Management and Economics of Construction Safety in Hong Kong

9 - Social Costs of Construction Accidents and the Impact of Safety Investment on Social Costs

A SA 1 Financial costs versus social costs To summarize the discussions in Chapter 8, the financial costs of a construction accident include (Tang et aI. , 1997): (1) loss due to the injured person's absence from work (2) loss due to the injured person's inefficiency after resuming work (3) medical expenses (4) fines and legal expenses (5) loss of time of other employees (6) equipment or plant loss (7) loss due to damaged material or finished work (8) loss due to idle machinery or equipment (9) other losses Ngai and Tang (1999) have attempted to compare the differences between financial costs and social costs, and to discover what the social costs of construction accidents are. Social costs are reckoned as the costs incurred by the society because additional resources are required to be utilized when construction accidents occur. If there were no accidents, the utilization of these society's resources could have been saved. This is the basic definition ofsocial costs. Details will be given as readers go through this entire chapter. - - - - 132 MANAGEMENT AND ECONOMICS OF CONSTRUCTION SAFETY IN HONG KONG The objectives of this chapter are to report on a study carried out in 2002 to 2004 (Tang et al. , 2004), and include the following: (1) identify from a list of contractors' financial losses,based on the previous work of Tang et al. (1997) , what financial losses are also social costs and what are not (2) identify other social costs borne by the society that are not contractors' losses (3) identify social safety investment in the construction industry (4) gather cost data on those identified in objectives 1,2 and 3 in Hong Kong for 1999, 2000 and 2001 (data from 2002 to 2005 are also provided at the end of this chapter as additional information) (5) analyze the data gathered and establish a relationship between the social safety investment and the social costs of accidents for the construction industry in Hong Kong. 2 Social costs of construction accidents There are basic financial cost items that a contractor will incur when a construction accident occurs. These items are detailed in Figure 1 of Chapter 8. Table 1 below is a reproduction of these items. The figures/numbers and the formulae given in the table have been explained in the previous chapter and will not be repeated here. "Day loss" in item 1 of Table 1 is important in calculating social costs. The social cost due to "day loss" of the victim is calculated by: daily wage of the victim x day loss (i.e., days absent from work). If the accident involves permanent disability of the victim, then the social cost due to the permanent disability will be calculated by: daily wage x 365 x (retire age 65 - injury age) x % disability / 100. The daily wage is calculated by dividing the monthly salary by 30 (because, in this equation it is multiplied by 365 days/year) , as workers are usually paid on a monthly basis in Hong Kong. As an example, if a worker who earns HK$600 a day (HK$7.8 = US$l) has been absent from work for 7 calendar days, and is certified by a doctor to be of 2% permanent disability as a result of the accident which occurs when the victim is of age 34, then the social cost will be: (HK$600 x 7) + [HK$600 x 365 x (65 - 34) x 2/100] = HK$4,200 + HK$135,780 = HK$139,980 SOCIAL COSTS OF CONSTRUCTION ACCIDENTS AND THE IMPACT OF SAFETY INVESTMENT ON SOCIAL COSTS 133 ----If an accident is a fatal case, then the social cost will be calculated by: daily wage x 365 x (retire age 65 - death age). The compensation sums paid by the employer (contractor) to the injured worker (employee) for both day loss and disability, as shown in item 1 of Table 1, are not counted as social costs because they are "transfers" (Tang, 2003) and therefore only financial but not social. Otherwise, they will be double counted with "day loss" (item 1) described above. * Table 1 Contractor's losses due to occurrence of a construction accident. Cost Items Arising From Each Construction Accident Project No. : ____ 1. Injured Person Uob Nature:________---J - Day Loss - Amount of Compensation - % of Disability - Disability Compensation 2. Loss From Injured Person (After Resuming Work) - Equivalent loss = (Day Loss x 1/20) + % of Disability...