P. S. Clark B.Sc. B. Econ. Grad Dip Erg MAusIMM	
Workplace Safety and Health Management	Vic
Economic Cost-Benefit Analysis and Planning	
30 January 2004

Workers' Compensation and OHS Productivity Commission 
PO Box 80
BELCONNEN ACT 2616
gnp1033The number of injuries is a compilation of data ranging from barely relevant minor cuts to total and permanent impairment injuries. `Incidence' assumes that a minor cut ranks equally in social and economic importance with permanent impairment and death.

`Incidence' measures are popular among regulatory and academic commentators, because any reduction in injury numbers, irrespective of the social or economic significance of the injury reduction, provides scope for reporting positive injury reduction performances. As an example, the CPM Third Report applauds the reported 20% reduction in workplace injury incidence as `a significant reduction', without any analysis of its real significance.

As `Incidence' of injury does not correlate with any relevant social or economic measures of injury impact, it is an irrelevant measure of health and safety performance.

DO PREMIUM RATES MEASURE HEALTH & SAFETY PERFORMANCE?

Workers' compensation premium rate structures and average premium rates in all jurisdictions are very significantly dependent upon Government policies and legislation. It is apparent that a number of Government policies are inconsistent with rational management of an insurance business or of workplace injury impact. Examples include funding shortfalls, caps on premium rates, cross-subsidised premiums, deficient improvement incentives, and self-insurance limitations. Arguably the most significant deficiency is over-management of minor claims, which should be more effectively and efficiently managed by employers. The Pareto estimate of spending 85% of resources managing 15% of total claim costs (not numbers of claims) probably applies for most if

not all Australian compensation schemes. This view is supported by the `deductibles' estimates on page 46 of the CPM Third Report. It is also perceived as consistent with the 1995 Industry Commission `Work, Health & Safety' report No.47 where 83% of total Australian workplace-related death, injury and illness costs were estimated to be associated with the 13% number of deaths and permanent disability injury claims.

The significant impact of unrelated-agenda Government policies on workers' compensation premium rates implies that premium rates are not a valid or useful measure of workplace injury impact in Australia. The CPM Third Report's claim that its performance indicators cover all aspects of the operation of workers compensation schemes does not comprehend the proposition that a prudently-managed scheme should (a) limit the scope of its activities to management of claims that cannot be better handled by others - in particular, minor claims - and (b) include effective incentives for reducing the social and economic impact of workplace injuries.

COST OF WORKERS' COMPENSATION CLAIMS A BETTER MEASURE
The total cost of workers' compensation claims in any jurisdiction is significantly dependent upon Government-legislated compensation benefit and support structures, including payments for maims and common law actions. Notwithstanding these variations and in the absence of any agreed measure for the social impact of workplace injury, it is advocated that the total cost of workers' compensation claims is the most relevant single measure of deficient workplace safety in Australia.

The total cost of workers' compensation claims for any period can be measured in a number of ways, in particular either as actual claim payments made or as estimates of incurred costs for claims received. With the exception of common law and maim payments referring to prior-period injuries, the total incurred cost of workers' compensation claims for any period (economic measure) correlates significantly with the total workdays lost due to injury for that period (social measure).
HAS THE NUMBER OF WORKERS' COMP CLAIMS DECLINED?
The Interim Report claim that `overall the number of workers compensation claims has declined' was challenged by Ms Grace of the ACTU with the comment [p.1017] that `the only reason why claims have ceased is because of changes to legislation - be it definition of "worker", be it definition of "injury" , the two major drivers, or be it other definition or barriers that come into workers comp to enable people to enter. That is the only reason why claims are declining. There is no evidence in those numbers to suggest that it is because of better occupational health and safety performance.'

Two aspects of these comments deserve closer scrutiny. Firstly, is the number of claims a relevant statistic for injuries to people ranging from a scratch to death? It is submitted that a more appropriate statistic is the gross incurred cost of all workplace-related injuries. While it might be argued that this number may underestimate the social and economic impact of fatalities for instance, gross incurred cost estimates are immediately available as they are required for determining actuarial scheme funding.

Secondly, has the number of workers' compensation claims declined overall in fact, or is the reported decline an artifact associated with reporting cut-off dates and specific legislative changes affecting or potentially affecting benefits available to injured employees? Ms Grace's comment that `the only reason why ... is because of changes to legislation' is appropriate for Victoria as well, where the annual number of compensation claims has been substantially constant for 18 years except for reporting artifacts associated with particular changes in workers' compensation legislation. Serious evaluation of the outcomes if any associated with changes in OH&S and workers' compensation legislation requires analysis of injury claims data and related statistics such as effective full-time employment numbers over the past 20 years or more. Such analyses clearly identify the significant but temporary aberrations associated with particular 'benefit-changing' legislative changes in individual jurisdictions and the continuing constant underlying claim numbers.

Australian workers' compensation and OH&S authorities tend to select a legislation-affected (high claim numbers) year as the base year to enable reporting optimistic claim number `improvements' associated with their activities and legislation, rather than longer period studies of claim number changes which might show little if any positive impacts.
WORK-RELATED FATALITY NUMBERS - FACT OR FICTION?
A number of Australian OH&S authorities and 'OH&S industry' members have claimed that workplace-related deaths are grossly understated by available workers' compensation claim data. Their claim is that deaths due to long-duration diseases, in particular associated with exposure to asbestos and a range of hazardous chemicals are not accepted as valid compensation claims and are therefore not included in the records. A number of estimates have been quoted over the years, starting from `1000 a year due to hazardous chemicals' [Winder 1991], subsequently revised to a 2239 `best estimate' in the so-called Kerr report. NOHSC has reported an annual workplace-related death rate of 3000 after adding reported traumatic workplace deaths and an estimate [500] for asbestos-related deaths to the Kerr report estimate. The ACTU [p.995] report that `3000 people die as a result of their work every year' adding their perception that this estimate is conservative. Adding [p.1002] that `Access Economics say it's more like 4800', [p.995] that `the ILO gave a paper at [a recent NOHSC] conference where they said that 7000 Australians die every year as a result of their work', and [p.998] that `even the most conservative estimate here, made by the employer community, is that thousands of people are dying every year', the ACTU claim [p.999] that `thousands ... people are dying as a result of occupational cancer.'

These claims raise a number of issues, the first of which is 'work-relatedness', noted at p.1002. Let us consider a hypothetical coke oven employee with a long term cigarette smoking addiction who is diagnosed with lung cancer. If the treating doctor considers that his or her patient's cancer may be due to his employment as a coke oven worker, the resulting workers' compensation claim implies 100 percent work-relatedness. On the other hand, if the treating doctor considers that the cancer may be a result of his smoking habit, smoking becomes the reported 100 percent cause. There is no scope for the shared causation suggested at p.1002 line 30, which would require superhuman diagnostic skills. As discussed elsewhere in this submission, it is perceived that a diagnosis of 'work-related' is more probable for a number of reasons, including the doctor's primary duty of care for his or her patient, limited knowledge of the patient's work environment, and the priority care and benefits available to compensation claimants. As medical professionals are well aware of the potential adverse consequences of exposure to hazardous materials whether in workplaces or elsewhere, the proposition that large numbers of Australians are dying due to workplace chemical exposures without diagnostic professionals identifying those exposures as an issue of concern, can only be described as ludicrous and an insult to Australian medical professionals.

The Australian smoking-related fatality toll (19,000 per year) provides a large and convenient source of `numbers' for `attribution' to alternative causation issues. It is submitted that the NOHSC-mandated `proportionate attributable risk' approach used to develop the Kerr report estimates predictably resulted in the notional re-assignment of a significant number of smoking-related deaths into an ill-defined category of `deaths due to exposure to workplace chemicals.'

A second issue is the validity of the `best estimate' numbers reported in the 1996 Kerr report. Those estimates resulted from a NOHSC-mandated `proportionate attributable risk' approach from dated and limited overseas sources. Mandated use of the `proportionate attributable risk' approach is perceived to have significantly predetermined the estimates reported, necessitated incorporation of inappropriate assumptions and prevented consideration of the available range of Australian statistics. As a result, the major Kerr report estimates were developed from two initial assumptions - that 15% of male lung cancer deaths and 1% of cardiovascular deaths were attributable to workplace chemical exposures. These assumptions derived from two overseas reports - a 1981 summary of cancer studies over the previous 40+ years, and a study of deaths in New York State published in 1986. The data sources for both reports were developed from unknown Northern hemisphere exposures with no significant relationship or relevance to contemporary Australian

workplaces, industrial activities, hygiene standards or exposure measurement techniques. Nevertheless, the Kerr report attributed the whole of its `best estimate' numbers to unspecified levels of workplace chemical exposures without correction for the significant health effects of smoking.

The Kerr report death estimates were: 28 poisonings, 875 non-cancer deaths predominantly cardiovascular events and 1291 cancer deaths predominantly 748 lung cancer and 168 other respiratory cancer deaths. Comparison with contemporary Australian data by competent professionals working in the field did not identify any significant correlations between the Kerr report estimates and reality. In a paper to the 1996 Australian Institute of Occupational Hygienists (AIOH) Annual Conference, Dr Allen Christophers, former (1957-80) Chief of the Industrial Hygiene Division of the Victorian Health Dept and occupational hygienist Manny Zammit studied the Kerr report estimates for deaths due to cardiovascular disease (771) and poisonings (28) and concluded that less than 2 and 7, respectively, were more probable estimates.

In a second (1997) AIOH paper, Christophers and Zammit examined inter alia the validity of the Kerr report assumption that 15% of male lung cancers were due to occupational chemical exposures and compared the report's estimates with available Australian evidence on occupationally-related lung cancers. The 1981 source for that assumption included 5% due to asbestos and 10% due to other exposures, whereas contemporary Australian evidence indicated 0.3% attributable to non-asbestos causes. Christophers and Zammit estimated that occupationally-related lung cancers could be in range 187 to 430 per year, but noted that their estimate was "predominantly based on past exposure to asbestos, which is now closely controlled."

Christophers and Zammit's AIOH papers pose serious concerns about the validity of the continuing NOHSC claim of 3000 deaths every year due to workplace chemicals, described by NOHSC commentators as `conservative.' NOHSC has vigorously defended the Kerr report, stating that it was not aimed at calculating future mortality or morbidity from current exposures to hazardous substances. Despite this claim, NOHSC continues to publicise and promote the `3000 deaths every year' as valid and factual, rather than an estimate critically dependent upon a very small number of dubious assumptions. It is significant that these assumptions were queried - but without response - by peer reviewer Australian Institute of Health & Welfare.

The perception is that the 1978 US Occupational Safety & Health Administration (OSHA) Bridbord et al. report has resurfaced. That report claimed 38% of all cancers were attributable to occupational exposures to six hazardous substances, a claim refuted by acknowledged experts Doll and Peto with the comment that "these estimates of total risk were so grossly in error that no arguments based even loosely on them should be taken seriously", adding that "it seems likely that whoever wrote the OSHA paper ... did so for political rather than scientific purposes, and it will undoubtedly continue in the future as in the past to be used for political purposes by those who wish to emphasize the importance of occupational factors." The public fear of cancer was combined with claims of occupational exposure risks to promote the political aims of statutory bodies competing for public attention and government funds.

The ACTU [p.1002] statements that `Access Economics say it's more like 4800', [p.995] that `the ILO gave a paper at [a recent NOHSC] conference where they said that 7000 Australians die every year as a result of their work', and [p.998] that `even the most conservative estimate here, made by the employer community, is that thousands of people are dying every year' can only be described as industrially-motivated claims. The Australian Chamber of Commerce and Industry has advised that no such `employer community' estimate has been made. As the supposed Access Economics statement and ILO paper are not public documents, the relevance of the numbers quoted is speculative at best.

It is submitted that NOHSC has not demonstrated that its `3000 deaths every year due to workplace chemical exposures' claim is valid with respect to numbers, workplace-relatedness, contemporary Australian workplaces and exposures or `every' year. The claim is perceived as aimed more at influencing public opinion and support for enhanced NOHSC power and funding, than providing a

credible demonstration of a major public policy need. NOHSC has significant funding and 
DO SELF INSURERS ADVERSELY AFFECT POOL FUNDING?

A number of submissions have expressed concern about adverse effects on workers' compensation scheme funding and administration costs potentially associated with self-insurance. Some have advocated against self-insurance to maximise the compulsory risk pooling.

It is submitted that a competently managed scheme should be able to handle any responsible level of transfer to self-insurance without adverse impacts on its funding or administration. Workers' compensation schemes are not perceived to be significantly different from any other large business operation in respect to effective management of business level impacts.

Concerns that better performing self-insurers leaving the pool will somehow increase the risk of the residual pool members is perceived to be a `red herring' issue. If the residual members are poorer performers and hence higher risk, they should attract appropriate premiums and not be cross-subsidised by better performers.

It is further submitted that the `risk pooling' approach is not per se in the best interest of providing incentives for improving injury outcome performance. The ideological position of `one in, all in' has minimal merit if an overall objective of the scheme is to reduce the number of individuals needing compensation and the necessary costs of their compensation rather than passively compensating injury outcomes as they occur. While the great majority of insured employers perceive only the latter objective, it is submitted that the former objective should be the only acceptable public policy position. There is little evidence that Australian workers' compensation schemes have made more than token injury prevention efforts. And what has been done has not achieved significant performance outcomes.

WHO BEARS THE COST OF WORKPLACE DEATH AND INJURY?

Returning to our hypothetical coke oven employee with a long term, heavy cigarette smoking addiction who is diagnosed with lung cancer. If the treating doctor considers that his patient's cancer may be due to his employment as a coke oven worker, the resulting workers' compensation claim implies 100 percent work-relatedness. The claim will be an expense to his employer and the relevant compensation scheme. On the other hand, if the treating doctor considers that the cancer may be a result of his smoking habit, smoking becomes the reported 100 percent cause and the employee and community (Medicare and social security) bear the resulting expense. The distribution of resulting expenses between the employer (including the relevant compensation scheme), the employee and the community is significantly dependent on the initial professional opinion of the treating medical officer, with only the advice of his or her patient, to assign 'work-related' or not. The present system makes significant assumptions about doctors' diagnostic skills and poses unanswered ethical questions. If the doctor's first priority is for his patient, rather than

the community at large, it is perceived that a diagnosis of 'work-related' might be more probable, due to the priority care and benefits available to compensation claimants.

However, the majority of workers' compensation claims are for 'over-exertion strain' type injuries, where assignment of 'work-relatedness' is much less a black or white decision. Here again, the treating medical officer's diagnosis appears constrained by the advice of his or her patient on the issue, and the doctor's perception of his or her ethical duty toward the patient.

The allocation of total annual expense between employers, employees and the community resulting from all potentially workplace-related death and injury cases is the gross outcome of the many such individual medical diagnostic decisions. In part for the reasons noted above, the perception is that the allocation favours the community rather than employers and workers' compensation schemes.

P S. Clark B.Sc., B. Econ., Grad Dip Erg	Attachment
Workplace Safety and Health Management Economic Cost-Benefit Analysis and Planning

December 1996

INDIRECT COSTS FOR WORKPLACE HEALTH & SAFETY ISSUES

Background
Australian laws and human courtesy require employers to comply with duty of care obligations for the safety of employees and other people affected by activities under the employer's control. The required safety-related activities pose costs to the business. So also will safety management failures - for injury claims, claims administration, fines. Progressive employers integrate their safety costs into mainstream performance measures and business controls, and assign accountability for effective management.

Most managers can identify total dollar values for significant cost items associated with safety activities, failures and proposals, such as induction and training, medical and first aid services, workers' compensation premium and claim costs, and workplace or equipment upgrading projects. But few managers are able to value the short and long term controllable variable costs associated with workplace safety. Valuation of the uninsured or indirect costs of safety has challenged managers for many years. This note summarises published information on indirect costs associated with health and safety issues.

Summary
The results of contemporary reports using valid approaches and data indicate that:
Indirect Injury Cost has a semi-variable but linear ratio to Direct Injury Cost.

If consistent definitions are used, the most-likely Indirect Injury Cost for any value of Direct Injury Cost can be calculated by adding estimated fixed cost and variable cost portions.
The US Simonds & Grimaldi incident classes provide some guidance on the fixed cost portion: ($US 1982)
Lost time injury cases	465	(includes variable "days lost" cost)	
"Doctors"' cases	115		
"First Aid only" cases	25		
No injury (property damage) cases	850		
The Gareau study variable cost (incremental) Indirect to Direct cost ratio of 0.42:1, and the Industry Commission OH&S Inquiry 0.35:1 indirect to direct cost ratio estimate for employers are within the range (0.05 to 0.63:1) reported by valid contemporary studies. An estimate of employer's cost per injury is:

Indirect Cost (per injury) = Fixed Cost (for injury class) + 0.35 x (Direct Cost)
Some definitions
"Direct costs" are the total amount of benefits paid by the insurer - such as weekly benefit payments, medical, hospital, medication, rehabilitation, transport, legal and lump sum payments. The scope of items included as direct costs is significantly affected by the workers' compensation arrangements in the jurisdiction. For examples, the duration of lost worktime compensation, the level of compensation paid, the extent of coverage for common law and registered motor vehicle injuries.
"Indirect costs", "Hidden costs" or "Uninsured costs" are the variable expenditures associated with injuries that are absorbed by the business - such as first aid treatment, work time and productivity lost by the injured and co-workers, replace worker recruitment, training and work-up costs. These are not normally reported in the mainstream business accounts. Some studies also include unrecoverable property damage costs associated with personal injury, others include all unrecoverable property, business interruption and like costs.
"Insured costs" There are several interpretations of this cost. One corresponds with "Direct costs." The second (Grimaldi) version reports workers' compensation premium payments as a component of "Total costs." This version includes the insurer's general administrative expenses and profit, together with payments made for publicity, publications, research and grants. Others (HSE) include property, interruption and other premium costs.
"Total cost" has several interpretations, corresponding with the variations noted above. Some businesses include their fixed costs e.g. for total operation of a medical centre, with the aim of reporting "Total cost of Safety", but this aggregative approach lacks focus on controllable cost items.

Some significant study data have been incorrectly quoted in OH&S Authority and other publications in Australia.

Identified errors have been corrected in this note. The pioneer studies
Heinrich (1931) examined 5000 insurance case files for US firms beginning from 1926. He reported overall indirect costs as linearly related to and four times the direct costs. In other words, the average ratio of indirect to direct costs was of the order of 4:1. This ratio was graphically depicted as an iceberg, showing a small (1) area of "visible, direct costs" above water with a larger (4) submerged area of "invisible, indirect costs." Although the 4:1 ratio varied significantly between industries and was developed from the modest compensation benefit schemes of the day, this ratio was widely adopted as a "magic number" into safety textbooks, with Worksafe Australia and the Victorian WorkCover Authority Health & Safety Division still advocating a 4:1 indirect cost ratio.

Simonds (1950) and Simonds & Grimaldi (1956), backed by the US National Safety Council, developed a new approach in 1947. Noting that Heinrich's study had "no precise frame of costs", offered "extremely tenuous" evidence for the 4:1 ratio, and the necessary linear relation between direct and indirect injury costs was not apparent, Simonds introduced the principle "total costs equals insured costs plus uninsured costs." Although uninsured costs were identical with Heinrich's indirect costs, they were now identified as quasi-"fixed" rather than variable costs. Four accident classifications were introduced, with each having a specific average uninsured cost. Using abbreviated descriptions, the uninsured cost estimates were:
	($US 1982)	
Lost time injury cases	465	
"Doctors"' cases	115	
"First Aid only" cases	25	
No injury (property damage) cases	850	
Simonds suggests an average 1:1 indirect to direct cost ratio, where specific injury details are unavailable.

Soderqvist, Rundmo, Aaltonen (1990) proposed three alternative injury costing models, adding the concept of "spare capacity" to the mainstream "accounting" and the widely-used "market pricing" models. They noted that the traditional accounting approach inadequately evaluated true injury costs, with substantial uninsured costs absorbed both within the business and borne by other than the compau also demonstrated the significance of work absence days as the determinant of indirect cost dollars, with average Indirect injury Cost = $C 793 + 52.7 x (days lost). This method also appears to address the key "spare capacity" injury cost model issues.
Oxenburgh and Guldberg (1993) enquired into the "hidden" costs due to injury, during their 1987 study on the costs and benefits of compliance with the draft 1986 Worksafe Manual Handling Code. 99 NSW managers (of the 224 asked) were able to respond, giving a range of nil to 3'h times the compensation cost (median of 1.75). "That is, the hidden costs added 75% to the compensation costs" or an indirect to direct cost ratio of 0.75:1 (which is usually misquoted as 1.75:1)
The UK Health and Safety Executive (1992) "The costs of accidents at work" report extends "accident" to include all accidental losses considered to be preventable by a rational business. Five 13-week studies were made in 1990-91: a supermarket construction project, an operating creamery, a transport firm, a North Sea oil production platform during winter and a public hospital. The study estimated:
•	Opportunity costs for labour paid and energy used during idle periods resulting from accident,
•	Insured costs as the total premiums for workers' compensation, public liability, property damage, vehicle damage, business interruption and product liability insurances,
•	Uninsured costs as sick pay, repairs, product loss or damage, investigation costs, hiring and training costs for replacement staff, loss of goodwill or corporate image.

The construction project had no serious and 56 minor injuries, with 3570 property damage items. An insured to uninsured costs ratio of 1:11 was estimated for the main contractor only. Opportunity costs were "mainly wages during periods of no production."
The creamery reported six >3 day injuries, 31 first-aid only and 889 non-injury and property damage events, with insured to uninsured costs ratio estimated at 1:36, most significantly due to lack of repair tradesmen during critical start-up periods and partly to the firm's insurance arrangements.
The transport company had no personal injuries at all, but uninsured losses were eight times higher than the insurance premiums paid during the period of the study.
The oil platform had two >3 day lost time injuries, 8 first-aid only, 252 non-injury accidents and 37 events judged "unpreventable", with many incidents resulting in lost oil production calculated at the company oil valuation. Insured to uninsured costs ratio was estimated at 1:11
The hospital reported six >2 days lost time injuries, 58 minor injuries (staff 25, patients 38, visitor 1) and 1168 non-injury accidents, but a costs ratio could not be calculated as the hospital was self-insured.
Despite the unrepresentative mix of businesses studied, the HSE report adds their cost estimates to develop an "average" cost dominated (at >84% of total ) by the mid-winter oil platform costs.
(Comment: The HSE document cannot be described as a valid or balanced analysis of the economic outcomes arising from preventable workplace injuries and property damage events. The report has no relevance for indirect to direct cost

or uninsured to insured cost ratios associated with Australian workplace injuries, for three principal reasons:
•	unspecified mix or period coverage of injury and unrelated loss insurance premium costs,
•	unspecified injury and damage insurance deductible levels, and
•	costs dominated by property loss and business interruptions, with minimal personal injury costs.)

Ore (1992) studied NSW construction deaths and injuries exceeding two days work absence. The study population included building, road, bridge, and other construction trades but excluded self-employers and a number of government agency employees. This study has a number of validity problems, perhaps the most significant being the assumption that production losses should be valued at twice the time lost at average earnings. Valuation of disease cases, predominantly (60%) hearing loss but averaging 29.4 weeks absence, poses a second validity question mark. S. Denis calculated a 1.42:1 indirect to direct cost ratio from Ore's paper.

Mangan (1993) developed a 7:1 indirect to direct cost ratio for the Queensland DEVETIR Division of Workplace Health and Safety (1993, 1994) from actual Queensland injury data by a hypothetical multiplication process, with significant double-counting errors. This involved a chain of assumed multipliers for production (value added) losses and annual wage losses, material damage costs (15-25%), "flow-on production losses" (50%), "non-wage losses" (25%) and "employer additional costs" (equal to their total WC premiums). The final step involves adding the QWCBoard operating expenses and federal OH&S services to develop a total of $1.04 to $1.17 billion annual "indirect costs" for occupational accidents in Queensland. Taking the QWCB compensation payments for 1987-88 of $168 million as "direct costs" gives an indirect to direct ratio estimate of 6.1 to 6.9, depending on the "flow-on losses" assumption used. While the estimates are reported as "conservative" and "match up well with some overseas results", it is relevant to note that Mangan's claims that it "is close to the ratio of 7:1 used by the National Safety Council of the US" and that "since the 1970's the US Bureau of Labour Statistics have worked on a ratio of 7:1 between direct costs (principally compensation payouts) and indirect costs" have been denied by those organisations. The US National Safety Council states that it "does not recommend the use of an arbitrary, fixed ratio to estimate uninsured costs from insured costs. There is no support in the research literature for a 7:1 ratio." The US Bureau of Labour Statistics "is unable to find any record of the Bureau having compared the direct costs of a work injury to its indirect costs."

While Worksafe Australia (1994) has used a number of higher indirect cost ratios in the past, "a conservative ratio of 1:1 (indirect to direct costs) has been used in Worksafe Australia documents" since its submission to the Industry Commission Inquiry into Workers' Compensation in Australia. But the Foreword reports "the total cost of work-related injury and disease at, at least, $15 billion annually and perhaps as high as $37 billion", implying ratios of at least 1:1 and as high as 4:1 And people associated with Worksafe such as Emmett (1995) and Foley, Gale & Gavenlock (1995) have continued to advocate 4:1 as a more likely ratio than "the most conservative overall measure of 1:1" adding that "some authorities have estimated the overall indirect to direct cost ratio at 7:1 and higher."

The Industry Commission (1994, 1995) reports on "Workers' Compensation in Australia" and "Work, Health and Safety" have highlighted the key role of indirect costs in measurement of the economic magnitude and distribution of the effects of workplace safety management failures within the national economy. Using South Australian benefit scales, the $20 billion total estimate for 1992-93 included $2.3 billion employer indirect costs at an indirect to direct cost ratio of 0.35:1 for employers, which is in the range of published study numbers. The national indirect to direct cost estimate of 1.8:1 includes computed employee and community cost estimates.

Prof. Jean Cross (Univ of NSW) reported to the 1996 "Futuresafe" conference on NSW studies using the UK Health and Safety Executive (1992) method. The three study sites showed uninsured to insured (premium) costs less than 1:1, well below the UK ratios and mainly consisting of minor injury costs.

Sandra Denis (1996) reviewed some of the key indirect to direct injury cost ratio literature in her recent Master's research paper. Denis' study did not evaluate the existence of a linear indirect to direct cost relationship, and concluded "that a ratio of between 1:1 (Andreoni, Brody et al., Klen) to 3:1 (IC, 1995) is not unreasonable. In the alternative, a 2:1 ratio might be used as an acceptable 'average' ratio", which incorporates the computed indirect injury cost impacts on injured people and the community.

Reported studies and references
Aaltonen & Soderqvist (1987) "Occupational injuries and economic assessment in furniture industries: a Nordic project" XIth World Congress on the Prevention of Occupational Accidents and Diseases, Stockholm

Andersson (1992) "Economic evaluation of ergonomic solutions" International J of Industrial Ergonomics 10: 161-171 and 173-178 Andreoni (1986) "The Cost of Occupational Accidents and Diseases" Occupational Safety and Health Series No. 54, ILO Geneva Bird (1974) "Management guide to loss control"

Brody, Letourneau, Poirier (1989) "The indirect costs of work accidents: Summary report" unpublished

Brody, Letourneau, Poirier (1990a) "Le coat des accidents du travail: Etat des connaissances" Relations Industrielles 45: 94-117 Brody, Letourneau, Poirier (1990b) "An indirect cost theory of work accident prevention" J Occupational Accidents 13: 255-270

Brody, Letourneau, Poirier (1990c) "Real indirect costs of work accidents: Results from our new model" J Occupational Accidents 12: 99 (Abstract)

Business Roundtable (1982) "Improving construction safety performance" Report A-3

Charbonnier (1980) "L accident du travail et le management de la prevention" Editions Hommes et Techniques, Paris

Compes (1965) "Betriebsunfdlle wirtschaftlich gesehen" ("Economic aspects of work accidents") Anlis Verlag Denbaer Co. Cologne Cross (1996) "Costing of Accidents" paper to "Futuresafe" Conference, Melbourne

Denis (1996) "Workplace health and safety: Some economic implications" Unpublished M.Econ. research paper, Univ of Melbourne Emmett (1995) "Regulatory reform in occupational health and safety in Australia" J Occup Health Safety-Aust NZ 11(6): 607-616 Fletcher (1972) "The Industrial Environment (total loss control): A Guide for managers and supervisors" National Profile, Ontario Foley, Gale, Gavenlock (1995) "The cost of work-related injury and disease" J Occup Health Safety-Aust NZ 11(2): 171-194

Gareau (1994) "Coats imputables mais non attribues aux accidents du travail avec lesion chez Twinpak" unpublished M.Sc. study, Univ de Montreal

Greenberg, Finkelstein, Bemdt (1995) "Economic consequences of illness in the workplace" Sloan Mgt Review/Summer 1995 pp.2638, MIT

Harms-Ringdahl (1990) "On economic evaluation of systematic safety work at companies" J Occupational Accidents 12: 89-98 Hatchek (1992) "Liability insurance: risk assessment" Safety Science 15(4-6): 403-417 Health and Safety Executive, UK (1992) "The costs of accidents at work"

Heinrich (1950) "Industrial accident prevention: A scientific approach" (First published 1931) Howard (1964) "Cost of accidents in seven undertakings" Personnel Practice Bulletin 20(3): 19-24

Hopkins (1994) "The impact of workers' compensation premium incentives on health and safety" J Occup Health Safety-Aust NZ 10(2): 129-136

Imre (1976) "Uninsured costs of work accidents: Replication and new applications of Simonds' method' PhD thesis, Michigan State Univ.

Industry Commission (1994) "Workers' Compensation in Australia" Report No. 36 Industry Commission (1995) "Work Health and Safety" Report No. 47

Klen (1989) "Costs of occupational accidents in forestry" J Safety Research 20: 31-40

Klen (1989) "Factors affecting accident costs to employers, employees and public administration in forestry" J Occupational Accidents 11: 131-147

Laufer (1987) "Construction accident cost and management safety motivation" J Occup Accidents 8: 295-315 
Leopold & Leonard (1987)