Economic researchers in the USA have been undertaking a study on the relationship between price shocks in the mining industry and their impact on mining safety. Their current mining safety research has found that in price shocks (where commodity values increase), greater financial resources can improve safety however, the impact of opportunity costs is higher. Ultimately concluding overall, worker safety suffers when commodity demand is high.
The researchers, from the US National Bureau of Economic Research (NBER), studied safety incident rates in the U.S. metals mining sector using data from the Mine Safety & Health Authority (MSHA) from 1983-2015.
The researchers highlighted that higher demand, and an associated increase in price and profit, can ease a firm’s financial constraints, enabling it to make safety investments like replacing worn-out equipment.
But favorable demand conditions also raise the opportunity cost of safety investment such as worker training or regulating the speed of production, that may come at the expense of current output.
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Ultimately the findings suggest that mines experience substantially higher injury and illness rates following positive demand shocks. “A one-percent exogenous increase in output price leads to 0.15 percent more injuries and illnesses per full-time worker” the researchers found.
The empirical research is important to mine safety as many companies and regulators have assumed that mineworker health and safety is often better in boom times given more resources available to reduce and impact injury and disease rates.
The research may have significant implications for regulators who have traditionally used compliance models based on past behaviors or notification of incidents. This research suggests that demand may be an important factor for regulatory surveillance of mining companies’ safety.
You can read the Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining full study here