Risk Management

A Bright Side of the Recession

One effect of the large number of layoffs has been a 17% drop in the number of workplace deaths.
David KatzAugust 24, 2010

Grim as the economic downturn has been for many workers, a fair number of them may be alive because of it.

In short, the wave of layoffs that started in late 2008 and lasted through 2009 meant that there were fewer workers around to get hurt. Based on preliminary results of its census of fatal workplace injuries, the U.S. Bureau of Labor Statistics reported late last week that the number of workplace deaths dropped 17% last year, to 4,340, from 5,214 in 2008.

The 2009 total represents the smallest annual preliminary figure since the census was first conducted in 1992. The recession “played a major role in the fatal work injury decrease in 2009,” the bureau reported.

The BLS won’t publish its findings on nonfatal workplace illnesses and injuries for 2009 until October. But workers’ compensation insurance claims not related to deaths similarly fell, according to Robert Hartwig, president of the Insurance Information Institute.

In fact, thanks to improvements in safety, the number of workplace accidents and deaths has been falling for a century, says Hartwig. The recession has merely intensified that trend. Besides decreasing the number of workers, the downturn has made some who are still employed “fear that a claim could make their job more vulnerable” and therefore decreased the number of claims, he adds.

To be sure, the decreased number of workplace deaths has meant smaller compensation outlays for workers’ comp carriers and employers. But the decrease in nonfatal claims has had a much greater impact, according to Hartwig. While a worker’s death settlement involves a payment to survivors, claims for injured living workers can include long-term medical costs and wage replacement.

In all, however, the drop in workers’ comp claims has amounted to “a wash” when compared with the amount of business that insurers have lost via the overall economic contraction, says Hartwig. The result has been a happy one for employers, who have been enjoying decreases in their insurance premiums for years. Eager to recoup business lost in the recession, carriers have been cutting their rates.

But the lack of worry about insurance costs could have a downside. Some companies could grow lax in their risk-management and workplace-safety practices as a result of the lengthy soft insurance market, says Hartwig. Such employers might suddenly encounter an increased frequency in employee accidents, as would employers who overwork their staff in an attempt to do more with less, he says.

Hartwig also says CFOs should be aware of two other workplace risks that have nothing to do with the economy: cell-phone texting while operating heavy equipment, and worker obesity. “Employers need to have a formal policy that texting while operating equipment is not permitted on the job,” he says.

Concerning the obesity of workers, a 2007 Duke University Medical Center analysis found “a clear linear relationship” between excessive body weight and the rate of workers’ comp claims. The claim numbers most strongly boosted by obesity included lower extremity, wrist or hand, and back problems; strains and bruises; and falls, lifting, and exertion. “The combination of obesity and high-risk occupation was particularly detrimental,” the study found.