reduce incidents.As statedbyReville,23 “by creatinga safeworkingenvironmentandproviding

workerswithequipment,employersmayhavegreaterabilitytocontrolthenumberandseverityofinjuriesthan

workershave, and therefore, accurate estimationof the full costs to employers is critical for educationof the

employercommunityandforthedesignofpoliciesintendedtoimprovesafety.”

This categorisation provides a useful distinction in costs, particularly for separating out the costs borne by

employers,theindividualandthecommunity,andisbecomingwidelyutilised,includinginAccessEconomics5and

inthisanalysis.

Classification by severity of the impacts of the incident

AccordingtotheIndustryCommission,482%ofallcostsaredueto13%ofincidents.24Forthisreasonitisimportant

tosub-categorisecostsatamoredetailedlevel,viathenatureofinjuryorseverityofinjury.

Leighetal9classifyincidentsasfollows:

• Deaths

• Non-fatalinjuries

– Non-disabling

– Disabling

- Permanenttotaldisability

- Permanentpartialdisability

- Temporary(totalandpartial)disability

- Onetosevendayslost

• Hospitalisations.

Theuseofthisclassificationsystem,asopposedtotheuseofthenatureofinjury,wasduetotheavailabilityof

cost-relateddata.

Weil19alsodescribesaclassificationsystemaccordingtotheseverityoftheincident,asfollows:

• Fatality

• Impairment

– Short-spell,fullreturntowork


– Short-spell,changeinearnings,withreturntowork

– Long-spell,changeinearnings,withreturntowork

– Long-spell,workinstability

– Withdrawalfromthelabourmarket.

Inthisanalysis,weconsultedwithACCanddecidedonacostclassificationbyseveritythatwasamenabletotheir

data.ThisclassificationispresentedinSection3.3.2.

�.� .� vALUIN g L IFE AND HEALTH

SinceSchelling’sdiscussionof theeconomicsof life saving,25 theeconomic literaturehasproperly focusedon

willingness-to-pay (willingness-to-accept)measures ofmortality andmorbidity risk. Using evidence ofmarket

trade-offsbetweenriskandmoney,includingnumerouslabourmarketandotherstudies(suchasinstallingsmoke

detectors,wearingseatbeltsorbikehelmetsetc),economistshavedevelopedestimatesofthevalueofastatistical

life(VSL).

The willingness to pay approach estimates the value of life in terms of the amounts that individuals are

prepared topay to reduce risks to their lives. Itusesstatedor revealedpreferences toascertain thevalue

peopleplaceonreducingrisktolifeandreflectsthevalueofintangibleelementssuchasqualityoflife,health

and leisure.While itovercomes the theoreticaldifficultiesof thehumancapitalapproach, it involvesmore

empiricaldifficultiesinmeasurement.26

ViscusiandAldy27summarisetheextensiveliteratureinthisfield,mostofwhichhasusedeconometricanalysisto

valuemortalityriskandthe“hedonicwage”,byestimatingcompensatingdifferentialsforon-the-jobriskexposure

inlabourmarkets,inotherwords,determiningwhatdollaramountwouldbeacceptedbyanindividualtoinduce

him/hertoincreasethepossibilityofdeathormorbiditybyx%.TheyfindtheVSLrangesbetweenUS$4million

andUS$9million,withamedianofUS$7million(inyear2000USdollars),whichissimilarbutmarginallyhigher

than theVSLderived fromUSproduct andhousingmarkets, and alsomarginally higher thannon-US studies,

althoughallinthesameorderofmagnitude.Theyalsoreviewaparallelliteratureontheimplicitvalueoftherisk

ofnon-fatalinjuries.

Aparticularlifemayberegardedaspriceless,yetrelativelylowimplicitvaluesmaybeassignedtolifebecause

ofthedistinctionbetweenidentifiedandanonymous(or‘statistical’)lives.Whena‘valueoflife’estimateis

derived,itisnotanyparticularperson’slifethatisvalued,butthatofanunknownorstatisticalindividual.28

Weaknesses in this approach, as with human capital, are that there can be substantial variation between

individuals.Extraneousinfluencesinlabourmarketssuchasimperfectinformation,orincome/wealthorpower

asymmetriescancausedifficultyincorrectlyperceivingtheriskorinnegotiatinganacceptablyhigherwage.

ViscusiandAldy27donotincludeanyNewZealandstudiesintheirmeta-analysis(andwewereunabletolocate

any)buttheydoincludetwoAustralianstudies,notablyKniesnerandLeeth29oftheAustralianBureauofStatistics

(ABS),withVSLofUS2000$4.2million,andMilleretal10oftheNationalOccupationalHealthandSafetyCommission

(NOHSC),withquiteahighVSLofUS2000$11.3m–19.1million(ViscusiandAldy,27Table4,pp92-93).Thereisalso

the issue of converting foreign (US) data to New Zealand dollars using either exchange rates or preferably

purchasingpowerparityandchoosingaperiod.

AccessEconomics30presentsoutcomesofstudiesfromYaleUniversity31–whereVSLisestimatedas$US2.66m;

UniversityofChicago32–US$5m;andCutlerandRichardson33–whomodelacommonrangefromUS$3millionto

US$7m,notinga literaturerangeof$US0.6millionto$US13.5millionper fatalityprevented(1998USdollars).


Theseeminentresearchersapplydiscountratesof0%and3%(favouring3%)tothecommonrangetoderivean

equivalentof$US75,000to$US150,000forayearoflifegained.

DALYs and QALYs

Inanattempt toovercomesomeof the issues in relation toplacingadollarvalueonahuman life, in the last

decadeanalternativeapproachtovaluinghumanlifehasbeenderived.Theapproachisnon-financial,wherepain,

suffering and premature mortality are measured in terms of disability-adjusted life years (DALYs), with 0

representingayearofperfecthealthand1representingdeath–theconverseofaQALYorquality-adjustedlife

year,where1representsperfecthealth.ThisapproachwasdevelopedbytheWorldHealthOrganization(WHO),

theWorldBankandHarvardUniversityandprovidesacomprehensiveassessmentofmortalityanddisabilityfrom

diseases,injuriesandriskfactorsin1990,projectedto2020.34Methodsanddatasourcesaredetailedfurtherin

Murrayetal.35

TheDALYapproachhasbeenadoptedandappliedinNewZealandbytheMinistryofHealth36andinAustraliaby

theAustralianInstituteforHealthandWelfare(AIHW).37Prematuremortality(YLL)andmorbidity(YLD)components

are separately identified. In any year, the disabilityweight of a disease (for example, 0.18 for a brokenwrist)

reflectsarelativehealthstate.Inthisexample,0.18wouldrepresentlosing18%ofayearofhealthylifebecause

oftheinflictedinjury.

MartinTobiasandtheNewZealandBurdenofDiseaseStudy(NZBDS)teamutilisedtheglobalandAustralian

studies toestimate theburdenofdisease forNewZealand.36EstimatesofYLL,YLDandDALYs forover100

conditions in nine age groups for both genders and two major ethnic groups (M-aori and non-M-aori) are

providedfortheyear1996.

The DALY approach has been successful in avoiding the subjectivity of individual valuation and is capable of

overcoming the problem of comparability between individuals and between nations, although nations have

subsequentlyadoptedvariationsinweightingsystems.

ThemainproblemwiththeDALYapproachisthatitisnotfinancialandisthusnotdirectlycomparablewithmost

other cost measures. In public policy-making, therefore, there is always the temptation to re-apply a financial

measureconversiontoascertainthecostofaninjuryorfatality,orthevalueofapreventivehealthintervention.

Suchfinancialconversionstendtoutilisewillingness-to-payorrisk-basedlabourmarketstudiesdescribedabove.

TheAustralianDepartment ofHealth andAgeing38 (basedonworkbyApplied Economics) has adopted a very

conservativeapproachtothisissue,placingthevalueofahumanlifeyearataroundA$60,000perannum,which

islowerthanmostinternationallowerboundsontheestimate.

InordertoconvertDALYsintoeconomicbenefits,adollarvalueperDALYisrequired.Inthisstudy,wefollow

thestandardapproachintheeconomicsliteratureandderivethevalueofahealthyyearfromthevalueoflife.

Forexample,iftheestimatedvalueoflifeisA$2million,theaveragelossofhealthylifeis40years,andthe

discount rate is 5 per cent per annum, the valueof a healthy yearwouldbe$118,000.ii Tolley, Kenkel and

Fabian39 review the literature on valuing life and life years and conclude that a range of US$70,000 to

US$175,000perlifeyearisreasonable.InamajorstudyofthevalueofhealthoftheUSpopulation,Cutlerand

Richardson40adoptanaveragevalueofUS$100,000in1990dollarsforahealthyyear.

Althoughthereisanextensiveinternationalliteratureonthevalueoflife,41thereislittleAustralianresearchon

thissubject.AstheBureauofTransportEconomics(BTE)26notes,internationalresearchusingwillingnessto

payvaluesusuallyplacesthevalueoflifeatsomewherebetweenA$1.8andA$4.3million.Ontheotherhand,

values of life that reflect the present value of output lost (the human capital approach) are usually under

$1million.

ii In round numbers, $2,000,000 = $118,000/1.05 + $118,000/(1.05)2 + ... + $118,000/(1.05).[Theactualvalueshouldbe$116,556,not$118,000

eveninroundnumbers.]


TheBTE26 adopts estimatesof $1million to$1.4millionper fatality, reflecting a 7 per cent and4per cent

discount rate respectively.Thehigher figureof$1.4million ismadeupof lossofworkforceproductivityof

$540,000,lossofhouseholdproductivityof$500,000andlossofqualityoflifeof$319,000.Thisisanunusual

approach that combines human capital and willingness to pay concepts and adds household output to

workforceoutput.

Forthisstudy,avalueof$1millionandanequivalentvalueof$60,000forahealthyyearareassumed.iiiInother

words,thecostofaDALYis$60,000.Thisrepresentsaconservativevaluationoftheestimatedwillingnessto

payvaluesforhumanlifethatareusedmostofteninsimilarstudies.iv

Asthecitationconcludes,theestimateofA$60,000perDALYisverylow.TheViscusi41meta-analysisreferredto

reviewed studies with values of a human life ranging between $US0.5 million and $US16m, all in pre-1993

USdollars.Eventhelowestofthese,convertedto2003Australiandollars,exceedstheestimateadopted(A$1m)

bynearly25%.TheBTEstudy26citedtendstodisregardtheliteratureatthehigherendandalsoadoptsarange

(A$1–$1.4m)belowthelowerboundoftheinternationalrangethatitidentifies(A$1.8–$4.3m).

The rationale for adopting very lowestimates is notprovidedexplicitly. Certainly it is in the interestsof fiscal

restraint to present as low an estimate as possible. That said, in OHS applications, low valuation of human

lifecan leadtoanunder-investment insafetymeasures,andwebelieve it issensibletoadoptamorerealistic

VSLmeasure.

Themajorityof the literaturedetailedabove supportsVSLs in the rangepresented inTable2.4,whichAccess

Economicsbelievesisimportanttoutiliseindiseasecostingapplicationsanddecisions.TheUSdollarvaluesof

the lowerbound,mid-rangeandupperboundare shownat left.The “average”estimate is theaverageof the

range,excludingthehighNOHSCoutlier.Equalweightingsareusedforeachstudybecause:

• theViscusiandAldymeta-analysissummarises60recentstudies

• theABSstudyisAustralian(possiblymorelikeNewZealandthanelsewhere,intheabsenceofNewZealand

studies)

• theYaleandHarvardstudiesarebasedontheconclusionsofeminentresearchersinthefieldafterconducting

literatureanalysis.

Where there is no lowor highUSdollar estimate for a study, themid-rangeestimate is used to calculate the

average.Themid-rangeestimatesareconvertedtoAustraliandollarsatpurchasingpowerparity(PPP,asthisis

less volatile thanexchange rates)ofUSD=0.7281AUD for2003, as estimatedby theOECD.AccessEconomics

concludestheVSLrangeinAustralialiesbetweenA$3.7millionandA$9.6m,withamid-rangeestimateofA$6.5m.

Theseestimateshaveconservativelynotbeeninflatedto2005prices,giventheuncertaintylevels,andwereused

inourworkforNOHSC.Inturn,weconvertthesetoNewZealanddollarsinthefarrightcolumn,usingPPP.

TheVSLrangeinNewZealandliesbetweenNZ$3.9millionandNZ$10.1m,withamid-rangeestimateofNZ$6.9m.

Weconservativelyusethelowestestimate,NZ$3.9m,inthisstudy.

Discount rate

The validity of both the human capital and willingness-to-pay methods rely substantially on the choice of an

appropriatediscountrate.Discountratesrangingbetween0and10%netofinflationeffectsareusedintheliterature,

althoughthemostcommonrangeisaround3%(seeexamplesintheprevioussection).Theperiodofdiscounting

dependslargelyontheagecohort(andhenceyearstillretirement),whichcanalsohaveasubstantial impacton

results,andshouldmatch,ifapplicable,theaverageexpectedagetodeath(orretirement)inthesourcestudy.

iii Theequivalentvalueof$60,000assumes,inbroadterms,40yearsoflostlifeandadiscountrateof5percent.[AEcomment:Moreaccurately

thefigureshouldbe$58,278.]

iv Inadditiontothecitedreferencesinthetext,seeforexampleMurphyandTopel’sstudy(1999)ontheeconomicvalueofmedicalresearch.

[AEcomment.IdenticalreferencetoourMurphyandTopel.32]


T A b L E � . � Estimates of VSL, various years, US$, A$ and NZ$

U S $ m A $ m N Z $ m

L O W E R M I D - R A N g E U P P E R 0 . � � �� . � � � �

ViscusiandAldymeta-analysis27 4 7 9 9.6 10.1

Australian:ABS29 4.2 5.8 6.1

NOHSC18 11.3 19.1

Yale31 2.66 3.7 3.9

Harvard33 0.6 5 13.7 6.9 7.3

Average* 2.9 4.7 7.4 6.5 6.9

* Average of range excluding high NOHSC outlier, using mid-range if no data; conservatively not inflated.

A$ and NZ$ conversions are at the OECD 2003 PPP rate.

Choosinganappropriatediscountrateforpresentvaluationsincostanalysisisasubjectofsomedebate,andcan

vary depending on which future income or cost stream is being considered. There is a substantial body of

literature, which often provides conflicting advice, on the appropriate mechanism by which costs should

be discounted over time, properly taking into account risks, inflation, positive time preference and expected

productivitygains.

Theabsoluteminimumoptionthatonecanadoptindiscountingfutureincomeandcostsistosetfuturevaluesin

currentdaydollarterms,onthebasisofarisk-freeassessmentaboutthefuture(thatis,assumethefutureflows

aresimilartothenear-certainflowsattachingtoalong-termgovernmentbond).

Wagesshouldbeassumedtogrowindollartermsaccordingtobestestimatesforinflation.Inselectingdiscount

ratesforNewZealandprojects,wehavesettleduponthefollowingasthepreferredapproach.

• Positive time preference–Weusethelong-termnominalbondrateof6.0%pa(fromrecenthistoryintrading

of NZGovernment 10-year bonds) as the parameter for this aspect of the discount rate. (If therewere no

positivetimepreference,peoplewouldbeindifferentbetweenhavingsomethingnoworalongwayoffinthe

future,sothisappliestoallflowsofgoodsandservices.)

• Inflation–TheReserveBankofNewZealandhasanagreementwiththeNewZealandgovernmenttopursue

monetarypolicythatdelivers1%to3%inflationonaverageoverthemediumterm.Overthepastfewyears,

inflationhasconsistentlyremainedinthetophalfof thisbandandisexpectedtoremainabove2.5%until

200842andsoweuseanassumptionof2.2%paforthisvariable.(Itisimportanttoallowforinflationinorder

toderiveareal,ratherthannominal,rate.)

Thediscountrateusedisthus:

• 6.0-2.2=3.8%

Wenotethisdoesnottakeintoaccountpotentialproductivitygrowth.

Annualising theVSL of NZ$3.9million in Table 2.4 using the discount rate of 3.8% over an average 40 years

expectedlifespan(theaveragefromthemeta-analysisofwage-riskstudies)providesanestimateofthevalueof

alifeyear(VLY)of$184,216.


�.� .� OTHER ISSUES

Property damage

Propertydamagereferstodamagetoamachine,toolsorotherproperty,orspoilageofmaterialandreplacement

ofequipmentandothermaterials.

Littlewasfoundintheliteratureregardingpropertydamage.Miller10separatesoutemployercostsofoccupational,

off-the-jobandmotorvehicleinjuries,andarguesthat“propertydamagecostsarenotinjurycosts”.Inhisstudy,

employer property damage costs are only calculated for motor vehicle accidents. Occupational crashes are

estimatedtocostemployersUS$38billionperyear,whichisapproximatelyone-quarterthevalueofoccupational

injurycosts.

Although the Industry Commission4 argued for the inclusion of property damage in estimating the costs of

workplaceaccidentsand injury, theywereunable to cost it and,given its lackof support in the literature,we

question the case for its inclusion. As per Access Economics,5 we argue that if property damage were to be

included,thensowouldcostssuchastheattendanceoffire,policeandmedicalvehiclestoanaccident,10evenif

noinjurytohumansweresustainedbutwheneverpropertydamagewasincurred.Insomecases,suchasanafter-

hoursexplosionataplant,forexample,theremaybehundredsofmillionsofdollarsofpropertydamagebutno

humaninjuries.Weconcludethatthiscategoryofcostdoesnotbelonginanestimateofthecostsofworkplace

injuryandillness,whichareessentiallyhumancosts.Itisthusnotincludedinthisstudy.

Figure2.3illustratestheconceptthattherearetwotypesofoccupationalincidents–thoseinvolvinghumans(the

OHSandcompensationrealm)andthoseinvolvingproperty(thebusinessinsurancerealm).Supposethecostof

incidentsinvolvinghumans,butwithoutpropertydamage,isrepresentedbyA,andthecostofincidentsinvolving

bothhumansandproperty isB+CwhereB is thecostofdamage tohumansandC is thecostofdamage to

property.Finally,supposeDisthecostofincidentsinvolvingpropertydamagebutnohumaninjuryordisease,

such as vandalismor a fire after hourswhen no-onewas around. AlthoughB and C are costs from the same

incident, they are nonetheless distinct, and to include the costs for C in estimating human costswould seem

spuriousreasoningunlessonealsoincludedthecostsofD,andestimatedallthepropertyandhumancosts,but

thenthepurposeoftheexercisewouldhavechangedfromtheonewesetouttoaccomplish.Moreover,allthe

propertycosts(allbusinessinsuranceclaimsexceptpossiblytheft)maywelldwarfthehumancosts.

F I g U R E � . � Costs of incidents involving humans and property

Costsofincidentsinvolvinghumans=A+B

Costsofincidentsinvolvingproperty=C+D

A

C

B

D

If,inaseparateanddifferentexercise,allpropertycostsweretobeestimated,possiblyintheprocessseparating

outthosethatinvolveddamagetohumans,thesimplestwayofdoingthatwouldbeeithertheexanteorexpost

fashion– the sumofbusiness insurancepremiumsor claimsacrossNewZealand forproperty theft, accident,

naturaldisasterandotherinsurabledamage.Theremightalsobeanestimateforuninsureditems.

However,ourconclusionisthatthereisnoneedforNOHSACtoestimatepropertydamage,exceptasanitemof

peripheralinterest.


Loss of goodwill and corporate image

As with property costs, this itemwas argued for by the Industry Commission4 but not costed, and has been

identified in other literature as an issue. For example, Allens Consulting Group in Australia recommended to

NOHSC in 2003 that, tomeasure loss of goodwill arising from occupational injury and disease, a case study

analysisbeadoptedofmajorincidents(smallerincidentsareunlikelytobemeasurable)andtheirrelationshipto

changesinsharepricesandchangesinrevenueinensuingmonths(ascomparedtotrend).Allenssuggestedthat

themagnitudewas“likelytobelargeforsomeindividualfirmsthatexperiencehigh-profileincidents,butsmallin

relationtooverallcosts”.

• While some large-scale incidentsmight provide a testing ground for this hypothesis, there are unlikely to

besufficientNewZealandincidentswheredatawouldbeavailableforrobusteconometricanalysesofsuch

trends.

• Onotherevidence,itisdubiouswhetherthecostofmeasuringsuchimpactswouldbeworthwhile,giventhat

theeffectsmaywellbeminor.Just0.5%ofUSmutualfundsaredevotedto“ethicalinvestment”.Inorderto

guideethicalinvestmentflows,thereareanumberofresearchorganisationsthatrankindustrialorganisations

accordingtotheirsocialresponsibility–onlyasubsetoftheseincludesworkersafetyissues.Corporateworker

safetyrecordsdon’tseemtobeasignificantissuewithintheinvestorcommunity–investorindifferencemay

wellreflectconsumerindifference.

AswithAccessEconomics’2004workforNOHSC,5wearescepticalaboutthevaluetobeaddedfromexploring

thisitem,relativetothelikelyeffort,andhavenotincludeditinthisNewZealandstudy.

Theassociationofthelossofgoodwilltoaparticularworkplaceincidentis,inthefirstplace,verydifficulttomake,

andsecondly,thevaluationofthelossisfairlysubjective,oratleastdifficulttoascertain.Goodwillissomething

thatisbuiltupovertimebyacompanyand,althoughawell-publicisedorlargeincidentoraccidentoccurringat

thatcompanywilldamagegoodwill,alesspublicisedincidentmaycausenolosstogoodwill.

Theconceptof includinggoodwillasacostofworkplaceaccidentsand injuries isalsosubjective. Inasimilar

mannertopropertydamagenotnecessarilybeinglinkedtothehumancostsassociatedwithaworkplaceincident,

itcouldalsobearguedthatgoodwillisnotrelatedtothehumancostsofaworkplaceincident.

WethereforerecommendthatthereisnotastrongcaseforNOHSACtoincludeanestimateofthecostforlost

goodwillfromoccupationalincidentsinitscalculationsofthecostofworkplaceinjuryandillness,althoughitmay

beaninterestingexerciseinadifferentcontext.

Prevention

Thecostsofprevention,althoughdiscussedinsomeoftheliterature,isgenerallynotcosted,norassignedasa

costofworkplace injuriesand illnesses.Bradyetal,21who look into the totalcostsofhealthandsafety in the

workplace, includepreventivemeasures(suchashealthandsafetypolicydevelopment, regulatorycompliance

costsandhealthandsafetycommittees)asanindirectcostnotassociatedwithaspecificinjuryorillness.

Weargue,inAccessEconomics5andhere,thatpreventioncostsarenotapartoftheactualcostofanoccupational

injury or disease, but rather a possible response to an incident or maintained as a pre-emptor to potential

incidents.Preventionisanimportantcomponentinthehealthandsafetyofworkplaces,butshouldbeusedasa

comparatortotheactualcostsincurredfromincidents.Valuingpreventionisimportantintheeconomicdecision

toincreasepreventivemeasurestothepointwherethemarginalgainfrompreventinganinjury/illnessequatesto

themarginalcostofprevention.Indeed,spendingmoreonpreventionshouldbeseenasapositivesteptowards

asaferworkenvironment,notasacostthatshouldbeavoided.

T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D� 0

COMpeNsaTION DaTa

SECT ION T HREE

3T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D ��


Incidentsofoccupationalinjuryanddiseasemaybecompensatedoruncompensated,asnotedearlier.Aswellas

compensationnotcoveringallcasesofoccupationalinjuryanddisease,itisunlikelytocoverallthecostsofsuch

incidents. Indeed, it is expected to fallwell short of themark, particularly formore severe conditions and for

certaintypesofconditions.Assuch,therearefundamentalflawsinextrapolatinginformationfromcompensation

data to a full costing of occupational incidents or as a basis for policy decisions. However, analysis of the

compensationdataisanessentialstartingpointonwhichtobuildcertaincostelements,tobeabletoestimate

whobearsthecostsofoccupationalincidents.

As a first step, it is necessary to estimate the number of uncompensated incidents. In Australia, there are

independentlygatheredsurveydataavailablefromtheAustralianBureauofStatistics(Work-related injuries,ABS

CatalogueNumber6324.0)thatprovideestimatesoftheaggregatenumberofwork-relatedinjuriesforpersonsaged

15yearsoroverinthetwelvemonthspriortobeingsurveyed.Thesedatawereadjustedtotakeaccountofthose

whowereconsidered,fromtheirsurveyresponses,tobeineligibleforvariousreasons.5

InNewZealand,thereisnosimilarindependentsurveythatwouldenableatop-downestimateofthetotalnumber

ofincidentsofoccupationalinjuries(ordiseases),soabottom-upapproachhasbeenadoptedinstead,building

upfromwhatisknownregardingcompensatedcasesofoccupationalinjuryanddisease,andutilisingotherdata

fromtheliteratureinvestigation,inparticularDriscolletal.1

To thisend, compensationdatawere requested from theACC for themost recentyearavailable (in theevent,

2004–05)andtheprecedingthreeyears(2001–02,2002–03,2003–04)wererequestedforthenumberofclaims,

averageandmediancostperclaimdisaggregatedby:

• agegroup(15–24,25–44,45–64,≥65years)

• gender(male,female)

• ethnicity(Ma-ori,Asian,NZEuropean,PacificIslanderandotherunknown)

• injury/illness(bymajorICD-10category)

• typeofcost(medical,transport,legaletc–whateveryourclassificationsare)

• industry(ACCclassificationsystem)

• cause(ACCclassificationsystem)and

• severity,inturn,disaggregatedby:

– temporaryabsence,fullreturntowork(withaveragenumberofdaysoffwork)

– temporaryabsence,partial return towork (withaveragenumberofdaysoffworkANDdaysworkedon

returncomparedtobeforetheincident)

– permanentincapacity

– fatality.

There was an attempt to optimisematrices within the ACC data to enablemultiple cross-tabulations without

generatinghighstandarderrorsorbreachingconfidentialityrestrictions.Refinementstothisdataspecificationare

brieflydiscussedbelow.


� .� ACC DATASET ISSUES

�.�.� C OvERAgE OF IN CIDENT S

TheACCdataprovidedcoveredanywork-relatedclaimthatwasregisteredwithACC.Itwasnotedthat10–15%of

claimsweredeclinedorpending.TheACCwerenotawareofanyreasonwhytherejectedclaimswouldreasonably

beconsidered tobevalidoccupational injuriesor illnesses.Discussionandestimationof the likelynumberof

uncompensatedincidentsisdetailedinSection4.1.

�.�.� YEAR OF IN CIDENT, YEAR OF REgIS TRATION

Asnotedintheliterature,timelagsbetweenwhenincidentsoccurandwhencompensationclaimsareregistered

canbeproblematic(particularlyfordiseases)inattemptstocalculatecoststhatrelatetodefinedtimeperiods.

However,theACCadvisedthathistoricaldatashowedthatover95%ofclaimsareregisteredwithinsixmonthsof

theincident,andalmostalloftheremaining5%areregisteredwithinonetotwoyears,suggestingarelatively

unskeweddistributionandlendingconfidencetotheuseofdatabasedondateoftheincidentordateofclaim

lodgement, although this might change if there were a trend, for example, towards a greater proportion of

compensateddiseasecasesovertime.

• Usingyearof incidentwouldriskunderstatementofthenumberofrecentincidents(thosethathadnotyet

beenregistered),inparticularforcertaintypesofconditionsthattendtobelate-registeredduetolonglead

times,eg,asbestosandhearinglossclaims.

• Using year of registration would not accurately reflect the year in which the incidents occurred, which is

conceptuallylesspurewhentryingtomatchwithuncompensatedincidentsormakecomparisonsovertime.

�.�.� MATC HIN g C OS T PERIODS

Inasimilarveintomatchingperiodsforactualandregisteredincidentsduetolags,thereisalsoaneedtoallow

forfurtherlagsbetweenwhencostsareincurred(eg,lostwages,medicalexpenses)andwhenthecompensation

paymentisbanked.ACCmakeallowanceforthisbycalculating,inadditionto“paidcosts”,the“ultimatecost”

(future expected costs) estimated for each time period, based on historical trends of open claims that are

subsequentlypaidout,usingtheStatisticalCaseEstimateModel.

�.�.� T YPES OF C OS T S

A process of consultationwith ACC led to the following cost categorisation, whichmatches conceptually and

enablesaclassificationschemainlinewiththatofNOHSC,18asdepictedinTable3.1.


T A b L E � . � Schema for cost classification

C O N C E P T U A L g R O U P T O TA L ( T ) E M P L OY E R ( E ) W O R K E R ( W ) S O C I E T Y ( S )

Production

disturbance

costs (PDC)

Human capital costs

(HKC)

Health and

rehabilitation costs

(MEDC)

Administrative costs

(ADMINC)

Transfer costs

(TRANC)

Valueofproduction

(includingovertime)

Staffturnovercosts

Presentvalueof

earningsbefore

incidentminus

earningsafterincident

Medical,hospital,

otherhealthand

rehabilitationcosts

incurredasaresultof

theinjury

Legalcosts

Investigationcosts

Travelcosts

Costoffuneraltoday

minuspresentvalue

offuturecost

Realdeadweightcosts

oftransferpayments

(welfareandtax)

Overtimepremium;

employerexcess

payments;sickleave

Staffturnovercosts

Zero

Thresholdmedical

payments

Reallegalcosts

incurredplusfines

andpenalties

Employerinvestigation

costs

Zero/negligible

Zero

Negligible

Lossofincomeprior

toreturnorpermanent

replacement,netof

compensation,welfare

andtax

Zero

Lossofincomeafter

returnorpermanent

replacement,netof

compensation,welfare

andtax

Gappaymentsfor

medical,hospitaland

rehabilitationservices

Reallegalcosts

incurred

Zero/negligible

Travelcosts,netof

compensation

Netcostsofbringing

forwardfuneral

Zero(accountedforin

nettingotheritems)

Compensationand

welfarepayments

transferredtoworker

fortemporarylossof

wage;taxlossesprior

toreturnorpermanent

replacement

Zero

Compensationand

welfarepayments

forlostincome

earningcapacity;

taxlossesafter

returnorpermanent

replacement

Compensation

medical,hospital

andrehabilitation

payments;public

healthsystem

payments;private

sector/health

insurancepayments

Reallegaland

enforcementcosts

incurredminusfines

andpenaltiescredit

Realcostsofrunning

thecompensation

system(including

investigationof

claims)

Compensationfor

travelcosts

Compensationfor

funeralcosts

Deadweightcosts

ofwelfarepayments

(DSP,SA,Mobility

Allowance,Rent

Assistance);

deadweightcosts

oftaxlosses


Other (OTHERC)

Suffering/early death

(SUFFC)

Carers

Aids,equipmentand

modifications

Zero

Zero

Zero

Carercostsnetof

carerpayment/

allowance

Aidsetc(netcostafter

reimbursements)

Suffering,earlydeath

(netofcompensation)

Paymentstocarers

plusdeadweightcost

Reimbursements

foraidsetc,plus

deadweightcost

Compensation

paymentsforsame

C O N C E P T U A L g R O U P T O TA L ( T ) E M P L OY E R ( E ) W O R K E R ( W ) S O C I E T Y ( S ) ,

T=E+W+Sforeachline.Totalfinancialcosts=PDC+HKC+MEDC+ADMINC+TRANC+OTHERC.

Sufferingandearlydeatharereportedseparatelyduetouncertaintylevels.

Eachcellissub-categorisedbyseveritylevel,compensated/uncompensatedanddisease/injury.

Note: Property damage and prevention costs are conceptually different and thus excluded.

TheACCcategoriesarelistedbelow.

• Weeklycompensation

• Independenceallowance/lumpsumpayments(forpermanentimpairment)

• Deathbenefits

• Rehabilitationcosts–theseincludeattendantcare,homehelp,residentialcareandcapital/equipmentcosts

(eg,wheelchairs)

• Hospitaltreatmentcosts

• Medicaltreatmentcosts–theseincludeambulance,GPs,alliedhealthandothernon-hospitalcosts

• Transportcosts

• Legalcosts

• Totalpaidcosts

• Ultimatecosttotal.

�.�.� OTHER DATA ISSUES

Diagnosis

TheACCadvisedthataround3%ofinjuriesinrecentyearshavenoICD-10categorycoding,andaround15%of

claimshavemultiplediagnoseslisted.Thisisinpartduetofree-fieldentryandthustextthatisinterpretedfrom

whatadoctororotherhealthprofessionalhasrecorded.Fortheanalysis,thiscategorisationwasthusbasedon

theprimarydiagnosis,andthemissingcodeswererecordedas“unknown”.

Industry codes

ACCclassifyindustriesusingtheANZIC(AustraliaNewZealandIndustryClassification)system.Inaround20%of

claims,theindustryisnotrecorded(lowcostclaims).Themissingdatawerecategorisedas“unknown”.

Under-estimation of hospital costs

Paidcostsrecordedagainstaclaimexcludeanyacutepublichealthcarecosts,ie,hospitalemergencydepartment,

acuteinpatientbedstaycostsandoutpatienttreatment.Electivesurgerycostsareincluded.Stepsareunderway

tolinktheACCandNZHIShospitaldatabases;however,thisprocesswasnotsufficientlyadvancedtobeusedfor

thisanalysis.Theseitemsarethusseriouslyunder-estimated.Ifitwereassumedthatallprivatehealthcostswere

includedinthecompensationpaid,thenanalternativeapproachwouldbetocalculatetheaveragecostofcare

perICD-10categoryintheprivatesystemandthenattributepublicsectorcarecostsonthisbasis.


Data enhancements and other notes

Forclaimspaidweeklycompensation,anestimateofactualpaiddurationwasavailableandwasprovidedbyACC.

Claimswithonlyapartial return toworkwereable tobe identifiedandaveragedaysworkedestimated.Their

pre-accidentworkpatternwasalsoavailable.Foropenclaims,anestimateoffutureexpectedweeklycompensation

durationwasalsoavailable.

Permanent impairment is recorded as a percentage of the whole person in 10% bands, but there may be a

significantdelayuntiltheclaimantisstabilisedbeforeanassessmentismade.

�.� DATA INTERROgATION METHODOLO gY

DataanalysiswasperformedinSAS,withacopyofthecodeusedsuppliedtoNOHSAC.Aseparatedatasetforeach

data serieswas created.The first dataset contained the relevant claimdata from the year of accident, and the

seconddatasetcontainedthesameinformationcollectedintheyeartheclaimwasactuallypaid.Asummarytable

wascreatedtochecktheaverageclaimamountineachyearaswellasthetotalforthedataset,toverifytheunit

recorddataagreedwithasuppliedsummaryofthetotalsbytheACC.Thefollowingdataadjustmentsweremade:

• Thedatawerescannedforanyextremeoutliersand,whilesomeoutlierswerefound,thesewereretained,as

theywereinterpretedtobereasonablesincetheywereusuallyofseveritycategory5and6(noreturntowork

andfatality).

• The ICD-10 category data, which were supplied as 21 categories, were meta-categorised into Injury (ICD

Categories19–22),Disease(ICDCategories01to18,excluding15)andMusculoskeletal(ICD-10category15).

• Thecausedata,whichweresuppliedas40categoriesasshowninTable3.2below,weremeta-categorisedas

follows:

– Categories1to19 Lossofbalanceorpersonalcontrol

– Categories21to29and91 Lossofcontrolofvehicle

– Categories31to39 Fireorexplosion

– Categories51to69and89 Collapse,overturnorinundation

– Category92 Lifting/carrying/strain

– Category71 Workpropertyorcharacteristics

– Categories,81,96to99and0 Other

T A b L E � . � ACC cause codes

C AT E g O RY C A U S E C AT E g O RY C A U S E

1 Slipping,skiddingonfoot

2 Trippingorstumbling

3 Pushedorpulled

4 Lossofconsciousness/sleep/giddy

5 Somethinggivingwayunderfoot

8 Twistingmovement

9 Lurching/jerksinvehiclesetc

11 Misjudgementofsupport

12 Lossofhold

13 Struckbyhand-heldtool/implement

15 Struckbyperson/animal

19 Otherlossbalance/personalcontrol

21 Puncture

23 Mechanicalmalfunction

25 Swerving/evasiveaction

27 Skid

28 Drivingintohole/object/animaletc

29 Otherlossofcontrolofvehicle

31 Fire

33 Explosion/blasting/implosion

35 Shooting

37 Electricalshock/shortcircuit

38 Boiling(violentandinadvertent)

39 Otherorunclearfireorexplosion


C AT E g O RY C A U S E C AT E g O RY C A U S E

51 Collapseofstack/goodsinbulk

53 Objectcomingloose/goodsshifting

55 Collisionwith/knockedoverbyobject

57 Recoil/ejection

59 Folding/collapse

61 Flooding/overflow/escapeofliquid

69 Othercollapse/overturning/inundation

71 Workpropertyorcharacteristics

81 Exposuretoelements

89 Bursting/breakage/distortion

91 Inadvertentmachine/vehiclemovement


96 Medicaltreatment

98 Criminalact

99 Otherorunclearcause

0 Other/undefined

Cross-tabulationswere created for each yearby severity, agegroup, ethnicity, injury/disease, ICDdescriptors,

industryandcause.Detailsofthesegroupingsareinthetablebelow.

T A b L E � . � Summary of categories for data cross-tabulations

F I E L D C AT E g O R I E S

Severity 1 Offworkforlessthan7days

2 >7daysandfullreturntowork 3 >7daysandstagedreturntowork 4 >7daysandpartialreturntowork 5 Noreturntowork

6 Fatality

9 Other

Agegroup 15–24

25–44

45–64

65plus

Ethnicity NZEuropean

NZMa-ori

PacificIslander

Asian

Other

Injury/disease Disease

Injury

Musculoskeletal

ICDdescriptors 01 Medicalandsurgicalprocedures

02 Infectiousandparasiticdiseases

03 Neoplasms

04 Endocrine,nutritionalandmetabolicdiseasesandimmunitydisorders

05 Diseasesofbloodandbloodformingorgans

06 Mentaldisorders

07 Diseaseofthenervoussystemandsenseorgans

08 Diseasesofthecirculatorysystem

09 Diseasesoftherespiratorysystem

10 Diseasesoftheoralcavity,salivaryglands,andjaws

11 Diseasesofthedigestivesystem

12 Diseasesofthegenitourinarysystem

13 Complicationsofpregnancy,childbirth,andthepuerperium

14 Diseasesoftheskinandsubcutaneoustissue

15 Diseasesofthemusculoskeletalsystemandconnectivetissue

16 Congenitalanomalies

18 Symptoms,signs,andill-definedconditions


F I E L D C AT E g O R I E S

19 Fractures

20 Dislocations

21 Sprainsandstrains

22 Injuryandpoisoning

Industry A Agriculture,forestryandfishing

B Mining

C Manufacturing

D Electricity,gasandwatersupply

E Construction

F Wholesaletrade

G Retailtrade

H Accommodation,cafesandrestaurants

I Transportandstorage

J Communicationservices

K Financeandinsurance

L Propertyandbusinessservices

M Governmentadministrationanddefence

N Education

O Healthandcommunityservices

P Culturalandrecreationalservice

Q Personalandotherservices

Z Classificationunknown

Cause 1 Lossofbalanceorpersonalcontrol

2 Lossofcontrolofvehicle

3 Fireorexplosion

4 Collapse,overturnorinundation

5 Workpropertyorcharacteristics


9 Other

�.� C OMPENSATED IN CIDENT S AND C OS T S

TheACCdatarevealedthat:

• in2004–05,therewereatotalof253,812occupationalincidentswithcompensatedcostof$204.5millionin

thatyearand“ultimate”expectedcostof$479.9million

• thenumberofincidentshasgrownby1.1%perannumonaverageoverthethreeyearsto2004–05

• paidcostshavefallenonaverageby4.0%perannum(reflectinglagsinrecentpayments)whileultimatecost

hasgrownonaverageby14.6%perannum.

Thistrendisalsoevidentinthecostpercasedata,assummarisedinTable3.4andFigure3.1.


T A b L E � . � Compensated incidents and costs, 2001–02 to 2004–05

C A S E S PA I D C O S T ( $ m ) U LT I M AT E C O S T ( $ m )

2001–02 245,861 235.2 321.5

2002–03 256,956 258.1 401.0

2003–04 254,093 242.9 423.2

2004–05 253,812 204.5 479.9

% C H A N g E

2001–02to2002–03 4.5% 10% 25%

2002–03to2003–04 -1.1% -6% 6%

2003–04to2004–05 -0.1% -16% 13%

3-yearaverage 1.1% -4.0% 14.6%

Note:Totalsmaynotsumduetorounding.

Source:ACCdataspecialrequest.

�.� .� bY DEMOgRAPHIC gROUPS

Analysis by agerevealsthatpaidcostpercaseincreaseswithagegroupin2004–05.

• Workersaged15–24yearsreceiveonaveragelessthanhalftheaveragepayout,ie,8–9%oftotalcostwhile

representing19%ofcases.

• Workersaged45–64received28%higherthanaveragepayouts, ie,42%oftotalcostbut33%ofcases. In

2004–05,theseworkersreceived:

– $2,427comparedto$1,891onaverageforultimatecostpercase

– $1,029comparedto$806onaverageforpaidcostpercase.

• Thismayreflectmoresevereincidents(eg,fatalitiesfromchronicdisease)disproportionatelyaffectingolderworkers.

• Whilepaidcostpercasefortheoldestworkerswashighest,ultimatecostpercasewaslessthantheaverage,

suggestingquickersettlements(lumpsums).

• Theresultsweresimilarforthepreviousyears.

Compensated costs per case, paid and ultimate, 2001–02 to 2004–05F I G U R E 3 . 1

2001–02 2002–03 2003–04 2004–05

Ultimate costs Paid costs

$2,000

$1,800

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

$0

Source: ACC data special request


T A b L E � . � Compensated incidents and costs, by age, 2004–05

T O TA L C O S T C O S T P E R C A S E

A g E g R O U P ( Y E A R S ) C A S E S PA I D C O S T ( $ M ) U LT I M AT E C O S T ( $ M ) PA I D C O S T ( $ ) U LT I M AT E C O S T ( $ )

15–24 47,867 18.4 37.9 385 793

25–44 114,817 84.4 227.8 735 1,984

45–64 82,983 85.4 201.4 1,029 2,427

65andover 8,145 16.3 12.8 2,004 1,567

All ages 253,812 204.5 479.9 806 1,891

% O F T O TA L R AT I O T O A L L - A g E Av E R A g E

15–24 19% 9% 8% 0.48 0.42

25–44 45% 41% 47% 0.91 1.05

45–64 33% 42% 42% 1.28 1.28

65andover 3% 8% 3% 2.49 0.83

All ages 100% 100% 100% 1.00 1.00



T A b L E � . � Compensated incidents and costs, by gender, 2004–05


g E N D E R C A S E S PA I D C O S T ( $ M ) U LT I M AT E C O S T ( $ M ) PA I D C O S T ( $ ) U LT I M AT E C O S T ( $ )

Females 62,372 39.5 96.6 633 1,548

Males 191,440 165.0 383.4 862 2,002

Total 253,812 204.5 479.9 806 1,891

% O F T O TA L R AT I O T O Av E R A g E

Females 25% 19% 20% 0.79 0.82

Males 75% 81% 80% 1.07 1.06

Total 100% 100% 100% 1.00 1.00



Analysis by ethnicityrevealsthatcostpercaseislowerforpeopleofAsianandPacificIslandethnicity(allyears).

• Paid cost per case for Pacific Island andAsianNewZealanderswas around70–80%of the average,while

ultimatecostpercasewasaround80–90%oftheaveragerespectively(Table3.7).

Analysis by genderrevealsthatcostpercaseishigherformales(allyears),againpotentiallyreflectinggreater

severityofincidents(Table3.6).

• Malescomprised75%ofcaseseachyearbutaround80%ofcosts.In2004–05:

– thepaidcostpercaseformaleswas$862comparedto$633forfemales

– theultimatecostpercaseformaleswas$2,002comparedto$1,548forfemales.


T A b L E � . � Compensated incidents and costs, by ethnicity, 2004–05


E T H N I C I T Y C A S E S PA I D C O S T ( $ M ) U LT I M AT E C O S T ( $ M ) PA I D C O S T ( $ ) U LT I M AT E C O S T ( $ )

NZEuropean 179,694 149.1 338.3 830 1,883

NZMa-ori 32,394 24.9 62.7 770 1,936

PacificIslands 13,019 7.6 19.8 583 1,522

Asian 8,470 5.3 14.1 629 1,669

Other 20,235 17.6 45.0 870 2,223

Total 253,812 204.5 479.9 806 1,891


NZEuropean 71% 73% 70% 1.03 1.00

NZMa-ori 13% 12% 13% 0.96 1.02

PacificIslands 5% 4% 4% 0.72 0.81

Asian 3% 3% 3% 0.78 0.88

Other 8% 9% 9% 1.08 1.18

Total 100% 100% 100% 1.00 1.00



�.� .� bY SEvERIT Y C ATE gORIES

Analysisbyseverityrevealsthatcostpercasewashighestforpeoplewhowerepermanentlydisabled,prohibiting

returntowork(severitycategory5).

• Thesepeoplerepresentedlessthan0.05%ofcasesandaround1–2%ofcosts,whichwassimilartopeople

partiallyreturningtoworkandforfatalities,althoughcostpercaseforfatalincidentswasaroundhalfthecost

ofpermanentdisabilities.

• Peoplewhoareoffworkforlessthan7daysrepresentaround90%ofcasesandaround25%ofcosts.

• Peoplewhowereabsentformorethan7daysbutwhohaveafullreturntowork(includingthosewithastaged

butfullreturn)representafurther8–9%ofcasesandaround60%ofcosts.

• Finally, the“other”category,whileonly0.2%ofcases, representsaround10%ofcosts,asthesecasesare

likely to be the ones where it is still uncertain whether and how a partial/staged return to workmay be

possible.

• Table3.8includesthe“allyears”sharesdataaswell2004–05,asitseemstoindicatethat,asexpected,over

timethesharesofseveritycategories1,2and3fall,while4,5and6increase.


T A b L E � . � Compensated incidents and costs, by severity, 2004–05 (and all years)


C A S E S PA I D C O S T U LT I M AT E C O S T PA I D C O S T U LT I M AT E C O S T

S E v E R I T Y, � 0 0 � – 0 � ( $ M ) ( $ M ) ( $ ) ( $ )

1.Lessthan7days 230,546 52.8 114.6 229 497

2.Fullreturntowork 15,494 70.8 169.4 4,569 10,934

3.Stagedreturntowork 6,222 49.5 125.5 7,954 20,164

4.Partialreturntowork 215 2.0 4.8 9,266 22,148

5.Noreturn/permanentdisability 30 2.3 3.5 77,655 118,322

6.Fatality 64 2.5 5.2 39,276 81,386

7.Other 1,241 24.6 56.9 19,809 45,848

Total 253,812 204.5 479.9 806 1,891

� 0 0 � – 0 � % O F T O TA L R AT I O T O Av E R A g E

1.Lessthan7days 90.8% 25.8% 23.9% 0.3 0.3

2.Fullreturntowork 6.1% 34.6% 35.3% 5.7 5.8

3.Stagedreturntowork 2.5% 24.2% 26.1% 9.9 10.7

4.Partialreturntowork 0.1% 1.0% 1.0% 11.5 11.7

5.Noreturn/permanentdisability 0.0% 1.1% 0.7% 96.4 62.6

6.Fatality 0.0% 1.2% 1.1% 48.7 43.0

7.Other 0.5% 12.0% 11.9% 24.6 24.2

Total 100% 100% 100% 1.00 1.00

A L L Y E A R S

1.Lessthan7days 91.0% 21.6% 22.9% 0.2 0.3

2.Fullreturntowork 6.7% 38.8% 34.7% 5.8 5.2

3.Stagedreturntowork 2.0% 27.7% 29.2% 13.9 14.6

4.Partialreturntowork 0.1% 1.2% 1.5% 21.0 26.0

5.Noreturn/permanentdisability 0.0% 1.8% 0.9% 240.8 126.1

6.Fatality 0.0% 2.0% 1.9% 63.6 59.9

7.Other 0.2% 6.9% 8.9% 37.0 47.9

Total 100% 100% 100% 1.00 1.00




� .� .� bY T YPES OF C OS T

Weeklycompensationpaymentswerethehighestcostitem(50.7%ofpaidcostsor$103.7million),followedby

medical(25.5%or$52.2million),rehabilitation(11.5%or$23.5million)andhospitalpayments(8.8%or$18.0

million)in2004–05.

T A b L E � . � Compensated incidents and costs, by type of cost, 2004–05

Disease 9.0 1.1 0.2 12.3 8.1 3.3 0.3 0.0 34.4 60.2 0.2

Injury 73.6 0.1 0.4 8.4 37.2 11.0 3.3 0.0 134.1 329.0 1.3

Musculoskeletal 19.5 0.0 - 2.4 6.2 3.4 0.3 0.0 31.7 80.9 0.3

Other 1.6 0.5 0.7 0.4 0.7 0.3 0.1 0.0 4.3 9.8 0.0

Total 103.7 1.7 1.3 23.5 52.2 18.0 4.0 0.1 204.5 479.9 1.8

Av E R A g E C O S T P E R C A S E ( $ )

Disease 703 87 19 960 633 260 24 1 2,685 4,694 12.0

Injury 333 1 2 38 168 50 15 0 607 1,489 6.1

Musculoskeletal 1,218 0 - 147 385 210 18 1 1,980 5,051 19.4

Other 389 113 174 98 178 80 29 3 1,067 2,419 6.5

Total 409 7 5 93 206 71 16 0 806 1,891 7.2

% O F T O TA L ( % )

Disease 26.2% 3.2% 0.7% 35.7% 23.6% 9.7% 0.9% 0.0% 100.0%

Injury 54.9% 0.1% 0.3% 6.3% 27.7% 8.2% 2.4% 0.0% 100.0%

Musculoskeletal 61.5% 0.0% 0.0% 7.4% 19.4% 10.6% 0.9% 0.1% 100.0%

Other 36.5% 10.6% 16.3% 9.2% 16.7% 7.5% 2.7% 0.3% 100.0%

Total 50.7% 0.8% 0.6% 11.5% 25.5% 8.8% 2.0% 0.0% 100.0%

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�.� .� bY INDUS TRIES AND C AUSES

Table3.10presentspaidandultimatecostsbyindustry.Oneinfiveincidents(andmorethan$1in$5ofcosts)

occurinthemanufacturingsector,althoughcostspercasearehighestintheminingindustry,ultimately$3,941

perincidentoccurringin2004–05.

T A b L E � . � 0 Compensated incidents and costs, by industry, 2004–05


PA I D C O S T U LT I M AT E C O S T PA I D C O S T U LT I M AT E C O S T

I N D U S T RY g R O U P C A S E S ( $ M ) ( $ M ) ( $ ) ( $ )

AAgriculture,forestryandfishing 25,942 35.6 82.8 1,373 3,191

BMining 1,065 1.5 4.2 1,446 3,941

CManufacturing 51,422 46.3 107.4 901 2,089

DElectricity,gasandwatersupply 1,253 1.1 2.7 909 2,172

EConstruction 28,905 35.5 82.5 1,229 2,854

FWholesaletrade 7,338 5.9 14.4 808 1,966

GRetailtrade 18,751 14.2 32.7 758 1,745

HAccommodation,cafes andrestaurants

7,431 4.9 13.0 660 1,755

I Transportandstorage 10,140 14.0 31.6 1,376 3,116

J Communicationservices 1,569 1.2 2.9 777 1,832

KFinanceandinsurance 1,110 0.6 1.5 521 1,351

L Propertyandbusinessservices 11,918 9.5 23.2 801 1,948

MGovernmentadministration anddefence

4,595 2.4 4.7 529 1,031

NEducation 7,331 4.0 9.9 545 1,351

OHealthandcommunityservices 9,922 8.1 20.5 818 2,063

PCulturalandrecreationalservice 6,305 6.2 15.7 982 2,484

QPersonalandotherservices 5,627 4.2 8.5 754 1,506

ZClassificationinknown 53,185 9.1 21.7 170 408

Total 253,812 204.5 479.9 806 1,891


AAgriculture,forestryandfishing 10.2% 17.4% 17.2% 1.70 1.69

BMining 0.4% 0.8% 0.9% 1.79 2.08

CManufacturing 20.3% 22.7% 22.4% 1.12 1.10

DElectricity,gasandwatersupply 0.5% 0.6% 0.6% 1.13 1.15

EConstruction 11.4% 17.4% 17.2% 1.53 1.51

FWholesaletrade 2.9% 2.9% 3.0% 1.00 1.04

GRetailtrade 7.4% 6.9% 6.8% 0.94 0.92

HAccommodation,cafes andrestaurants

2.9% 2.4% 2.7% 0.82 0.93

I Transportandstorage 4.0% 6.8% 6.6% 1.71 1.65

J Communicationservices 0.6% 0.6% 0.6% 0.96 0.97

KFinanceandinsurance 0.4% 0.3% 0.3% 0.65 0.71

L Propertyandbusinessservices 4.7% 4.7% 4.8% 0.99 1.03

MGovernmentadministration anddefence

1.8% 1.2% 1.0% 0.66 0.55



N Education 2.9% 2.0% 2.1% 0.68 0.71

O Healthandcommunityservices 3.9% 4.0% 4.3% 1.02 1.09

P Culturalandrecreationalservice 2.5% 3.0% 3.3% 1.22 1.31

Q Personalandotherservices 2.2% 2.1% 1.8% 0.94 0.80

Z Classificationunknown 21.0% 4.4% 4.5% 0.21 0.22

Total 100% 100% 100% 1.00 1.00

Table 3.11 summarises costs by cause. Over one-third of incidents and costs were due to loss of balance or

personalcontrol.Lifting,carryingandstrainsaccountedforafurtherquarterofincidentsandcosts.Around10%

ofcostswereinthecatch-all“other”category.Apartfromthiscategory,therewasnotagreatdealofvariationin

costpercaseasaresultofdifferentcauses.

T A b L E � . � � Compensated incidents and costs, by cause, 2004–05



C A U S E C A S E S ( $ M ) ( $ M ) ( $ ) ( $ )

1Lossofbalanceorpersonalcontrol 88,588 72.1 175.1 813 1,977

2Lossofcontrolofvehicle 3,495 2.7 7.0 786 2,004

3Fireorexplosion 1,991 0.9 3.0 473 1,519

4Collapse,overturnorinundation 21,443 12.3 32.2 574 1,502

5Workpropertyorcharacteristics 42,275 43.2 88.1 1,021 2,084

6Lifting/carrying/strain 63,555 52.1 127.0 820 1,998

9Other 32,465 21.2 47.5 653 1,462

Total 253,812 204.5 479.9 806 1,891


1Lossofbalanceorpersonalcontrol 34.9% 35.2% 36.5% 1.01 1.05

2Lossofcontrolofvehicle 1.4% 1.3% 1.5% 0.98 1.06

3Fireorexplosion 0.8% 0.5% 0.6% 0.59 0.80

4Collapse,overturnorinundation 8.4% 6.0% 6.7% 0.71 0.79

5Workpropertyorcharacteristics 16.7% 21.1% 18.4% 1.27 1.10

6Lifting/carrying/strain 25.0% 25.5% 26.5% 1.02 1.06

9Other 12.8% 10.4% 9.9% 0.81 0.77

Total 100% 100% 100% 1.00 1.00

�.� .� bY DISEASE AND INJURY T YPE

Table3.12presentsdetailedinformationonthenumberofincidentsandcompensatedcostsbyICD-10category,

whileTable3.13summarisesthesebydisease/injurygroup.

• Intotal,injuriesrepresented87.0%ofincidentsandtwo-thirdsofcosts:

– Injuriesaretheaggregateofcategories19to22inclusive.

– Over82%ofincidents(butlessthanhalfofcosts)wereclassifiedincategories21Sprainsandstrainsand

22Injuryandpoisoning.

– Fracturesanddislocations(categories19and20)werelessthan5%ofincidentsbutsome18%ofcosts.


• Diseases,includingmedicalandsurgicalprocedures,represented5%ofcasesbutover12%ofcosts.

– Cancer (category3Neoplasms)andcardiovasculardisease (category8)weremostexpensivepercase,

at over $40,000 each. However, there were only 34 and 10 cases respectively in 2004–05 that were

compensated,combinedlessthan0.5%ofcosts.

– Diseasesofthenervoussystemandsenseorgans(category7)represented2.4%ofincidentsandupto

10%ofcosts.

• Musculoskeletaldisease(separatedfromotherdiseaseandinjuries),wasafurther6.3%ofincidentsandover

15%ofcosts(ICD-10category15).

• “Other”casesrepresented1.6%ofincidentsandaround2%ofcosts.

T A b L E � . � � Compensated incidents and costs, by ICD-10 category, 2004–05


PA I D C O S T U LT I M AT E PA I D C O S T U LT I M AT E

C A U S E C A S E S ( $ M ) C O S T ( $ M ) ( $ ) C O S T ( $ )

01Medical&surgicalprocedures 708 4.9 11.1 6,870 15,725

02Infectious&parasiticdiseases 102 0.2 0.6 2,367 5,471

03Neoplasms 34 1.2 1.5 36,065 45,267

04Endocrine,nutritional&metabolic diseases&immunitydisorders

1 0.0 0.0 201 215

05Diseasesofblood &bloodformingorgans

1 0.0 0.0 13 277

06Mentaldisorders 170 1.3 4.4 7,610 25,631

07Diseasesofthenervoussystem &senseorgans

6,186 21.4 32.2 3,452 5,210

08Diseasesofthecirculatorysystem 10 0.1 0.4 14,282 42,112

09Diseasesoftherespiratorysystem 111 0.6 1.3 5,075 12,006

10Diseasesoftheoralcavity, salivaryglands&jaws

517 0.2 0.2 303 387

11 Diseasesofthedigestivesystem 894 3.7 5.9 4,101 6,570

12Diseasesofthegenitourinarysystem 10 0.0 0.1 2,905 14,092

14Diseasesoftheskin &subcutaneoustissue

4,040 0.8 2.3 209 573

15Diseasesofthemusculoskeletalsystem &connectivetissue

16,019 31.7 80.9 1,980 5,051

18Symptoms,signs,&ill-definedconditions 33 0.0 0.1 1,007 1,718

19Fractures 8,354 26.7 66.5 3,195 7,963

20Dislocations 3,661 9.3 21.7 2,543 5,936

21Sprains&strains 106,220 66.2 160.2 624 1,508

22Injury&poisoning 102,688 31.9 80.6 310 785

Other 4,053 4.3 9.8 1,067 2,419

Total 253,812 204.5 479.9 806 1,891


01Medical&surgicalprocedures 0.3% 2.4% 2.3% 8.5 8.3

02Infectious&parasiticdiseases 0.0% 0.1% 0.1% 2.9 2.9

03Neoplasms 0.0% 0.6% 0.3% 44.8 23.9

04Endocrine,nutritional,&metabolic diseases&immunitydisorders 0.0% 0.0% 0.0% 0.2 0.1



05Diseasesofblood &bloodformingorgans

0.0% 0.0% 0.0% 0.0 0.1

06Mentaldisorders 0.1% 0.6% 0.9% 9.4 13.6

07Diseasesofthenervoussystem &senseorgans

2.4% 10.4% 6.7% 4.3 2.8

08Diseasesofthecirculatorysystem 0.0% 0.1% 0.1% 17.7 22.3

09Diseasesoftherespiratorysystem 0.0% 0.3% 0.3% 6.3 6.3

10Diseasesoftheoralcavity, salivaryglands&jaws

0.2% 0.1% 0.0% 0.4 0.2

11 Diseasesofthedigestivesystem 0.4% 1.8% 1.2% 5.1 3.5

12Diseasesofthegenitourinarysystem 0.0% 0.0% 0.0% 3.6 7.5

14Diseasesoftheskin &subcutaneoustissue

1.6% 0.4% 0.5% 0.3 0.3

15Diseasesofthemusculoskeletalsystem &connectivetissue

6.3% 15.5% 16.9% 2.5 2.7

18Symptoms,signs,&ill-definedconditions 0.0% 0.0% 0.0% 1.2 0.9

19Fractures 3.3% 13.0% 13.9% 4.0 4.2

20Dislocations 1.4% 4.6% 4.5% 3.2 3.1

21Sprains&strains 41.8% 32.4% 33.4% 0.8 0.8

22Injury&poisoning 40.5% 15.6% 16.8% 0.4 0.4

Other 1.6% 2.1% 2.0% 1.3 1.3

Total 100% 100% 100% 1.00 1.00

T A b L E � . � � Compensated incidents and costs, by disease/injury group, 2004–05



g R O U P C A S E S ( $ M ) ( $ M ) ( $ ) ( $ )

Disease 12,817 34.4 60.2 2,685 4,694

Injury 220,923 134.1 329.0 607 1,489

Musculoskeletal 16,019 31.7 80.9 1,980 5,051

Other 4,053 4.3 9.8 1,067 2,419

All groups 253,812 204.5 479.9 806 1,891

% O F T O TA L R AT I O T O A L L - A g E Av E R A g E

Disease 5.0% 16.8% 12.5% 3.33 2.48

Injury 87.0% 65.6% 68.6% 0.75 0.79

Musculoskeletal 6.3% 15.5% 16.9% 2.46 2.67

Other 1.6% 2.1% 2.0% 1.32 1.28

All groups 100% 100% 100% 1.00 1.00



T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D� �

4T O T A L C O S T

esTIMaTes

SECT ION FOUR



Costscalculationsarederivedby firstestimatingthetotalnumberof incidents (cases)ofworkplace injuryand

disease in 2004–05, and then applying the methodology from NOHSC18 together with the ACC and other

New Zealand average cost data to estimate total costs. The first step involves estimating the number of

uncompensatedcases,whichisaddressedinthefollowingsection.

�.� UN C OMPENSATED C ASES AND THE “N” MATRIX

Anumberofsourcesarerelevantwhenestimatingthenumberofuncompensatedcasesofwork-relateddisease

andinjuryinNewZealandin2004–05.

• Driscolletat1estimatedthat,eachyearinNewZealand,thereare:

– about700–1,000deathsfromoccupationaldisease

– about100deathsfromoccupationalinjury

– 17,000–20,000newcasesofwork-relateddisease

– about200,000occupationalaccidentsresultinginACCclaims.

• Australiansurveydatasuggestedthattherewere,infact,manycasesofoccupationalinjuriesthatwerenot

includedincompensationdatasetsbecauseeitheralinkagecouldnotbeproven,ortheinjurieswererelatively

minorandtheemployeesreportedthattheydidnotbelievetheywereeligibletoclaim,orthattheybelieved

thepossiblecompensationwasnotworththeeffort(ortheperceivedrepercussions)oflodgingaclaim.

• Theliterature(notablyHeadandHarcourt3)suggestedthatcompensationwasbelievedtobemoregenerous,

widelyavailableandeasilyaccessibleinNewZealandthanoverseas,withadirectcomparisontoAustralian

compensation(recallSection2.1.3).

• Section3.1.1notedthattheACCdatacoveredwork-relatedclaimsregistered,with10–15%ofclaimsdeclined

orpending,andtheviewthatthiscoveragewasrelativelycomprehensive.

• Another New Zealand view reflected was that compensation coverage of injuries may be better than for

diseases,intermsofincidentscovered.

Piecingtogetherthesepiecesofinformationandthecompensationdatafromthepreviouschapter,amatrixwas

derivedofa“basecase”scenariofor2004–05ofthenumberofincidentsbydiseaseandinjury,cross-tabulated

toseverity,derivedinturnfroma“low”(best)casescenarioanda“high”(worst)casescenario.

• The low case uses the lowerbounds fromDriscoll et al1 and themost positive viewof the accessibility of

compensation for injuries,postulating700deaths fromoccupationaldisease,17,000casesofwork-related

disease,90fatalworkplaceinjuriesandnouncompensatednon-fatalworkplaceinjuries.

• Thehigh caseuses theupperbounds fromDriscolletal1 andaccessibilityof compensation for injurieson

parwiththatofAustralia,postulating1,000deathsfromoccupationaldisease,20,000casesofwork-related

disease,110fatalworkplaceinjuriesanduncompensatedworkplaceinjuriesestimatedasafurther39%ofthe

numberofcompensatedinjuries.18

• Thebase casetakesamid-rangeofthesescenarios,with850deathsfromoccupationaldisease,18,500cases

ofwork-relateddisease,100fatalinjuriesandtotalworkplaceinjuriesestimatedastheaverageofthoseofthe

lowandhighscenarios.

TheconceptualapproachissummarisedinTable4.1.


T A b L E � . � Conceptual framework for estimating the number of incidents

C O M P E N S AT E D U N C O M P E N S AT E D T O TA L

Injuries ACCdata Derivedasresidual Factoredupbasedofaverageofaminimumfrom Driscolletal1andamaximumfrom Australianestimates

Disease ACCdata Derivedasresidual Estimatedfromattributablefractions1

Total ACCdata Verticalsumand Verticalandhorizontalsum horizontalresidual

Twofinalpointsshouldalsobemade:

• Inestimating theseveritysplits forcompensated injuriesanddiseases, the“musculoskeletal”and“other”

compensatedincidentswereallocated94.5%toinjuriesand5.5%todisease,inlinewiththeratioofdefined

injuriestodiseases.Thusinsteadofthe253,812casesbeingallocated220,923toinjuries,12,817todisease

and 20,072 to “musculoskeletal and other”, they were simply allocated 239,894 to injury and 13,918 to

disease.

• Inaddition,thenon-fatalseveritysplitsforuncompensatedinjuriesanddiseaseswereallocatedinthesame

proportionsasthecompensatedones,whichmaytendtoerrontheconservativeside,whichisdesirablewhen

evidenceislacking.

The resulting estimateof the total number of incidents in 2004–05 is 305,150 (256,894 to 353,407),with the

severityandinjury/diseasesub-categorisationsestimatedasshowninTable4.2.

C OMPARISONS WITH AUS TRALIA

Thesefindingssuggestthat,inNewZealand,thenumberofcompensatedworkplaceincidentsisabout83%ofthe

total, compared to 69% in Australia, which bears out the general view that, across the board, access to

compensationisrelativelygood.

However,excludingtherelativelylargenumberoftheleastsevereincidentsinbothcountriesrevealsthatonly81%

oftheremainingincidentsarecompensatedinNewZealand,comparedto87%inAustralia,whichalsoseemsto

bearouttheanecdotes(eg,inrelationtorelativelypooraccesstocompensationformoresevereconditionssuch

ascancer).Moreover,whiletheestimatesfromDriscolletal1arethebestcurrentlyavailable,itshouldbenoted

thattheyappearveryconservative,andthusinourviewthereisconsiderableriskthatthenumberandproportion

ofuncompensatedcases(particularlyfordisease)inNewZealandisinfacthigherthantheestimatespresented

inthisreport.

Moreover,inmakingcomparisonsbetweenthetwocountries,itmustbenotedthattheoverallpercapitaratesof

occupationalinjuryanddiseaseappearmuchhigherinNewZealandthaninAustralia–some15%oftheworkforce

relativetoaround4%perannumrespectively.


T A b L E � . � Estimated workplace incidents, by severity and disease/injury, 2004–05

T O TA L C A S E S C O M P E N S AT E D U N C O M P E N S AT E D T O TA L

1.Lessthan7days 230,546 45,839 276,386

2.Fullreturntowork 15,494 3,112 18,606

3.Stagedreturntowork 6,222 1,247 7,469

4.Partialreturntowork 215 44 259

5.Noreturn/permanentdisability 30 7 37

6.Fatality 64 886 950

7.Other 1,241 203 1,444

Total 253,812 51,338 305,150

I N J U RY

1.Lessthan7days 218,515 42,589 261,104

2.Fullreturntowork 14,270 2,781 17,051

3.Stagedreturntowork 5,768 1,124 6,893



6.Fatality 42 58 100

7.Other 1,097 164 1,261

Total 239,894 46,756 286,650

D I S E A S E

1.Lessthan7days 12,031 3,250 15,282

2.Fullreturntowork 1,224 331 1,555

3.Stagedreturntowork 454 123 576



6.Fatality 22 828 850

7.Other 144 39 183

Total 13,918 4,582 18,500

�.� TOTAL C OS T ELEMENT S

InlinewiththeschemapresentedinSection3.1.4(Table3.1),thissectionexplainsthecalculationofcostsbytype,

severity and compensated/uncompensated, in line with the NOHSC methodology,18 although with some

methodologicalvariationstoaccommodatedifferencesinNewZealanddataandparameters.Notethat ineach

casethecostelementsaremultipliedbythe“N”matrix,thatis,thematrixofincidentsineachrelevantcategory

asderivedintheprevioussection.

�.� .� PRODUCTION DIS TUR bAN CE C OS T S (PDC)

Production disturbance costs (PDC) are the extra cost of production or the value of production lostwhile the

sidelinedworker isoffwork,priortoeitherreturn(fullorpartial)orpermanentreplacement,togetherwiththe

costsofsuchreplacementifrequired.

Walshetal43statethat“absenteeismisthemostfrequentlymeasuredcomponentof indirectcosts”andthat it

isquiteoftenusedasaproxyforproductivitylosses.21TheIndustryCommission4definedlossofproductivityas


“thehoursnotworked, yetpaid forby theemployer”.Thisdefinition isused inNOHSC18 andmeasuredusing

averagewagespluson-costs,multipliedbyanassumedperiodofabsencefollowingaworkplaceincident.

Value of production (VOP) lost

An important consideration inPDC is that theemployer/producermayeither lose theproduction (andsuffer idle

capacity of associated plant and equipment) or utilise alternative labour usually at a premiumprice (and hence

continuetoemployotherinputsofproductionatnormallevels)tomaintainproduction,orsomecombinationofthese.

Thesepathwaysaremutuallyexclusiveintotal,asillustratedinFigure4.1.Weutilisetherealworldobservationthat

producersprefer,wherepossible,tomaintainproduction.Hence,weestimatethecostofthatpath,notingthatifthe

costsofidlecapacityaretobeincludedinthefuture,themethodforcalculatingthisitemwouldhavetochange.

Theordinaryvalueofproductionofthesidelinedworker isaverageweeklyearnings(AWE),plusamark-upfor

on-costs.

• InNewZealand,weuseaverageweeklyearningsof$794.83,44,45 includingfull-timeandpart-timeearnings,

fromtheMarch2005quarter,toaccordwiththeACCdata.Theon-costmark-upusedis12.5%,bringingtotal

AWEincludingon-coststo$894.18.

• Thiswagerateismultipliedbytheaverageweekslostperincident(WLPI)foreachseveritycategory,fromthe

ACCdata(withfiveworkdaysinaweek).

• Theovertimepremiumpayment(OTP)inthecaseoftheproductionbeingreplaced,isestimatedas:

OTP = WLPI*AWE*0.4

– The overtime premium of 40% is based on NOHSC18 and is lower than the 50% used by the Industry

Commission,4citingworkbyOxenburgh46whosuggestedanovertimerateof50to100%.

– Thelowerratewasusednotingthat,inthepresenceofslacklabourresourcesinternaltosomeaffected

workplaces,itispossiblethattheremaybelessovertimeandover-employmentcostsforsomeincidents,

sothatemployersmaymakeuplostproductionthroughuseofsalariedorpart-timeemployeestomake

uptheproductionatordinaryornoadditionalwagecosts.

– Notealsothatthisapproachimplicitlyassumesthatthedistributionofovertimeworkedisthesameasthe

distributionofincidents.

• Thusintotal,thevalueofproduction(VOP)isdefinedbytheequation:

VOP = WLPI*AWE*1.4

Staff turnover costs (STC)

Furthertothecostofproductionatapremiumprice,thereisalsoadisruptiontoproduction,inseveritycategories

otherthan1and2,ofbringingforwardtheemploymentandtrainingofnewstafftomakeupproductionthatisunable

tobecontinuedbythesidelinedworkerinthemediumtolongterm–thestaffturnoverandtrainingcost(STC).

Literature analysis revealed that staff turnover and training costs varymarkedly between studies. Leigh et al9

indicatethatthe“costofhiringandtrainingaredifficulttoestimate”and“fewstudieshaveaddressedtheissue”.

F I g U R E � . � Value of production pathways

Replaceproduction;noidlecapacity;payovertime;additionalunitcast=WLPI*AWE*1.4

Donotreplaceproduction;idlecapacity;noovertimepremium;costoflostproduction=WLPI*(AWE+idlecapacityunitcostsperweek)

Incident


Barron,BlackandLowenstein47estimatethat161hoursofmanagers’andco-workers’timeisrequiredtohireand

trainnewworkersduringthefirstthreemonthsoftheirtenure.Leighstatesthatthiscalculationislikelytobean

under-estimate, given the sample used by the authors. Leigh nevertheless uses this figure (which equates to

US$2,454in1992)asthecostforhiring,traininganddisruptiontoacompanyforeverydeath,permanenttotal

injuryandpermanentpartial injury.He thenassumes that temporary injuriesaddUS$149apieceandallother

disablinginjuriescostUS$12apiece.

Otherstudiesprovideconsiderablevarianceonthesefigures:

• AccessEconomics48estimateshiringcostsalonetoaverageUS$3,310in1994.

• MillerandGalbraith49assumedthata fatal injurywouldcosttheemployer fourmonthsofwagestopayfor

recruitment,retrainingandlossofspecialskills.Thisappearstobeanarbitraryassessmentwithnoreasoning

stated.

• TheHSE16useanaveragefigureofUK£1,918peremployeeturnedover.Thisincludesleavingcosts,replacement

costs,transitioncostsandotherindirectcostsassociatedwithlossincustomerservice/satisfaction.However,

theauthorsofthisstudystatethat,sinceemployeeswillleaveatsomepointirrespectiveoftheirinjury/illness,

itisonlythecostofbringingforwardlabourturnoverthatshouldbeincluded.

• TheCouncilforEqualOpportunityEmployment(CEOE)inAustraliastatedin2004thatlabourturnovercosts

range between 50–130% of the incumbent’s salary.v This includes costs associated with separation (exit

interviews,administration,separationpay),replacementofstaff(jobadvertising,administration,interviews,

testing, staff meeting, post-employment dissemination of information), training, lost productivity and lost

businesscosts.

• TheInformationIndustriesBureauoftheQueenslandgovernmentusedanevenhigherestimateofthecostsof

turnover,of80–200%oftheincumbent’ssalarydependinguponskillandresponsibilitylevel.50Thiswasbased

onaverysimilarlistofcomponentstothatoftheCEOEandalsoincludedintangiblecostssuchasintellectual

capital,employeeattitudesandinnovation.

• AccessEconomics5concludedthefollowingfromthisevidence:

– Overseasdatausedtoestimatethisitemrangesfromfourweeks(coveringhiring,trainingand“disruption”

whichtheUSstudyacknowledgesisconservative)andaroundfiveweeks(morecomprehensivecoverage

intheUKstudyvi)to16weeksinMilerandGalbraith.49

– InAustralia,thecostsappearmuchhigher,rangingfrom26to104weekssalary,andcoveringseparation,

recruitment,trainingand(lessrelevantly)lostproductivityandlostbusinesscosts.

– IncontrasttoNOHSC’spre-200454.5weeksintotal,weestimatethecostsmoreconservativelyatthelow

endoftheAustralianspectrum,thatis26weeks.

– Staffturnovercostsareassumedtobebroughtforwardbythreeyears,basedonaveragestaffturnoverof

15%perannum,whichimpliesthatpeoplechangejobs,onaverage,approximatelyonceevery6.7years,

sothesidelinedworkeronaverage,therefore,waslikelytohavehad3yearstohis/hernextjobchange

beforetheincidentoccurred.

Therefore,inNewZealand,thecostofbringingforwardthestaffturnoverisestimatedas:

STC(3-7) = 26*AWOTE – (26*AWOTE)/(1+r)3

Anaddedcomplexity inthe“bring-forward”isthattheworker’sreplacementwillalsohaveearlierreplacement

costs–ie,thefirmwillneedtorecruitagaininsixyearsratherthan9,andin12ratherthan15,andsoon.Wehave

conservativelylimitedthisanalysistothefirstroundeffects,however.

v Informationobtainedfromhttp://www.eowa.gov.au/,accessedon5January2004.

vi AssumingAWEaround£400,appliedtotheaveragefigureof£1,918peremployeeturnedover.


Total PDC

TotalPDCisdefinedasthesumofthevalueofproductionlostandthestaffturnovercosts.

PDC = VOP(1-7) + STC(3-7)

ResultsforNewZealandarepresentedinTable4.3belowshowing:

• total cost of the disturbance to productionwas estimated as $572.9million in 2004–05, of which $471.9

million(82%)wasforcompensatedcasesand$101.0million(18%)wasforuncompensatedcases

• thevalueofproductionlostwas$557.6million(97%),whilethestaffturnovercostswere$15.3million(3%).

T A b L E � . � PDC costs, by severity and compensation status, 2004–05 ($m)

S E v E R I T Y WEEKS LOST PER IN CIDENT C O M P E N S AT E D C A S E S U N C O M P E N S AT E D C A S E S T O TA L

vA L U E O F P R O D U C T I O N

<7days 0.20 56.4 11.2 67.6

Fullreturn 10.50 203.8 40.9 244.7

Stagedreturn 16.87 131.4 26.3 157.8

Partialreturn 20.99 5.6 1.1 6.8

Permanent 41.47 1.6 0.4 1.9

Fatal 6.11 0.5 6.8 7.3

Other 39.58 61.5 10.1 71.6

Total 1.45 460.7 96.8 557.6

S TA F F T U R N Ov E R C O S T S

Stagedreturn 7.4 1.5 8.9

Partialreturn 0.5 0.1 0.6

Permanent 0.1 0.0 0.1

Fatal 0.2 2.1 2.3

Other 3.0 0.5 3.4

Total 11.1 4.2 15.3

T O TA L P D C

<7days 56.4 11.2 67.6

Fullreturn 203.8 40.9 244.7




Fatal 0.6 8.9 9.5

Other 64.4 10.6 75.0

Total 471.9 101.0 572.9

A breakdown of PDC by who bears those costs – employers, workers or society – is derived in the following

sections.


PDC borne by the employer

The employer pays for the staff turnover costs and the overtime premium for the employeeswhomustwork

overtimetodothesidelinedworker’sjob.ThenormalVOPcost,forthesidelinedworker,however,isborneinpart

bytheemployer,inpartbythecommunityandinpartbytheindividual.Incompensatedcases,theemployerpays

anexcesspayment (EEP),while inbothuncompensatedandsomecompensatedcases,sick leave(SL)maybe

takenintheshorttermasitisavailable.Thus:

PDCE = OTP + STC + EEP + SL

Employer excess payment (EEP)

Formoralhazard reasons, insurersdonot compensateemployees their fullwage.The literaturediscusses the

potentialofinsurancepaymentschangingthebehaviourofemployersandemployees.Forexample,foremployees,

moralhazardsincludespendingalongerperiodoftimeoutofwork,thefilingofaworkers’compensationclaim

foranonwork-related injury,or failing to takeproper safetyprecautions. Foremployers,moralhazardsmight

includethefailuretoprovideappropriatesafetytrainingornotprovidingappropriateworktoinjuredworkers.51

Reville citesworkon themoral hazards issue, showing that higherdisability benefits lead tohigherdisability

claims.Thisworkhasalsoshownthathigherbenefitsleadtogreatertimeoutofworkforthosewithatemporary

disability.Thereis,however,debateregardingthereasonsforthis.

IntheUS,Miller10statesthattheaveragecompensationsystempays:

• 86%oftemporarydisabilityafter-taxwagelosses

• 50%ofafter-taxwagelossesforpermanentdisabilities.

Milleralso indicates thatstate laws in theUSsetqualifying thresholds, ranging fromtwo toninedays,before

wagelosscompensationkicksin.Inthemeantime,employeesusuallyremainonsickleaveandonthepayroll.

Theduration of this period impacts on the split of the cost between the employer, employee and community.

Withalongerthreshold,theemployerbearsmoreofthecost.

NOHSC18modelsemployerexcesspaymentsusing theweightedaverageproportionofworkers’wagespaidby

employers(96.5%)andtheaverageexcessperiod(3.3daysoutof5-dayworkweek).

• Theparameterswerebasedoncompensation,ABSandCommonwealthGovernmentdataandarealsousedfor

theNewZealandcalculation,withtheexceptionthatforcategory1workers,WLPIismuchlessthaninAustralia

(1.0ratherthan2.2)sonaturallytheNewZealandparameterisusedinstead.

• ItisimportanttonotethattheEEPmustbebasedonaverageweeklyordinarytimeearnings(AWOTE),rather

thanAWE.

• NewZealandAWOTEwas$770.44,44,45includingfull-timeandpart-timeearnings,fromtheMarch2005quarter,

toaccordwiththeACCdata.Theon-costmark-upusedis12.5%,bringingtotalAWOTEincludingon-coststo

$866.75.

EEP(1-7,c) = .965 * AWOTE * [1.0/5(1,c) , 3.3/5(2-7,c) ]

In total,EEPwas thusestimatedas$52.1million inNewZealand in2004–05,with theseveritydisaggregation

shown inTable4.4.Note that there isnoEEPassociatedwithuncompensatedpayments,so thesplitbetween

injuryanddiseasecasesisshowninstead.


T A b L E � . � Employer excess payments by severity and disease/injury, 2004–05 ($m)

S E v E R I T Y I N J U R I E S D I S E A S E T O TA L

<7days 37.2 2.0 39.2

Fullreturn 7.9 0.7 8.6




Fatal 0.0 0.0 0.0

Other 0.6 0.1 0.7

Total 49.0 3.1 52.1

Sick leave

Asnotedabove,theliteraturesearchrevealedthatsickleavemaybetakenbycompensatedworkersandthatthe

employerbearsthecostofprocessingit.10Thelattercostissmall,andtheliteratureincludesitinadministrative

costsasitisnotpartoftheproductivitydisturbanceperse.

• NOHSC18foundthat,forcompensatedworkers,sickleaveonlyappliedtothoseworkersincategory3(apartial

returntowork–category4inNewZealand),whereasforuncompensatedcases,sickleavewasusedbyallbut

category1workers(andincludingcategory5fatalities,notablyfordisease).

• Ineachcase,twoweeks’sickleavewereassumedtobetaken.

TheseassumptionsmightneedtobereviewedandadjustedinNewZealand,butsincetheyhavenobearingon

the total cost estimate and only a small impact on the distribution of costs between the employer and the

individual,theassumptionsareretainedinthiscosting.

AfinalmethodologyissuetonoteisthattheaveragecostperworkerofsickleaveisbasedontheproductofAWOTE

(notAWE)andtheaveragenumberofweekstakenofsick leaveforeachseveritycategory isassumedtobe2.

Algebraically,

SL(2-7,u and 4,c) = 2 * AWOTE

Total sick leave cost due to occupational injury and disease was thus estimated as $9.9 million in 2004–05

(Table4.5).

T A b L E � . � Sick leave by severity and compensation status, 2004–05 ($m)

S E v E R I T Y C O M P E N S AT E D C A S E S U N C O M P E N S AT E D C A S E S T O TA L

<7days - - -

Fullreturn - 5.4 5.4

Stagedreturn - 2.2 2.2


Permanent - 0.0 0.0

Fatal - 1.5 1.5

Other - 0.4 0.4

Total 0.4 9.5 9.9


PDC borne by the worker

Fortheperiodoftheproductivitydisturbance,workersbearthedifferencebetweenwhattheywouldhaveearned

intheabsenceofthe incidentandthe incometheyreceive intheperioduntil theyeitherreturntoworkorare

replaced.Thisincomemaybesourcedfromsickleave,theemployerexcesspayment,compensationandwelfare

payments,andtheyalsopaylesspersonalincometaxoverall.

Alltheincomesourceitemsforthesidelinedworkerarecalculatedseparately.Aswehaveseen,theemployer’s

sickleaveandexcesspaymentsgototheworker,sotheseequateexactlywiththeworker’sreceipts.Moreover,

thecompensationandwelfarepaidbysocietyalsogoesentirelytotheworker.Hencethisitemiscalculatedasa

residualof$61.3million(Table4.6).

PDC borne by society

Insociety,theinsurancesectorpayscompensationpaymentstosomeworkersforlostwages,aswellaspublic

welfarepayments tosupportworkerswhohave lostearningsthroughoccupationalhazardanddisability.Note

thatforthisitemweareonlyinterestedinthesepaymentsfortheperiodoftheproductiondisturbance.

In some cases, theworkermay also receive additional private insurance benefits (such as income protection

insurance)buttheseare likelytodisplacewelfarepayments,aresmall intheshorttermanddonotaffectreal

costs,onlytransfers.Henceourviewisthatthisextrasophisticationisnotparticularlyvaluableinmodelling.

For each severity category, average compensation payments for lost wages in the short term (CPWS(1-7,c)

) are

derivedfromtheACCdata,applyingonlytocompensatedworkers.The“shortterm”istheperiodbeforereturning

toworkorpermanentreplacement.

Theprovisionofwelfarepaymentsisquitecomplex,andisdetailedinSection4.2.5.Itistheshort-termwelfare

paymentsthatarerelevanthere,sowecallthematrixWPS.

The finalelementof theproductiondisturbancecostbornebysociety is the lossof taxation revenue fromthe

displacedworker(theTAXSmatrix).Whileitisnotedthatthereisalsogreateradditionaltaxationrevenuefromthe

replacementworker(greaterbecauseoftheovertimepremium),thisisessentiallyatransferfromoneeconomic

unittoanotherwithinthesocietygroupso,forsimplicity,itisnotitemised.TheTAXSmatrixisexplainedinSection

4.2.5.Tosummarise:

PDCS = CPWS + WPS + TAXS

Altogether,thePDCcostsbornebysocietyareestimatedas$274.9million(Table4.6).Thusoverallthesharesof

productiondisturbancecostsborne:

• bytheemployeris41%

• bytheworkeris11%,notingthattheaftertax(disposableincome)positionofcategory1workersisestimated

toimproveby$8.9millionoverall

• bysocietyis48%.


T A b L E � . � PDC by severity and bearer of cost, 2004–05 ($m)

S E v E R I T Y E M P L OY E R W O R K E R S O C I E T Y T O TA L

<7days 58.5 -8.9 17.9 67.6

Fullreturn 83.9 1.2 159.7 244.7

Stagedreturn 59.6 45.3 61.8 166.7


Permanent 0.7 0.5 0.9 2.0

Fatal 5.9 0.8 2.8 9.5

Other 24.9 20.9 29.1 75.0

Total 236.6 61.3 274.9 572.9

�.� .� HUMAN C APITAL C OS T S (HKC)

Conceptual and methodological issues

Oneofthemostsignificantcostsofworkplaceinjuryanddiseaseisthelong-termlossofworkandproductivity.

Therearetwobroadapproachesformeasuringthislossdescribedintheliterature:

• lostwages/humancapitalmethod

• frictionmethod.

The lost wages/human capital methodisbasedonneoclassicaleconomictheory.Wagesandothermarginalcosts

areassumedtoequalthevalueofthemarginalrevenuegeneratedbyanadditionalworkerunderconditionsoffull

employment.22Lostproductisthusthevalueofthewages(measuredasaverageearnings)plusotherinputsto

production(capital,plantandequipment,land,enterpriseetc)multipliedbythenumberofworkdaysmissed.For

reducedproductivitywhileworking,apercentageofthiscalculationisused.

Thelimitationswiththisapproacharethat itdoesnot incorporatequalityof lifedimensions,andthechoiceof

wagerateisanissue.Moststudiesuseanall-industryaveragewagerate,whereassomeuseaminimumwageor

industry-specificrate.Thechoiceoftimeperiodisalsoanissue,withsomestudiesusingafixedperiodandothers

using a variable period (such as life expectancy). It also does not allow for the situation where a previously

unemployedpersontakesontheworkoftheinjuredemployee.Inthissituation,societymaynotsufferaslargea

loss,asthepreviouslyunemployedworkerwhogeneratednoincomenowgeneratesanincome,whiletheinjured

workernolongergeneratesanincome.Thisleadsustothealternativefrictionmethodofcalculatingproductivity

losses.

The friction method was developed by Koopmanschap, Rutten, van Ineveld and van Roijen.52 This approach

estimates production losses for the time period required to restore production to its pre-incident state. This

contrasts to thehumancapitalmethodwhere, forexample, thepotential lossofproduction fromadisease is

calculatedoveramuchlongertimeframe.Thetimeperiodusedunderthefrictionmethodcouldbedeterminedby

whentheemployeereturns towork,orbywhenareplacement is found.21Thismethodgenerallyassumesthat

there is unemployment, and that a person who was previously not earning an income replaces the injured

worker.

Predominantlythehumancapital/lostwagesmethodisused,andindeedthisiswhatLeighetal9usedintheUS

andNOHSC/IndustryCommissioninAustralia.Thereasonforchoosingthehumancapitalmethodtendstobea

generalrecognitionthat,aftertheinitialdisruption,untilproductionisrestoredtoformerlevels(mostrelevantfor

minorinjuries),thereisessentiallythelossofthelabourresource(whenthereispermanentdisabilityorfatality)

overthelongerterm,whichreducesthecapacityoftheeconomytoproduceatanygivenlevelofunemployment.


Thehumancapitalapproachisanaccountingapproachthatusesthediscountedpresentvalueofaworker’s

futureearningsasaproxyforthecostofprematuredeath,injuryorillness.Itcharacterisespeopleasalabour

sourceandinputtotheproductionprocessandimpliesthevaluetosocietyofpreventinganincidentisthe

savinginpotentialoutputorproductivitycapacity.26

ThishumancapitalapproachisalsoconsideredappropriateinNewZealand,asadevelopedeconomyoperating

atnearfullcapacity,andthatthehumancapitallossesarenotsufficienttoinfluencetheaveragewage.

Foremployeeswhoonlyreturntoworkonareducedbasis,thereistheissueoftheirearningsprofile.Weil19depicts

threeearningsprofiles:

• Minimaleconomicloss–wheretheemployeere-enterstheworkplacewithalowerlevelofearnings(priorto

theiraccident),butwheretheirearningsthenrisequicklytothepre-injuryearningsprofile.

• Moderate economic loss – where upon re-entry to the workforce, at a lower level of pay, the post-injury

earningsprofilehasareducedrateofearningstothatwhichwouldhaveotherwiseensued.

• Significanteconomic loss–wheretherearemultipleentriesandexits fromtheworkforceandtheabsolute

levelofearningsfallseachtime.

AccordingtoWeil,anumberofstudieshave lookedintoearningprofilesassociatedwith injuriesandreturnto

workschedules.Inparticular,WeilcitesReville23andPetersonetal53tostatethat,overthefiveyearsfollowingan

injury, workers receive approximately 40% lower earnings on average than an equivalent control group of

employees.

Section2.3.4summarisedtheapproachtodistinguishinghumancapitalandproductivitymeasuresfromthemore

recent and comprehensive literature onwillingness-to-paymethods that enable valuation of the non-financial

aspectsofthevalueofleisure,healthandhumanlife.

NOHSC18correctly considers the human capital cost (HKC) as the streamof lifetime earnings that is lostwhen

workerswithaninjuryorillnessareunabletore-entertheworkforceattheirformerlevel,untilaverageretirement

age.This is the difference between the present value of the earnings before the incident – PV(EBI) – and the

presentvalueofearningsaftertheincident–PV(EAI).Mathematically:

HKC(3-7) = PV(EBI) – PV(EAI) where

PV(EBI) = SUM(i=1…RETA-RTWA)EBI/(1+r)^i and

PV(EBI) = SUM(i=1…RETA-RTWA)EBI/(1+r)^i

Thesumisovertheperiodofyearsremaining–thatis,retirementage(RETA=62yearsinNewZealand)minus

theaverageagefollowingtheincidentatwhichtheworkerreturnstowork(RTWA=40yearsinNewZealand).

• TheRETAparameterestimate(whichisinfactthesameasinAustralia)isdrawnfromOECD.vii,54

• RTWAisderivedfromtheACCdata(itisthreeyearsyoungerthaninAustralia)basedontheaverageageofan

incident(39.6years)plustheaveragetimeoffwork(175.1days).

Thesummationsarethusoveraperiodof62-40=22years.Thediscountrateis3.8%asderivedinSection2.3.4.

Afewpointsareworthnoting:

• Forallworkers,EBI = AWE*52 (whereAWE is theStatisticsNewZealandestimateplus the 12.5%on-cost

loading).

vii SeeinparticularFigure1RetirementagesvarywidelyintheOECD:Estimatedeffectiveretirementageofoldermaleworkersin2000,based

onDuvalR(2003)The retirement effects of old-age pension and early retirement schemes in OECD countries,OECDEconomicsDepartment

WorkingPapers,No.370.


• Forcategory3,4and7workers,weusetheNOHSC18estimatethatEAI(3,4,7) = 0.64 * EBIforworkersexperiencing

apartialreturntowork.Thismaybeconservativesincesomeofthe“other”workersmaynot,infact,return

towork.

• Forcategory5and6workers,EAI(5-6) = 0sincethereisnocontributiontoproductionfromthoseworkersafter

theincident.

• Thesumoverallinjuredworkerswilldependonthedistributionoftheiragesonleavingtheworkforce,aswell

asontheiraverageage.Thisisbecausethenetpresentvalueoflostfutureearningsvariesnon-linearlywith

age.However,wedonotmakethisrefinementinthisanalysis.

• $46,498istheaveragepre-incidentwages,sothepresentvalueofthefutureincomesstreamis$711,001.

• $29,758istheaveragepost-incidentwage(64%ofthepre-incidentwage),sothepresentvalueofthefuture

incomesstreamis$455,041andthelostearningsare$255,960.

HKC by bearer of cost

NoneoftheHKCisbornebytheemployer.Itisborneinpartbytheworker,aslossofincome,andinpartbysociety,

throughcompensationandwelfarepayments.

AswithPDC,itmakessensetocalculatetheworker’slossofearningsasaresidual–thedifferencebetweenthe

totalHKCandthewelfare,compensationandtaxlossesbornebysociety(sincetheemployerburdeniszero).

HKC borne by society

Averagecompensationpaymentsforlonger-termlossofearningsforseveritycategories3to7(amatrixwecall

CPWL(3-7,c)

)isderivablefromtheACCdata.AswiththeCPWSmatrixforPDC,thismatrixiszeroforuncompensated

workers.The“longterm”isdefinedastheperiodaftertheworkersarepermanentlyreplaced(partiallyorfully).

Asnotedearlier,theprovisionofwelfareandtaxpayments iscomplex,detailedin4.2.5.Wecall thelong-term

welfarepaymentmatrixWPLandthelong-termtaxmatrixTAXL.So:

HKCS = CPWL + WPL + TAXL

Totalhumancapitalcostisthusestimatedas$3.05billion(Table4.7)ofwhich:

• $1.88billion(62%)isbornebytheworker

• $1.17billion(38%)isbornebysociety.

T A b L E � . � HKC by severity and bearer of cost, 2004–05 ($m)

S E v E R I T Y T O TA L E M P L OY E R W O R K E R S O C I E T Y

<7days - - - -

Fullreturn - - - -

Stagedreturn 1,911.7 - 1,109.0 802.8

Partialreturn 66.2 - 38.0 28.2

Permanent 26.5 - 17.6 9.0

Fatal 675.5 - 522.4 153.0

Other 369.7 - 194.5 175.1

Total 3,049.6 - 1,881.5 1,168.1


�.� .� HEALTH AND REHAbIL ITATION C OS T S (MEDC)

ACCwereabletoprovidecompensationdataforthevarioussub-componentshere–medicalcosts,hospitalcosts

and rehabilitation costs. Essentially these costs include the real expenditures of treating and rehabilitating

workerstoenhancetheirhealthandassistthembackintowork.

MEDCisthesumof:

• thresholdpaymentsmadebyemployers(MEDE)

• paymentsmadebysocietyincluding:

– compensationmedicalandhospitalpayments(CPMEDS)

– compensationrehabilitationpayments(CPREHABS)

– publichospitalpayments(PUBHOSPS)paymentspaiddirectly

– other social funders of uncompensated services, including private health funds, other publicly funded

servicesandthenotforprofitsector

• paymentsmadebyworkersincluding:

– gappaymentsforhealthservices(GAPW)

– theirownrehabilitationcosts,foruncompensatedcases.

MEDC = MEDE + GAPW +REHABW+ CPMEDS + CPREHABS + PUBHOSPS + PHIETCS

MEDC borne by the employer

Our understanding is that employers are liable for the first or “threshold” payment of medical expenses for

compensatedemployees.NOHSC18estimatedthiscomponentasA$145forcategory1workersandA$290forother

workers.IntheabsenceofotherNewZealanddata,wehavesimplyconvertedthesethresholdpaymentsintoNew

Zealanddollarsusingpurchasingpowerparityestimates(seeSection2.3.4).Thus, inNewZealanddollars, the

employercostisestimatedas:

MEDE = $153(1,c) + $306(2-7, c)

TheestimateforNewZealandin2004–05isthus$42.5millionintotal,ofwhich$35.3millionisforcategory1

incidents.

MEDC borne by the worker

Thisitemcomprisestwocomponents.

• The worker “gap” payments are calculated as 16.1% of the “residual” estimated, once other components

havebeenestimated,forallbuttheleastseverecategoryofincidents.The16.1%parameterisbasedonthe

proportionofhealthsystemcostsbornebythehouseholdsectorinNewZealand.55Ofotherhealthexpenditure,

77.9%waspubliclyfinanced,5.7%wasbornebyprivatehealthinsurersand0.3%bythenotforprofitsector.

Theleastsevereincidentsareexcludedastheredonotappeartobesignificantgapsfortheseincidents.

• The rehabilitation payments borne by workers are estimated as the average rehabilitation payment (from

ACCdata)appliedtouncompensatedworkers.Intheabsenceofevidencetothecontrary,itisassumedthat

uncompensatedworkers bear the same average rehabilitation costs as compensatedworkers, rather than

somediscountedamount(inlinewithNOHSC18).

MEDW = GAPW (2-7) +REHABW (1-7,u)

The total bill for workers is estimated as $35.3 million – $22.3 million in health gaps and $13.0 million in

uncompensatedrehabilitationcosts(Table4.8).


T A b L E � . � Health and rehabilitation costs borne by workers, by severity, 2004–05 ($m)

S E v E R I T Y H E A LT H gA P S R E H A b I L I TAT I O N T O TA L

<7days - 5.5 5.5





Fatal 0.5 2.0 2.5

Other 3.2 0.7 3.8

Total 22.3 13.0 35.3

MEDC borne by society

Thisitemcomprisestheremainingfourcomponents.

MEDS = CPMEDS + CPREHABS + PUBHOSPS + PHIETCS

Thecompensationpaymentsforhealth(theCPMEDmatrix)andrehabilitation(CPREHAB)arecalculatedfromthe

averagepaidcostbyseveritylevel,factoredupbytheratioofultimatecoststopaidcosts,reflectingtheincidence

approach.

• Thisratiois2.3intotal,2.1forinjuriesand1.8fordisease(thelattermatrixderivedasaresidual).

• CPMEDincludesbothmedicalandcompensatedhospital(ie,privatehospital)payments.

The public hospital component is derived based on averaging a low and high estimate of the number of

hospitalisations,andthenapplyingtheaveragecost-weightmultiplierforallhospitalisationsinNewZealand.

• ThelowestimateisbasedonDriscolletal1of14,724.

• Thehighestimateisbasedonthetotalnumberofincidentsincategories2through7(althoughindeedsome

category1workersmayalsobehospitalised,andsomemoresevereincidentsmaynot),yielding55,454.

Driscolletal1referencedtoStatisticsNewZealand56notesthat:

New Zealand’s non-fatal injury statistics are only available for counts of injury hospitalisations (stays in

hospitalofat leastoneday).TheACCdata forwork-related injuriesusedhereprovidesno informationon

whetherinjuredworkerswerehospitalised…

Between1July2001and30June2002,14,724work-relatedinjuriestreatedsolelyinahospitalaccidentand

emergencydepartmentand/orbyadmissioninthehospitalwerenotincludedintheavailableinformation.

Cost-weightsforstaysinpublichospitalsarecalculatedviaacomplexalgorithmthattakesaccountoflengthofstay

aswellasotherissuesrelatedtocostcomplexityofadmissions.57

• The cost-weight multiplier converts the cost-weight to a dollar amount; in 2003–04 the multiplier was

$2,728.55formedical/surgicalinpatients.

• The2003–04multiplierwasinflatedto$2,807.68in2004–05,basedonhealthcostinflationof2.9%.

Theaverageestimateofpublichospitalcostsisthus$98.5million($41.3millionto$155.7million).

Oncethepublichospitalcomponentisknown,itispossibletoestimatetotalhealthandrehabilitationcostsfrom

this,asAccessEconomics’previousdiseasecostburdenstudieshaveshowntheretobeafairlystablerelationship


betweenpublicinpatientandtotalcostsforsimilartypesofconditions.Specifically,AccessEconomics58estimated

thecostsofalltypesofarthritisinNewZealand,aconditionthatislikelytobesimilartooccupationalinjuryand

disease, given the large component of the latter that is due to sprains, strains and other conditions in the

musculoskeletalcategory,andthefactthatarthriticconditionsrepresentoverhalfofthemusculoskeletalchapter

oftheICD-10.

Thereportindicatedthatpublicinpatientcostsweresome14.2%oftotalcosts,whichincludedmedical,specialist,

pharmaceutical,alliedhealthandresidentialcarerecurrentcosts,aswellastakingintoaccountanon-recurrent

loadingforcapitalexpenditures,publichealthandadministration,researchandconsumables/equipment.

Thisfractionisusedtofactorupthe$98.5millionestimatetogenerateatotalestimateforhealthandrehabilitation

costsof$693.8millionin2004–05.

Given the totalcostestimate,a residualcan thenbecalculated that includes theuncompensatedmedicaland

hospitalexpenses(thatarenotpublichospitalexpenses)aswellasanyotherhealthorrehabilitationcostsie,the

sumoftheGAPpaymentsbornebytheworkerandthePHIandothersocially-financedelements.

Theseveritydistributionforthepublichospitalandresidualcostmatricesarebasedontheaverageoftheother

componentsforwhichtherearedataavailable.

ThehealthandrehabilitationcostsbornebysocietyaresummarisedinTable4.9,whiletotalcostsaresummarised

inTable4.10.

T A b L E � . � Health and rehabilitation costs borne by society, by severity, 2004–05 ($m)

S E v E R I T Y C P M E D C P R E H A b P U b H O S P P H I E T C T O TA L

<7days 89.2 27.5 56.0 180.9 353.6

Fullreturn 39.0 9.6 20.1 55.8 124.5

Stagedreturn 23.4 10.4 13.6 37.1 84.6

Partialreturn 0.9 0.4 0.5 1.4 3.3

Permanent 0.4 3.0 1.3 3.3 8.1

Fatal 0.0 0.1 0.9 2.5 3.5

Other 11.9 4.1 6.1 16.5 38.6

Total 164.8 55.1 98.5 297.6 616.0

Overall,employersbore6.1%ofthesecosts,workers5.1%andsociety88.8%.Injuriesaccountedfor78.5%and

occupationaldiseases21.5%.


T A b L E � . � 0 MEDC, by severity, disease/injury and bearer of cost, 2004–05 ($m)


T O TA L

<7days 35.3 5.5 353.6 394.4

Fullreturn 4.7 12.6 124.5 141.9

Stagedreturn 1.9 9.2 84.6 95.7


Permanent 0.0 1.4 8.1 9.4

Fatal 0.0 2.5 3.5 6.0

Other 0.4 3.8 38.6 42.8

Total 42.5 35.3 616.0 693.8

I N J U R I E S

<7days 33.5 0.4 248.6 282.5

Fullreturn 4.4 11.4 112.3 128.1



Permanent 0.0 0.7 4.6 5.3

Fatal 0.0 0.2 0.4 0.6

Other 0.3 3.5 35.7 39.5

Total 40.0 25.0 483.3 548.3

D I S E A S E

<7days 1.8 5.0 105.0 111.8

Fullreturn 0.4 1.2 12.2 13.8



Permanent 0.0 0.6 3.5 4.1

Fatal 0.0 2.3 3.1 5.4

Other 0.0 0.4 2.8 3.3

Total 2.4 10.3 132.7 145.5

�.� .� ADMINIS TRATI vE C OS T S (ADMIN C)

Legalandadministrativecosts,althoughidentifiedinafewstudies,aregenerallynotcosted.Administrativecosts

generallycoverthecostsassociatedwiththeadministrationofcompensationprogrammes,processingofclaims

andsickleave,injuryinvestigation,record-keepingandinjuryreporting.10

Leighetal,9citingworkbyNelson,59usesthedifferencebetweenpremiumspaidandbenefitspaidtomeasurethe

administrative(oroverhead)costsfortheworkers’compensationsystem.Itisestimatedthat31%ofthemedical

benefitspaidrepresentadministrativeexpensesofthesystem.Hethengoesontonotethatthis31%wouldnot

necessarily apply to uncompensated cases, and assumes 15% for non-compensatedmedical payments (after

removingthosemedicalcostspaiddirectlybythepatients,whichwasestimatedat18.4%ofthetotal).Leighuses

thesamefiguresincalculatingadministrativecostsassociatedwithotherindemnitybenefits,suchaspayments

bysocialsecurity,privatedisabilityinsuranceandotherwelfarepayments.


TheHSE16assumethatadministrativecostsassociatedwithdealingwithabsences(suchasthecalculationand

paymentsofbenefits,processingofsickleaveandextramanagementtime)equatestoanaverageof30minutes

perdayofabsence.Thisisappliedtotheaveragewage(includingnon-wagelabourcosts)foranaccounts/wages

clerk.Foradministrativecostsandprofitsassociatedwithinsurancecompanies,theHSEassumethistobe15%

ofgrossclaims.

These sources provided guidance thatwas utilised in Access Economics,5 which first separated these various

elementsintotheirrespectivecosttypes–productionandadministrative(legalandadministrationelements)–

andthenrefinedtheestimationtherein,basedontheavailabledata.ThisapproachisalsoadoptedhereforNew

Zealand,basedontheACCcostcategoriesanddata,toprovideestimatesfor:

• legalcosts

• administrationcosts

• investigationcosts

• thebring-forwardoffuneralexpenses.

Legal costs

Legalfeesandassociatedcostsarebornebyworkers,theemployerandsociety.

Societybearsthecompensatedlegalcosts.CompensationdataprovidedbyACCareusedand,aswithmedical,

hospitalandrehabilitationpaidcosts,arefactoredupbytheratiobetweenultimateandpaidcosts inorderto

estimate,onan incidenceapproachbasis, thecompensatedcosts for2004–05,by injury,diseaseandseverity.

However,thecompensatedlegalcostthuscalculatedwasonly$190,000.

Thisestimateiswellshortofthoseintheliterature.Miller10calculatesadministrationandlegalfeesforemployers

tobe13%ofinsurancepayments,butdoesnotseparateoutthetwocomponents,withoverheads/profitsafurther

5.15%.TheNewSouthWalesWorkcoverAnnualReportindicatesthat,for2000–01,legalfeesamountedto11.8%

oftheirclaimspayments.

However,the“nofault”policyinNewZealandmaymeanthatlegalcostsareverymuchlowerthanoverseas.Thus,

conservatively, thecompensatedcomponent isusedasthebasis for theestimate, ie, thecomponentborneby

society.Forcompensatedcases,aswithNOHSC,18itseemsreasonablethatemployers’legalcostswouldbesimilar

toworkers’ (reimbursed through the compensation system). In this sense, itwould be argued that,where an

individualneededlegaladvice,sodidtheemployer.Thusforcompensatedcases,thetotalcostestimateistwice

thecompensatedcosts($380,000),sharedequallybetweentheemployerandsociety.Foruncompensatedcases,

thelegalcostsareassumedtobesmallandarethusnotestimated(Table4.11).

Totallegalcostsarethusestimatedas$0.4million,withemployersandsocietybearing50%each,andworkers

notbearinganyofthecosts.

T A b L E � . � � Legal costs, by severity, 2004–05 ($m)


<7days 0.07 - 0.07 0.14

Fullreturn 0.06 - 0.06 0.11

Stagedreturn 0.02 - 0.02 0.04

Partialreturn - - - -

Permanent 0.00 - 0.00 0.00

Fatal 0.01 - 0.01 0.02

Other 0.03 - 0.03 0.07

Total 0.19 0.19 0.38


NOHSC18alsocalculateslegalpenaltiesandfinesimposedbythecourtsystem,withtheemployerbearingthecost

ofthoseprosecutionsresultinginconvictions.However,itwasnotedthatthefinesimposedareatransfercost

fromtheemployertosociety,andthereforethecostdoesnotaddtothebottomline.Althoughthosecasesthat

are prosecuted but where no conviction ensues also impose a small real cost, this was only A$1.2million in

Australia,andthevalueofthetransferwasonlyA$10million,sonoattemptwasmadetoestimatethecostof

penaltiesandfinesinNewZealand,asitwaslikelytobeextremelysmall.

Investigation costs

InvestigationcostsweresourcedfromACCdata,togetherwithparameterestimatesfromtheavailableliterature.

• TheHSEcalculatedthattheinvestigationcostsofcompensationschemeswere4.7%oftotalclaimpayments,

verysimilartotheinvestigationfiguresofNewSouthWalesWorkcoverof5.1%in2000–01.viiiInNewZealand,

we thususeanaverageof4.9% to calculate the social costof investigations,which total$23.5million in

2004–05.

• NOHSC18estimatedthat therelationshipbetweensocial investigationcosts (of thecompensationschemes)

andthoseofemployers,wasintheratio390:134.

• Onthebasisofthisratio,theemployerinvestigationcostisestimatedas$8.1millionin2004–05,bringingthe

totalinvestigationcostto$31.6million.

Investigationcostsweredistributedbyseverityonthebasisofthesharesoftheotherthreeadministrativecost

elements.

Travel costs

TheIndustryCommissiondefinedthesecompensationpaymentsasthoseintendedtocover“traveltodoctor(s),

rehabilitationcentres,solicitorsandthelike”.

TheACCdataprovidethestartpoint forestimatingtravelcosts,withpaidcostspercasefactoreduptoderive

ultimatecostspaidbysociety,withthesameaveragecostsappliedtouncompensatedincidentstoestimatetravel

costs paid byworkers. Theremay be someother public support for injuredworkers’ travel costs through the

welfaresystembut,giventhesizeofthiscomponent,thevalueofthisitemwasnotestimated.

Moreover,althoughtheremaybesometravelcostsinvolvedfortheemployer,forexample,travellingtoandfrom

court,solicitorsetc,asinNOHSC,18thesearealsolikelytobeminorandarethereforenotincluded.

Travel costs are summarised inTable 4.12,which shows that total travel costswere estimated in 2004–05 as

$23.2million,ofwhich$5.4million(23%)werebornebyworkersand$17.9million(77%)werebornebysociety.

T A b L E � . � � Travel costs, by severity, 2004–05 ($m)


<7days - 1.2 6.2 7.4

Fullreturn - 1.1 5.7 6.9

Stagedreturn - 0.7 3.6 4.4

Partialreturn - 0.1 0.4 0.4

Permanent - 0.0 0.2 0.3

Fatal - 1.9 0.1 2.0

Other - 0.2 1.6 1.9

Total - 5.4 17.9 23.2

viii WorkcoverAnnualReport2001/02http://www.workcover.nsw.gov.au/Publications/General/AnnualReports/annualreport0102.htm


Funeral costs

NOHSC18pointsoutthattherelevantcostoffuneralsisinfactthecostofbringingthemforward(sinceeveryone

dieseventually).Thisrealcostwasverysmall–onlyA$8millioninAustralia,usingtheestimatedaveragefuneral

costofA$3,617.

ConvertedtoNewZealanddollarsusingpurchasingpowerparity,thisaveragecostisestimatedas$3,822.

Thedegreetowhichcostsarebroughtforwarddependsonaveragelifeexpectancy,whichisbasedonNewZealand

lifeexpectancytables60fortheaverageageofafatality(52fromtheACCdata).Atthisage,NewZealanderson

averagewouldhaveanestimated29yearsof further life.Thecalculation for the funeral costbrought forward

becomes:

FUNC(w,6) = $3,822 – $3,822 /(1+r)^i = $2,542

with i = 29 and r = 3.8%

Thisfigureismultipliedbythenumberoffatalitiesandattributedtotheworker.Thereisnodifferencebetween

injuryanddisease-relatedfatalities,orcompensatedanduncompensatedfatalities.

Itisnotedthat,inNewZealand,afuneralgrantmaybeavailabletothepartner,child,parentorguardianofsomeone

whohasdied,tohelptowardsthecostofthefuneral.Thegrantof$1,611.65isincomeandassettested.ixHowever,

thetotalcostofthisitemroundstozerosothetransferelementisnotcalculated.

Summary of administrative costs

Asummaryof theadministrative costelements isprovided inTable4.13 showing total administrative costsof

$55.4millionofwhich:

• $8.3million(15%)isbornebyemployers

• $5.6million(10%)isbornebyworkers

• $41.6million(75%)isbornebysociety.

T A b L E � . � � Administrative costs, by severity, 2004–05 ($m)


<7days 0.5 1.2 7.6 17.6

Fullreturn 27.2 25.1 15.0 16.2

Stagedreturn 20.1 18.5 10.4 10.3


Permanent 0.6 0.6 0.4 0.6

Fatal 8.2 9.3 2.9 5.3

Other 8.8 8.0 4.6 4.5

Total 8.3- 5.6 41.6 55.4

ix Seehttp://www.workandincome.govt.nz/asat1April2005.

�.� .� TRANSFER C OS T S (TRAN C)

AshighlightedintheliteraturereviewandparticularlyinSection2.3.3,itisimportanttoestimatetransfercostsin

ordertoallocatecostsbywhobearsthem,aswellastoestimatethedeadweightlosses(DWLs)associatedwith

theadministrationofanddistortionaryimpactsfromthesetransfercosts.


Transferpaymentsdonotaddtothetotal“bottomline”costsofwork-relatedincidents.Instead,theyaffectthe

allocationof costs toemployers,workersand society.However theDWLsassociatedwitha transferpayment,

includingadministrationcosts,doaddtothebottomlineoftotalcosts.

Thechaptersofarhasaccountedfortransferswithinvariouscostitems(eg,somecompensatedpayments,public

health systemcosts).This sectionaddresses the remaining transfers, inboth the short term (until theworker

eitherreturnstoworkorceaseswork)andinthelongerterm(afterthispoint),thusenablingresolutionofthePDC

andHKCmatrices.Deadweightlossesofthetransfersarethencalculated.

Taxation and compensation transfers

Inordertoestimatethevalueofthetransfers,weuseanaveragepersonalincometaxrateforNewZealandof

22%,asestimatedintheAccessEconomicsmacroeconomicmodelestimatefor2005.

Taxationpaymentsarethuscalculatedas:

TAXS = 22% * VOP and TAXL(3-5) = 22% * HKC

Sotheshort-termtaxtransferis$122.7million,andthelong-termtaxtransferis$670.9million(Table4.14).

CompensationpaymentsforlostproductionarecalculatedfromACCcompensationdatafortheremainingitems

oftotalcost–notablyweeklycompensationpayments,independenceallowance,lumpsumpaymentsanddeath

benefits.

As previously, the paid costs are factored up to estimate ultimate costs, and then applied to the number of

compensatedworkers($221.1millionintotal).Thepaymentsforcategory1and2workersareallocatedtotheCPS

(short-term)matrix,whiletheremainingcostsbyseveritycategoryareallocatedinthesameproportionasthe

non-employerPDCrelativetotheHKC(11%).Becauseofthelargenumberofclaimsinthe“fullreturntowork”

category,CPSisinfactgreaterthanCPL–$117.2millioncomparedto$103.9million(Table4.14).

T A b L E � . � � Taxation and compensation transfers, by severity, 2004–05 ($m)

S E v E R I T Y TA X S TA X L C P S C P L

<7days 14.9 - 3.1 -

Fullreturn 53.8 - 101.2 -

Stagedreturn 34.7 420.6 7.8 63.3


Permanent 0.4 5.8 0.2 1.5

Fatal 1.6 148.6 0.5 4.4

Other 15.7 81.3 4.0 32.1

Total 122.7 670.9 117.2 103.9

Welfare payments

Welfarepaymentsfromsocietytotheworker,whileunabletowork,areestimatedfromdatafromtheMinistryof

SocialDevelopment.x

Therearetwomainwelfarepaymentsthataworkermayreceivewhileunabletowork:

• SicknessbenefitisprovidedforNewZealanderswhoaretemporarilyoffworkorworkingatareducedlevel

because of sickness, injury, pregnancy or disability. Age, family income and other conditions (eg,medical

certificates)apply.Aweightedaveragesicknessbenefitof$173.56perweekiscalculatedbasedontheage

x MinistryofSocialDevelopmentwebsite http://www.workandincome.govt.nz/fordataasat1April2005.


distributionoftheworkforce(19%areunder25years)andequalsplits(27%each)betweenpaymentratesto

couples,soleparentsandsinglesover25.

• Disabilityallowancereimbursespeopleforongoingregularcoststhattheyincurbecausetheyhaveadisability.

There is an income test that must be met. The amount of allowance paid depends on a person’s costs.

Amaximumpaymentof$49.48perweekispayable,withtheassumptionthatworkersincategories3,4,5and

7wouldbeeligibleforthispayment.Thedisabilityallowanceforpermanentincapacitywouldbepayableuntil

age65(ie,25yearsfromaverageRTWAof40years).Thepresentvalueofthisincomestream,withadiscount

rateof3.8%,isestimatedas$42,701.

AsimilarmethodtothatofNOHSC18applies:

• Category1workersaredeemednottoreceivewelfarepayments.

• For category 2 workers (full return to work), compensated workers are deemed not to receive welfare

payments,whileuncompensatedworkerswouldreceivesicknessallowance in theshort term(for theWPLI

minustwoweeksofsickleave).

• Forcategory3,4,5and7workers(moreseriousincapacity):

– Intheshortterm,bothcompensatedanduncompensatedworkerswouldreceivesicknessallowance(for

theWPLIminustwoweeksofsickleave),thesameasfortheuncompensatedcategory2workers.

– Inthelongterm(ie,afterworkforceseparationorreturntoworkatreducedcapacity),bothcompensated

anduncompensatedworkerswouldreceivethepresentvalueofthedisabilityallowance.Thereasonfor

thisisthattheincomethresholdfordisabilityallowanceis$591.31perweekonaverage,whileaverage

earningsaftertheincident(EAI)wereestimatedas64%ofAWE(withouttheon-costs),whichwouldbe

only$508.69,sothegapistwicethesizeofthepayment.

• Forcategory6workers(fatalincidents):

– Intheshortterm,bothcompensatedanduncompensatedworkerswouldreceivesicknessallowance(for

theWPLIminustwoweeksofsick leave),whilenotingthat, inactuality, thecompensatedamounthere

roundstozeroandtheuncompensatedamountisalsoverysmall.

– Inthelongterm(ie,aftertheworkerhasdied),neithercompensatednoruncompensatedworkersreceive

disabilityallowance.

PuttingtogetherthesevariouselementsresultsinestimationoftheWPSandWPLmatrices(welfarepaymentsin

theshorttermandlongterm),summarisedinTable4.15.

• Totalwelfarepaymentsintheshortrunare$35.1million,with$25.1milliontocompensatedworkersand$35.1

milliontouncompensatedworkers.

• Totalwelfarepaymentsinthelongrunare$393.2million,with$329.1milliontocompensatedworkersand

$64.1milliontouncompensatedworkers.


T A b L E � . � � Welfare transfers, by severity and compensation status, 2004–05 ($m)

S E v E R I T Y W P S W P L

C O M P E N S AT E D U N C O M P E N S AT E D T O TA L C O M P E N S AT E D U N C O M P E N S AT E D T O TA L

<7days - - - - - -

Fullreturn - 4.6 4.6 - - -

Stagedreturn 16.1 3.2 19.3 265.7 53.2 318.9

Partialreturn 0.7 0.1 0.9 9.2 1.9 11.0

Permanent 0.2 0.0 0.3 1.3 0.3 1.6

Fatal 0.0 0.6 0.7 - - -

Other 8.1 1.3 9.4 53.0 8.7 61.7

Total 25.1 10.0 35.1 329.1 64.1 393.2

Calculation of deadweight losses

Taxationpaymentstransferincomefromindividualmembersofsocietytothegovernment,whothentransfersit

againtoothermembersofthecommunitythroughthewelfaresystemandgovernmentservices.Inreality,these

transfersarenotcostlesstoorchestrate.Forexample,administrationofataxationsystemhascosts.InAustralia,

acomparisonofthetotalamountsspentandrevenueraisedin2000–01,relativetotheCommonwealthdepartment

runningcosts,suggeststhatadministrationcostsaccountfor1.25%ofeachtaxationdollarraised.58Evengreater

costsareincurredduetothedistortionaryimpactthattaxationhasonworkers’workandconsumptionchoices.

WorkbytheAustralianProductivityCommission61foundtheefficiencycost(ordeadweightloss–DWL)associated

withthesedistortionsamountsto27.5%ofeachtaxdollar.

InNewZealand,studiesbyDiewertandLawrence62,63 found that, in 1991, thedeadweight lossassociatedwith

personalincometaxwas18%andforconsumptiontaxesaround14%.TheyalsonotedthattheDWLsassociated

withlabourtaxationincreasedfrom5%toover18%inthe20yearsupto1991.Inthisreport,weusethe18%for

theestimateofthedeadweightlosses,notingthatitmaybeaconservativeestimateinviewofanotherstudy64

basedon 1988data that generated estimates ranging from24.6% to 146.2%of taxes raised.Theuse of 18%

balancestheupsideriskthattheDWLshavecontinuedtoincreasesince1991againstthedownsideriskthattax

raisedfromnon-laboursourceshaslowerassociatedDWLs.

The18%parameterisappliedtoboththetaxationreceiptslostandthewelfarepaymentsandothergovernment

expendituresincurred,since,inabudgetneutralsetting,thelatteralsorequiredtaxationtoberaisedandhence

itsdistortionaryimpacts.Insumthenitisappliedto:

• TAXSandTAXL

• WPSandWPL

• PUBHOSP(PHIETCisconservativelynotexcluded).

Intotal, thedeadweight lossesareestimatedas$237.7million in2004–05,ofwhich$191.0millionaredueto

casesofoccupationalinjuryand$45.8milliontocasesofoccupationaldisease(Table4.16).


T A b L E � . � � Deadweight losses from transfers, by severity and injury/disease, 2004–05 ($m)

S E v E R I T Y I N J U R I E S D I S E A S E T O TA L

<7days 9.8 3.0 12.8





Fatal 2.9 24.5 27.3

Other 27.5 3.8 31.4

Total 191.9 45.8 237.7

�.� .� OTHER C OS T S (OTHERC)

Workerswhosufferpermanentworkplaceinjuriesordiseasearelikelytorequirepersonalcareandservices,either

fromfamilyandfriendsonavoluntarybasisorthroughaccessingtheformalcaresectorthroughanyofavariety

ofpublicprogrammes,orboth.Theseservicesincludepersonalcare,bathing,mobilityassistanceandhometasks

suchashousecleaning,gardening,meals,laundryassistanceandhousemaintenance.

Category3,4,5and7workerswhosufferworkplaceinjuriesordiseaseandtheirfamiliesandcarersmayalso

requireavarietyofadditionalequipment,aidsandhomemodificationsinordertocontinuelivingathomesafely.

Theseincludebathingandtoiletingaids(eg,showeraccessories),safetyaids(eg,handrailsandlighting),adapted

cutleryandcommonitems(eg,clothingwithVelcro),mobility/transportaids(eg,walkingframes,wheelchairs),

nursingaids(eg,pressure-reliefmattresses),equipmentforliftingandtransfers(eg,hoists),leisureandrecreation,

mobility,seatingandtransportandmodificationstotheirhomes.

Whetherpaidforprivatelyorpublicly,alltheseitemsincuradditionalrealcosts.NOHSC18estimatedthesefromdata

summarised in Frisch65 (18, Table 1), who had undertaken detailed survey work of the costs of such items in

Australia, based in turn on data from the Department of Family and Community Services Survey of Disability

SupportPensionersoriginallyreportedinWalshandChappell.66Theoriginaldataaremeanannualisedcostsfor

peoplewithmusculoskeletal impairmentswithnon-zerocosts foraparticularexpenditurecategory.Aswiththe

hospitaldata,becausethesearepeoplewithmusculoskeletalconditionsthatarelikelytohavesimilardisability

impactsasmanyoccupationalincidents,thesedataareconsideredappropriatetoapplyinthisNewZealandcost

estimationalso,onceagainadjustedbasedonPPP.Theannualcostsarethusestimatedas:

• $1,783perannumforcarersonaverage

• $560perannumforaids,equipmentandhomemodifications.

Weassumethesecostsareincurredforcategory3,4,5and7workerseachyearfromthetimeoftheinjury(RTWA

=40years)tilldeath(ALE=80yearsatage40,againfromtheNewZealandlifeexpectancytables).Thepresent

values for carer costs (CARERC) and for aids, equipment and modifications (AEMC) are thus calculated with

r=3.8%as:

CARERC(3,4,3,7) = SUM(i=1…ALE-RTWA)$1,783/(1+r)^i = $ 37,745 and

AEMC = SUM(i=1…ALE-RTWA)$560/(1+r)^i = $11,865


Intotal,theothercostswereestimatedas$293.1millionin2004–05,ofwhich:

• $223.0millionwasforcarers

• $70.1millionwasforaids,equipmentandhomemodifications(Table4.17).

T A b L E � . � � Other costs, by severity, 2004–05 ($m)

A I D S , E q U I P M E N T A N D

S E v E R I T Y C A R E R S H O M E M O D I F I C AT I O N S T O TA L

<7days - - -

Fullreturn - - -




Fatal - - -

Other 34.9 11.0 45.9

Total 223.0 70.1 293.1

Noneof thesecostsarebornebyemployers.Rather, theyaresharedbetween individualsand thecommunity.

Giventhattheoriginaldatareflectedmusculoskeletalconditions,itmaybefairtoassumethattheaveragecosts

applyequallywelltoinjuryanddiseasesub-categories.ItwasunclearfromtheMinistryforSocialDevelopment

websitewhethercarersorworkersareentitledtogovernmentpaymentstoassisttheminmeetingthesecosts,or

howmuchtheymayreceive.Also,inAustralia,thevaluewasquitesmall(onlyA$9.5millionforcarerallowance

resultingfromworkplaceincidents).

EstimatingthevalueofsuchtransferpaymentsmaybeafuturerefinementforNOHSACtoundertake,tobetter

estimatethesplitbetweenthecostsbornebytheindividualandthosebornebysociety.Inthisanalysis,theyare

simplyallocatedtotheworker,whilenotingthatinfactinmaybethefriendsandfamilyoftheworkerwhobear

thebruntofthesecosts.

Costs not included

Adamsetal2notedthatrelationshipbreakdownwasanimportantimpactofworkplaceinjuryanddisease.

Onesetofindirectcoststhatwereconsiderablearosefromfamilyseparations,bothphysicalandemotional.

In four cases relationships were broken, with a further two cases losing their pre-injury relationships

permanently.Inaddition,thereweremajorlifestylechangesformanyofthefamilies,withmanyparticipants

changingtheircareers,beginningorstoppingstudy,andgivinguphobbiestocareforthefamilymember.

Whenfamiliesseparate,therealcostscanbequite large.AccessEconomicsestimated,forexample, ina2004

reportforthefederalOfficeforWomen(nowlocatedintheDepartmentofFamilyandCommunityServices)that,

incasesofdomesticviolence,theconsumptionlossesresultingfromseparationofpartnersandhouseholdswere

infactaroundone-thirdofthetotalcostsofA$8.1billion.

It may thus be worthwhile to better estimate the relative likelihood of separations resulting from workplace

incidents,inwhichcasesuchcostscouldbeincludedinfutureestimates.However,givencurrentdataavailability,

thesearenotabletobeconfidentlyestimatedatthetimebeing.


�.� .� C OS T S OF SUFFERIN g AND PREMATURE DEATH (SUFFC)

Gross cost of suffering

Inall cases therewasadegreeof suffering, insomesufferingwasextreme forbothparticipantsand their

families.2

The literature on willingness to pay provided an estimate of the value of a life year (VLY) in New Zealand of

$184,216,basedonthevalueofastatisticallifeof$3.9millionwithadiscountrateof3.8%perannumover40

years(Section2.3.4).

Weapplythisvaluationtoalltheseveritycategoriestoestimatetheaveragecostofsufferingandprematuredeath

(SUFFC). Critical parameters are the disability weightings fromNOHSC,18 in turn based onMathers et al37 and

accordingwiththeNewZealandweightsfromtheMinistryofHealth’sburdenofdiseaseandinjurystudyalso.36

Theseweightsarethesameforcompensatedanduncompensatedcases,andaresummarisedinTable4.18.For

eachevent,anumberofpossibleexamplesareincluded.

T A b L E � . � � Disability weights used for estimating costs of suffering

S E v E R I T Y W E I g H T I N J U RY E X A M P L E S D I S E A S E E X A M P L E S

1 0.1 Openwound(0.108) Moderatehearingloss(0.120)

Short-termeyeinjury(0.108) Slippeddisc,chronicpain(0.125)

2 0.2 Ribfracture(0.199) Melanoma,primarytreatment(0.190)

Internalinjuries(0.208) Severeasthma(0.230)

3,4,7 0.4 Femurfracture(0.372) Colorectal/livercancer,primarytherapy(0.430)

Burn,20–60%(0.441) Hypertensiveheartdisease(0.352)

5 0.6 Spinalcordinjury(0.725) Occupationaloverusesyndrome,severe(0.516)

Poisoning(0.608) AIDS(0.560)

6 1.0 Transportaccident Stroke/heartfailure

Electrocution Lungcancer/mesothelioma

Forseveritycategories1and2,thepainandsufferingispresumedtemporary,soislimitedtotheaveragetimeoff

work.Hencethegrosscostofsufferingis:

Gross SUFFC(1-2) = WLPI(1-2)/52 * VLY * Weight(1-2)

Forcategories3through7,however,thehumancostintermsofsufferingandprematuredeathispresumedto

impactuntilALEof80yearsatage40(fromtheNewZealandlifeexpectancytables),sothecalculationisapresent

valueone,withthediscountrateof3.8%.Theequationis:

Gross SUFFC(3-5) = SUM(i=1…ALE-RTWA) VLY * Weight(3-5) /(1+r)^i

Usingthismethodology,thegrosscostofsufferingfromoccupationalincidentsinNewZealandisestimatedas

$18.3billionin2004–05.

Net cost of suffering

There is another important consideration. Since this calculation of suffering and early death is based on a

willingness-to-pay approach from wage-risk studies, this item conceptually includes in the VSL the workers’

perceptionsof thecosts that theywouldbear from lossofhealthy life, taking intoaccountallknownpersonal


impacts–thesufferingitself,lostwages/income,out-of-pocketpersonalhealthcostsandsoon.Toavoiddouble

counting,thelatterelementsmustbenettedoutandanestimateofthenetcostofsufferingcalculated.However,

costsspecific tothe incidentsthatarenotbornebytheworker,andarethusunlikely tohaveentered intothe

calculationsofpeopleinthesourcewage/riskstudies(forexample,publiclyfinancedhealthspending),should

notbenettedout.

Theknownfinancialimpacts(totheworker)deductedfromthegrosscostofsufferingarethematricesPDCW,HKC

W,

GAPW,REHABW, LEGAL

W,TRAVEL

WandOTHERC (presumedallborneby theworker),which togetheramount to

$2.3billion.

Notethat,duetothetransfer impactsnotedearlier, thenetcostofsufferingbornebyworkers incategory1 is

negative,ie,theincreasesindisposableincomeareestimatedtooutweighthefinancialcosts,onaverage.

Withtheseadjustments,thenetcostofsufferingandprematuredeathduetoworkplaceincidentsin2004–05is

$16.0billion.

T A b L E � . � � Gross and net cost of suffering, by severity, 2004–05 ($m)

S U M O F F I N A N C I A L C O S T S

S E v E R I T Y g R O S S S U F F E R I N g C O S T b O R N E bY W O R K E R S N E T S U F F E R I N g C O S T

<7days 19.1 -2.2 21.3

Fullreturn 138.5 14.9 123.6

Stagedreturn 11,651.4 1,401.3 10,250.1


Permanent 87.3 21.3 66.0

Fatal 3,705.0 527.6 3,177.4

Other 2,253.0 265.4 1,987.6

Total 18,257.8 2,276.6 15,981.3

Comparison with international results

Leighetal9estimatedthatthecostofsufferingandearlydeathwereovertwice,andpossiblyuptosixtimes,as

highasalltheothercostsputtogether,atleastUS$350billionwithacruderange“betweenUS$533andUS$905

billion”(p7),comparedtoUS$155.5billion.Humancapitalcosts,incontrast,were“only”$67billion(one-fifthof

thelowestendofthepainandsufferingestimates).Hence,ourresultsparalleltheseproportionsclosely.Human

capitalestimatesarelikelytobeinthe$3billionrange–sofivetimesthiswouldbe$15billion.Iftotalfinancial

costsarearound$5billion,thenourpainandsufferingestimatesarealsobetweentwoandsixtimesashigh–just

overthreetimesinfact.TheseresultsalsoaccordwiththeAustralianproportionalitiesfromNOHSC,18unsurprisingly,

givenmethodologicalsimilarities.

AsintheUSandAustralianstudies,thehumanlifeandsufferingestimatesareincludedintheconclusionsbutas

aseparateitem,giventheuncertaintysurroundingtheestimatesofVSLandVLY.

�.� SUMMARY OF TOTAL C OS T S

Thissectionsummarisesthecoststhathavebeencalculatedinprecedingsections.


�.� .� THE C OS T MATRIX – T YPE OF C OS T bY bEARER

Puttingalltheseestimatestogether,wederiveatotalfinancialcostforoccupationalinjuryanddiseasein2004–05

of$4.9billion(3.4%ofGDP),excludingthecostofsufferingandearlydeath.

Thelattercostelementisconservativelyestimatedasafurther$16.0billion.Thecomponentsaresummarisedin

Table4.20.

12%

62%

14%

Costs, by type, share of total (%)F I G U R E 4 . 3

1%5%

6%

PDC HKC MEDC ADMINC TRANSC OTHERC

Employersboreanestimated$287million(5.9%)ofthetotalfinancialcosts.Workersborearound$2.28billion

(46.4%)andsociety–primarily through thecompensationsystemandgovernmentsector–bore$2.34billion

(47.7%).

However,itisimportanttonotethatemployersalsopaytheworkers’compensationpremiumsfromwhichsociety

meetsinpartitslion’sshare.Wereweadoptingan“exante”measurementapproachratherthanan“expost”one,

thecommunitysharewouldbelower(around38%)andtheemployersharewouldbehigher(around16%),since

$480millionextrawouldbebornebytheemployers.Weshouldalsonotethatemployers,inturn,maypassonthe

higherpremiumsinhigherprices,ormayusethemtonegotiateloweroverallwageandsalarypayments.Thus,in

generalequilibrium,thecompensationcostsarespreadacrosstheeconomy.

2%

Compensated financial costs

21%

77%

Total 2004–05 = $20.9 billion

Uncompensated financial costs Suffering (uncompensated)

Costs, by compensation share of total, 2004–05 (%)F I G U R E 4 . 2


Of the total$4.9billionof financial costs in2004–05 (estimated fromMarch2004 toMarch2005), Figure4.3

illustratesthat:

• productiondisturbancecostsaccountedfor$573million(12%oftotalfinancialcosts)

• humancapitalcostsaccountedfor$3.05billion(62%)

• healthandrehabilitationcostsaccountedfor$694million(14%)

• administrativecosts(includinglegal,investigation,travelandfuneralcosts)accountedfor$55million(1%)

• thedeadweightcostsassociatedwithtransferswereanestimated$238million(5%)

• carercostandthecostsofaids,equipmentandmodificationsforworkersinvolvedinincidentswereestimated

as$223millionand$70millionrespectively(6%together).

Thenumberofincidentsisthekeysingledriverofoverallresults.

T A b L E � . � 0 Summary of costs, by type of cost and bearer, 2004–05 ($m)

T O TA L C O S T S T O TA L E M P L OY E R W O R K E R S O C I E T Y

PDC VOP 558 OTP 159 WPS 35

Productiondisturbancecosts EEP 52 TAXS 123

SL 10 CPS 117

STC 15 STC 15

Total PDC 573 PDC(E) 237 PDC(W) 61 PDC(S) 275

HKC WPL 393

Humancapitalcosts TAXL 671

CPL 104

Total HKC 3,050 HKC(E) - HKC(W) 1,882 HKC(S) 1,168

MEDC GAP 22 CPMED 165

Healthandrehabilitationcosts REHAB(W) 13 CPREHAB 55

PUBHOSP 99

PHIETC 298

Total MEDC 694 MED(E) 42 MED(W) 35 MED(S) 616

ADMINC

Administrativecosts

Legal TotalLEGALC 0 LEGALC(E) 0 LEGALC(W) 0 LEGALC(S) 0

Investigation TotalINVESTC 32 INVEST(E) 8 - INVEST(S) 24

Travel TotalTRAVC 23 TRAVC(W) 5 TRAVC(S) 18

Funerals TotalFUNC 0 FUNC(W) 0

Total ADMINC 55 ADMINC(E) 8 ADMINC(W) 6 ADMINC(S) 42

TRANSC

Transfercosts

Total TRANSC 238 TRANSC(S) 238

OTHERC

Othercosts

Carers TotalCARERC 223 CARERC(W) 223

Aids&modifications TotalAEMC 70 AEMC(W) 70

SUBTOTAL 4,902 287 2,277 2,338

5.9% 46.4% 47.7%

Suffering, early death Total SUFFC 15,981 SUFFC(W) 15,981

TOTAL inc. suffering 20,884 287 18,258 2,338

1.4% 87.4% 11.2%


Costs, by bearer, share of total, 2004–05 (%)F I G U R E 4 . 4

0 10 20 30 40 50 60 70 80 90

Financial All costs, including suffering

Employer

Worker

Society

5.9

Employer

Worker

Society

1.4

11.2

87.4

46.4

47.7

If thevalueofsufferingandprematuredeath is includedandattributedtoworkers,thentheirestimatedshare

of the costs of workplace injury and disease is 87.4%, with 11.2% borne by society and 1.4% by employers.

Figure4.4illustratestheverysmallshareoftotalcosts(2%)thatarecompensated.

�.� .� SEvERIT Y C ATE gORIES

Thefinancialcostpercaseishighestforpermanentdisabilities,whilethetotalcostpercase(includingsuffering)

ishighestforfatalities(Figure4.5).

Cost per case, by severity of the incident, 2004–05 ($)F I G U R E 4 . 5

<7 days

Full return

Average

Staged return

Partial return

Other

Permanent

Fatal

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000

Financial Suffering

ThisimpactisfurtherdetailedinTable4.21,withhumancapitalcostsdrivingthehighfinancialcostsofstaged

returnsandsufferingdominatingthetotalcostprofile.

Figure 4.6 depicts the dominant profile of the costs of staged return incidents in the profile, representing

$2.6billionofthetotal$4.9billionofcosts(overhalf ).


Total annual cost, by severity of the incident, 2004–05 ($m)F I G U R E 4 . 6

Permanent

Partial return

<7 days

Full return

Other

Fatal

Staged return

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

Financial Suffering

T A b L E � . � � Total annual costs, by severity, disease/injury and type of cost, 2004–05 ($m)

T O TA L

F I N A N C I A L g R A N D

P D C H KC M E D C A D M I N C T R A N S C O T H E R C C O S T S S U F F E R I N g T O TA L

<7days 67.6 - 394.4 17.6 12.8 - 492.3 21.3 513.7

Fullreturn 244.7 - 141.9 16.2 14.1 - 416.9 123.6 540.5

Stagedreturn 166.7 1,911.7 95.7 10.3 145.3 237.1 2,566.7 10,250.1 12,816.9

Partialreturn 7.4 66.2 3.7 1.0 5.1 8.2 91.6 355.3 446.9

Permanent 2.0 26.5 9.4 0.6 1.7 1.9 42.1 66.0 108.1

Fatal 9.5 675.5 6.0 5.3 27.3 - 723.6 3,177.4 3,901.0

Other 75.0 369.7 42.8 4.5 31.4 45.9 569.1 1,987.6 2,556.7

Total 572.9 3,049.6 693.8 55.4 237.7 293.1 4,902.4 15,981.3 20,883.7

I N J U R I E S

<7days 63.9 - 282.5 11.6 9.8 - 367.8 25.1 392.9

Fullreturn 220.5 - 128.1 8.4 12.7 - 369.6 112.2 481.8

Stagedreturn 150.0 1,764.2 89.1 5.5 133.8 218.8 2,361.4 9,459.6 11,821.0

Partialreturn 6.4 58.6 3.2 0.2 4.5 7.3 80.1 314.2 394.3

Permanent 0.9 9.2 5.3 0.5 0.7 - 17.2 22.4 39.6

Fatal 0.8 71.1 0.6 5.1 2.9 - 80.4 335.2 415.7

Other 66.5 322.9 39.5 2.1 27.5 40.1 498.5 1,736.6 2,235.2

Total 508.9 2,225.9 548.3 33.3 191.9 266.8 3,775.1 12,005.4 15,780.5

D I S E A S E

<7days 3.7 - 111.8 6.0 3.0 - 124.5 -3.8 120.7

Fullreturn 24.2 - 13.8 7.8 1.4 - 47.2 11.4 58.6

Stagedreturn 16.7 147.5 6.5 4.8 11.4 18.3 205.3 790.6 995.9

Partialreturn 1.0 7.7 0.5 0.8 0.6 0.9 11.6 41.0 52.6

Permanent 1.1 17.4 4.1 0.0 1.0 1.2 24.9 43.6 68.5

Fatal 8.7 604.4 5.4 0.2 24.5 - 643.2 2,842.1 3,485.3

Other 8.5 46.8 3.3 2.4 3.8 5.8 70.6 251.0 321.6

Total 64.0 823.7 145.5 22.1 45.8 26.3 1,127.3 3,975.9 5,103.2

Stagedreturnsaccountedfortwothirdsofthesufferingcosts,duetothecombinationofhighpercapitalcosts

andarelativelylargenumberofincidents.


T A b L E � . � � Costs per case, by severity, disease/injury and type of cost, 2004–05 ($)

T O TA L

F I N A N C I A L g R A N D

P D C H KC M E D C A D M I N C T R A N S C O T H E R C C O S T S S U F F E R I N g T O TA L

<7days 245 - 1,427 64 46 - 1,781 77 1,859

Fullreturn 13,150 - 7,624 871 760 - 22,406 6,643 29,049

Stagedreturn 22,318 255,960 12,807 1,374 19,451 31,750 343,661 1,372,384 1,716,045

Partialreturn 28,664 255,960 14,279 3,795 19,821 31,750 354,270 1,373,347 1,727,617

Permanent 54,304 711,001 252,931 15,757 45,596 49,610 1,129,199 1,768,763 2,897,962

Fatal 10,030 711,001 6,308 5,621 28,748 - 761,708 3,344,615 4,106,322

Other 51,931 255,960 29,611 3,088 21,715 31,750 394,055 1,376,235 1,770,291

Average 1,877 9,994 2,274 182 779 960 16,066 52,372 68,437

I N J U R I E S

<7days 245 - 1,082 45 37 - 1,409 96 1,505

Fullreturn 12,930 - 7,511 491 746 - 21,678 6,580 28,258

Stagedreturn 21,757 255,960 12,931 791 19,418 31,750 342,608 1,372,439 1,715,048

Partialreturn 27,852 255,960 13,855 796 19,758 31,750 349,971 1,373,408 1,723,380

Permanent 70,177 711,001 412,270 42,334 50,693 49,610 1,336,085 1,738,420 3,074,505

Fatal 8,068 711,001 5,628 51,157 28,525 - 804,379 3,352,369 4,156,748

Other 52,729 255,960 31,325 1,636 21,810 31,750 395,211 1,376,678 1,771,889

Average 1,775 7,765 1,913 116 669 931 13,170 41,882 55,051

D I S E A S E

<7days 243 - 7,319 391 197 - 8,150 -248 7,901

Fullreturn 15,569 - 8,863 5,048 909 - 30,390 7,329 37,719

Stagedreturn 29,019 255,960 11,327 8,345 19,846 31,750 356,247 1,371,729 1,727,976

Partialreturn 34,881 255,960 17,527 26,745 20,305 31,750 387,170 1,372,879 1,760,048

Permanent 45,928 711,001 168,848 1,732 42,906 49,610 1,020,026 1,784,775 2,804,801

Fatal 10,260 711,001 6,389 263 28,774 - 756,688 3,343,702 4,100,390

Other 46,419 255,960 17,785 13,106 21,057 5,471 359,799 1,373,181 1,732,980

Average 3,460 44,522 7,864 1,195 2,477 1,420 60,937 214,913 275,850

Thistablealsohighlightstheshareoffinancialcostsattributabletoinjuriesanddisease:

• $3.8billion(77.0%)isduetooccupationalinjuries

• $1.1billion(23.0%)isduetooccupationaldisease.

Thesharesdonotchangemuchwhenthecostsofsufferingareincluded(75.6%comparedto24.4%).

Costs per case are presented in Table 4.22, where the high costs of permanent disabilities and fatalities are

evidenced,drivenbyhumancapitalcostsinbothcasesandbyhealthandrehabilitationcostsforincidentscausing

permanentincapacity.

��T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

Figure4.7highlightsthedominantnatureofthehumancapitalcostspercaseforoccupationaldisease,somesix

timesthenextlargestcostitem.

Financial cost per case, by severity and injury/disease, 2004–05 ($)F I G U R E 4 . 7

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Injuries Disease

PDC

HKC

MEDC

ADMINC

TRANSC

OTHERC

1,7753,460

7,76544,522

1,9137,864

1161,195

6692,477

9311,420

�.� .� C OS T S bY DISEASE/ INJURY T YPE

Applyingtheanalysisofcostspercasebyseverityanddisease/injurytypetothecategoriesenablesacalculation

ofthefinancialandtotalcostsforeachcategory,whichcanthenbecomparedwiththecompensatedcomponent

(Table4.23).

• Neoplasms(cancers)are,percase,byfarthemostcostlycondition,atover$700,000infinancialcostsand

$2.9millionpercase(includingsuffering)in2004–05.

• Only5.2%ofthefinancialcostsofcancerand1.3%ofthetotalcostsarecompensated.

• Incontrast,theleastfinanciallycostlyarecasesofinjuryandpoisoning($8,350percase),althoughtotalcase

costsaresomefourtimesthefinancialcasecosts.

• Table3.12showedtherewasonlyoneleastseverecaseineachofcategories4and5,sothelowsamplesize

explainstheidenticalcostspercasefor2004–05.

• Costsarerelativelybestcompensatedfornervoussystemandsensedisordersbut,evenso,thisonlyextends

tocover6.3%ofthetotalcosts.

• Onaverage,only9.8%offinancialcostspercaseand2.3%oftotalcostspercasearecompensated.


T A b L E � . � � Financial and total cost per case, by ICD-10 category, 2004–05 ($)

C O M P E N S AT I O N

C O S T S P E R C A S E A S % O F T O TA L

F I N A N C I A L

C AT E g O RY F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

01Medical&surgicalprocedures 113,129 509,143 11.6% 2.6%

02Infectious&parasiticdiseases 67,838 268,011 6.7% 1.7%

03Neoplasms 724,373 2,906,392 5.2% 1.3%

04Endocrine,nutritional,metabolic&immunitydisorders 9,400 9,488 1.9% 1.9%

05Diseasesofblood&bloodformingorgans 9,400 9,488 2.4% 2.4%

06Mentaldisorders 119,101 544,567 17.9% 3.9%

07Diseasesofthenervoussystem&senseorgans 22,328 69,270 19.4% 6.3%

08Diseasesofthecirculatorysystem 178,512 847,607 19.6% 4.1%

09Diseasesoftherespiratorysystem 114,586 536,145 8.7% 1.9%

10Diseasesoftheoralcavity,salivaryglands&jaws 9,449 9,557 3.4% 3.4%

11Diseasesofthedigestivesystem 67,132 266,828 8.1% 2.0%

12Diseasesofthegenitourinarysystem 94,829 429,737 12.4% 2.7%

14Diseasesoftheskin&subcutaneoustissue 14,477 32,216 3.3% 1.5%

15Diseasesofthemusculoskeletalsystem&connectivetissue 35,487 163,037 11.8% 2.6%

18Symptoms,signs,&ill-definedconditions 53,947 229,672 2.6% 0.6%

19Fractures 66,055 308,692 10.0% 2.1%

20Dislocations 39,429 180,278 12.5% 2.7%

21Sprains&strains 13,777 59,266 9.1% 2.1%

22Injury&poisoning 8,350 33,183 7.8% 2.0%

Other 20,105 87,784 10.0% 2.3%

Average 16,066 68,437 9.8% 2.3%


Cost per case, by ICD-10 category, 2004–05 ($000)

0 500 1,000 1,500 2,000 2,500 3,000

Financial Suffering

05 Diseases of blood& blood forming organs

04 Endocrine, nutritional, metabolic& immunity disorders





All ICD-10 categories

07 Diseases of the nervoussystem & sense organs

06 Mental disorders

Other

15 Diseases of themusculoskeletal system

20 Dislocations




19 Fractures





03 Neoplasms

F I G U R E 4 . 8

Figure4.8illustratestheexpensivenessofcancer,withcirculatorydiseasearatherdistantsecondandrespiratory

diseasethird.


T A b L E � . � � Financial and total cost, by ICD-10 category, 2004–05 ($m)

C O S T S % O F T O TA L

F I N A N C I A L F I N A N C I A L

C AT E g O RY ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

01Medical&surgicalprocedures 96 433 2.0% 2.1%

02Infectious&parasiticdiseases 8 33 0.2% 0.2%

03Neoplasms 30 119 0.6% 0.6%

04Endocrine,nutritional,metabolic&immunitydisorders 0 0 0.0% 0.0%

05Diseasesofblood&bloodformingorgans 0 0 0.0% 0.0%

06Mentaldisorders 24 111 0.5% 0.5%

07Diseasesofthenervoussystem&senseorgans 166 515 3.4% 2.5%

08Diseasesofthecirculatorysystem 2 10 0.0% 0.0%

09Diseasesoftherespiratorysystem 15 72 0.3% 0.3%

10Diseasesoftheoralcavity,salivaryglands&jaws 6 6 0.1% 0.0%

11Diseasesofthedigestivesystem 72 287 1.5% 1.4%

12Diseasesofthegenitourinarysystem 1 5 0.0% 0.0%

14Diseasesoftheskin&subcutaneoustissue 70 156 1.4% 0.7%

15Diseasesofthemusculoskeletalsystem&connectivetissue 683 3,140 13.9% 15.0%

18Symptoms,signs,&ill-definedconditions 2 9 0.0% 0.0%

19Fractures 663 3,100 13.5% 14.8%

20Dislocations 174 793 3.5% 3.8%

21Sprains&strains 1,759 7,569 35.9% 36.2%

22Injury&poisoning 1,031 4,097 21.0% 19.6%

Other 98 428 2.0% 2.0%

Total 4,902 20,884 100.0% 100.0%

TotalcostsarepresentedinTable4.24andFigure4.9.Sprainsandstrainsarelargestat$1.8billioninfinancial

costsand$7.6billionintotalcosts(36%ofthetotal).


Total annual cost, by ICD-10 category, 2004–05 ($m)F I G U R E 4 . 9

0 1000 2000 3000 4000 5000 6000 7000







06 Mental disorders

03 Neoplasms

14 Diseases of the skin &subcutaneous tissue

11 Diseases of the digestive system

Other conditions


07 Diseases of the nervous system& sense organs

20 Dislocations

19 Fractures

15 Diseases of the musculoskeletalsystem and connective tissue



Financial Suffering

�.� .� C OS T S bY INDUS TRY

Applyingtheanalysisofcostspercasebyseverityanddisease/injurytypetotheindustrycategoriesenablesa

calculationofthefinancialandtotalcostsforeachindustry,whichcanthenbecomparedwiththecompensated

component(Table4.25).

• Thereisnotagreatdealofdifferenceincostpercasebyindustry,althoughfinancialcostsinthetransport

andstorageindustry(themostcostlyatnearly$24,000percase)areoverthreetimesthoseingovernment

administrationanddefence(theleastcostlyatjustover$7,000percase).

• Costsarerelativelybestcompensatedinthecommunicationservicesindustrybut,evenso,thisonlyextends

tocover4.7%oftotalcosts.

• Agriculture,forestryandfishing;construction;andmanufacturingranksecond,thirdandfourthmostcostly

respectively,intermsoffinancialcostspercasein2004–05.

Figure 4.10 presents the relative costs per case. As expected, the unclassified category represents the least

expensiveincidents.


T A b L E � . � � Financial and total cost per case, by industry, 2004–05 ($)



F I N A N C I A L

I N D U S T RY g R O U P F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

AAgriculture,forestry&fishing 22,174 96,191 12.0% 2.8%

BMining 16,952 71,603 19.3% 4.6%

CManufacturing 20,452 88,136 8.5% 2.0%

DElectricity,gas&watersupply 16,275 70,031 11.1% 2.6%

EConstruction 21,571 94,516 11.0% 2.5%

FWholesaleTrade 18,718 82,302 8.7% 2.0%

GRetailTrade 18,754 84,105 7.7% 1.7%

HAccommodation,cafes&restaurants 17,315 75,467 8.4% 1.9%

ITransport&storage 23,764 104,616 10.9% 2.5%

JCommunicationservices 10,810 32,753 14.1% 4.7%

KFinance&insurance 10,507 45,352 10.7% 2.5%

LProperty&businessservices 16,201 68,795 10.0% 2.4%

MGovernmentadministration&defence 7,166 26,230 12.0% 3.3%

NEducation 9,424 38,032 11.9% 3.0%

OHealth&communityservices 20,060 87,283 8.6% 2.0%

PCultural&recreationalservice 14,706 61,630 14.0% 3.4%

QPersonal&otherservices 13,766 55,929 9.1% 2.2%

ZClassificationunknown 4,459 14,172 7.6% 2.4%

Average 16,066 68,437 9.8% 2.3%


Cost per case, by industry, 2004–05 ($000)

0 10 20 30 40 50 60 70 80 90 100

Financial Suffering




N Education




All industries



B Mining


F Wholesale trade

G Retail trade


C Manufacturing

E Construction



F I G U R E 4 . 1 0


T A b L E � . � � Financial and total cost, by industry, 2004–05 ($m)



I N D U S T RY g R O U P ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

AAgriculture,forestry&fishing 692 3,000 14.1% 14.4%

BMining 22 92 0.4% 0.4%

CManufacturing 1,264 5,449 25.8% 26.1%

DElectricity,gas&watersupply 25 106 0.5% 0.5%

EConstruction 750 3,285 15.3% 15.7%

FWholesaletrade 165 726 3.4% 3.5%

GRetailtrade 423 1,896 8.6% 9.1%

HAccommodation,cafes&restaurants 155 674 3.2% 3.2%

ITransport&storage 290 1,275 5.9% 6.1%

JCommunicationservices 20 62 0.4% 0.3%

KFinance&insurance 14 61 0.3% 0.3%

LProperty&businessservices 232 986 4.7% 4.7%

MGovernmentadministration&defence 40 145 0.8% 0.7%

NEducation 83 335 1.7% 1.6%

OHealth&communityservices 239 1,041 4.9% 5.0%

PCultural&recreationalservice 111 467 2.3% 2.2%

QPersonal&otherservices 93 378 1.9% 1.8%

ZClassificationunknown 285 906 5.8% 4.3%

Total 4,902 20,884 100.0% 100.0%

TotalcostsarepresentedinTable4.26andFigure4.11.Manufacturingislargestat$1.3billioninfinancialcosts

and$5.4billionintotalcosts(one-quarterofthetotal).


Total annual cost, by industry, 2004–05 ($m)F I G U R E 4 . 11

0 1,000 2,000 3,000 4,000 5,000

Financial Suffering



B Mining



N Education


P Cultural & recreational services


F Wholesale trade





G Retail trade


E Construction

C Manufacturing

�.� .� C OS T S bY C AUSE

Applying theanalysisof costsper caseby severity anddisease/injury type to the cause categories enables a

calculationof the financialandtotalcosts foreachcause,whichcanthenbecomparedwith thecompensated

component(Table4.27andFigure4.12).

• Thespreadofvariationinfinancialcostsisevenlessbycausethanbyindustry,largelybecausethecatch-all

category“workpropertyorcharacteristics”issolarge(asseenbytheproximityofcoststotheaverageforall

categories).

• Costpercasewashighestfor“lossofbalanceorpersonalcontrol”,although“lifting/carrying/strain”wasa

veryclosesecondin2004–05.

• Surprisingly (to the authors at least), “fire or explosion” was in fact the least costly per case and best

compensated.


T A b L E � . � � Financial and total cost per case, by cause, 2004–05 ($)



F I N A N C I A L

C A U S E C AT E g O RY F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

1Lossofbalanceorpersonalcontrol 17,775 77,878 9.3% 2.1%

2Lossofcontrolofvehicle 15,527 64,752 10.7% 2.6%

3Fireorexplosion 9,399 34,980 13.4% 3.6%

4Collapse,overturnorinundation 13,073 54,828 9.6% 2.3%

5Workpropertyorcharacteristics 16,255 68,282 10.7% 2.5%

6Lifting/carrying/strain 17,411 76,663 9.5% 2.2%

9Other 10,965 38,214 11.1% 3.2%

Average 16,066 68,437 9.8% 2.3%

Cost per case, by cause, 2004–05 ($000)F I G U R E 4 . 1 2

0 10 20 30 40 50 60 70

Financial Suffering

3 Fire or explosion

9 Other




All causes



TotalcostsarepresentedinTable4.28andFigure4.13.“Lossofbalanceorpersonalcontrol”isagainlargestat

$1.9billioninfinancialcostsand$8.3billionintotalcosts(approaching40%ofthetotal).

T A b L E � . � � Financial and total cost, by cause, 2004–05 ($m)



C A U S E C AT E g O RY ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

1Lossofbalanceorpersonalcontrol 1,893 8,295 38.6% 39.7%

2Lossofcontrolofvehicle 65 272 1.3% 1.3%

3Fireorexplosion 22 84 0.5% 0.4%

4Collapse,overturnorinundation 337 1,413 6.9% 6.8%

5Workpropertyorcharacteristics 826 3,471 16.9% 16.6%

6Lifting/carrying/strain 1,330 5,858 27.1% 28.0%

9Other 428 1,492 8.7% 7.1%

Total 4,902 20,884 100.0% 100.0%


F I G U R E 4 . 1 3

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Financial Suffering

3 Fire or explosion



9 Other




�.� .� C OS T S bY ETHNICIT Y

Applyingtheanalysisofcostspercasebyseverityanddisease/injurytypetotheethnicitycategoriesenablesa

calculationof the financialandtotalcosts foreachgroup,whichcanthenbecomparedwith thecompensated


• Aswithcause,theverylargeshareofonegroup–inthiscaseNZEuropeans–reducesthespreadofvariation

incosts.

• CostpercasewashighestforNZMa-oripeopleandlowestforPacificIslandandthenAsianpeoplein2004–05.

• Therewasverylittledifferenceincompensationratesbetweenethnicgroups.

T A b L E � . � � Financial and total cost per case, by ethnicity, 2004–05 ($)



F I N A N C I A L

E T H N I C I T Y F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

1NZEuropean 15,937 68,001 9.8% 2.3%

2NZMa-ori 17,816 76,037 9.0% 2.1%

3PacificIslands 14,561 62,078 8.7% 2.0%

4Asian 14,622 63,401 9.5% 2.2%

5Other 15,979 66,351 11.6% 2.8%

Average 16,066 68,437 9.8% 2.3%

Cost per case, by ethnicity, 2004–05 ($000)F I G U R E 4 . 1 4

0 10 20 30 40 50 60 70

Financial Suffering

3 Pacific Islands

4 Asian

5 Other

1 NZ European

All ethnicities

2 NZ Maori


TotalcostsarepresentedinTable4.30andFigure4.15.CostsforNZEuropeanswere,reflectingtheirpopulation

share,thelargestcostcomponentat$3.4billioninfinancialcostsand$14.7billionintotalcosts(70%ofthetotal).

T A b L E � . � 0 Financial and total cost, by ethnicity, 2004–05 ($m)



E T H N I C I T Y ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

1NZEuropean 3,443 14,691 70.2% 70.3%

2NZMa-ori 694 2,961 14.2% 14.2%

3PacificIslands 228 972 4.6% 4.7%

4Asian 149 646 3.0% 3.1%

5Other 389 1,614 7.9% 7.7%

Total 4,902 20,884 100.0% 100.0%

Total annual cost, by ethnicity, 2004–05 ($m)F I G U R E 4 . 1 5

0 5,000 10,000

Financial Suffering

4 Asian

3 Pacific Island

5 Other

2 NZ Maori

1 NZ European

�.� .� C OS T S bY AgE gROUP

Applying the analysis of costs per case by severity and disease/injury type to the age categories enables a

calculationof the financialandtotalcosts foreachgroup,whichcanthenbecomparedwith thecompensated


• Thecostpatternmirrorsthatofthecompensatedcases,withworkersaged45–64yearsincurringthehighest

costpercase.

• Theyoungestworkers(15–24years)incurtheleastcostpercase,andareleastwellcompensated.

T A b L E � . � � Financial and total cost per case, by age group, 2004–05 ($)



F I N A N C I A L

A g E g R O U P F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

15–24years 11,953 49,143 5.5% 1.3%

25–44years 16,004 68,766 10.3% 2.4%

45–64years 18,403 79,288 11.0% 2.5%

65yearsandover 17,295 66,653 7.5% 2.0%

Average 16,066 68,437 9.8% 2.3%


F I G U R E 4 . 1 6

0 10 20 30 40 50 60 70

Financial Suffering

15–24

65 plus

All ages

25–44

45–64

TotalcostsarepresentedinTable4.32andFigure4.17.Costsforworkersaged25–44yearswerelargestat$2.2

billioninfinancialcostsand$9.5billionintotalcosts(over45%ofthetotal).

T A b L E � . � � Financial and total cost, by age, 2004–05 ($m)

C O S T S P E R C A S E % O F T O TA L


A g E g R O U P ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

15–24years 688 2,828 14.0% 13.5%

25–44years 2,209 9,493 45.1% 45.5%

45–64years 1,836 7,910 37.5% 37.9%

65yearsandover 169 653 3.5% 3.1%

Total 4,902 20,884 100.0% 100.0%

Total annual cost, by age, 2004–05 ($m)F I G U R E 4 . 1 7

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Financial Suffering

65 plus

15–24

45–64

25–44

�.� .� C OS T S bY gENDER

Applyingtheanalysisofcostspercasebyseverityanddisease/injury typetothegendercategoriesenablesa

calculation of the financial and total costs for males and females, which can then be compared with the

compensatedcomponent(Table4.33andFigure4.18).

• Asexpected,thereisrelativelylittledifferencebetweenoverallcostpatternsformalesandfemales.Thisfinding

hasbeeninfluencedbytheuseofoverallaverageweeklyearningsandthesamevalueofalifeyearformen

andwomen.

• Evenso,costspercasearealittlehigherformen,andtheyarealittlebettercompensated,relatively.


T A b L E � . � � Financial and total cost per case, by gender, 2004–05 ($)



F I N A N C I A L

g E N D E R F I N A N C I A L ( $ ) T O TA L ( $ ) C O S T S T O TA L C O S T S

Males 16,280 69,212 10.2% 2.4%

Females 15,407 66,061 8.4% 1.9%

Average 16,066 68,437 9.8% 2.3%

Cost per case, by gender, 2004–05 ($000)F I G U R E 4 . 1 8

0 10 20 30 40 50 60

Financial Suffering

Females

All persons

Males

TotalcostsarepresentedinTable4.34andFigure4.19.Costsformaleswere$3.7billioninfinancialcostsand

$15.9billionintotalcosts(76%ofthetotal).

T A b L E � . � � Financial and total cost, by gender, 2004–05 ($m)

C O S T S P E R C A S E % O F T O TA L


g E N D E R ( $ M ) T O TA L ( $ M ) C O S T S T O TA L C O S T S

Males 3,747 15,930 76.4% 76.2%

Females 1,155 4,954 23.6% 23.8%

Total 4,902 20,884 100.0% 100.0%

Total annual cost, by gender, 2004–05 ($m)F I G U R E 4 . 1 9

0 5,000 10,000 15,000

Financial Suffering

Females

Males

5RefeReNCes

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�0 0 T H E E C O N O M I C A N D S O C I A L C O S T S O F O C C U PAT I O N A L D I S E A S E A N D I N J U RY I N N E W Z E A L A N D

the economic and social costs of occupational disease...

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