Wage compensation for job-related illness: Evidence from a matched employer and employee survey in the UK

Despite voluminous studies on compensating wage differentials for job-related fatal or non-fatal injuries, there remain few published studies confirming the existence of compensating wage differentials for job-related illness. This study utilizes a recently completed UK employer-employee survey to look at this specific issue. I find there is strong evidence of wage compensation for job-related illness risk for both male and female employees in the UK. The estimated wage compensation for one job-related illness episode per year ranges from 27% to 140% of annual earnings depending on gender and estimation approaches.     

The value of job safety for railroad workers

The value of reducing job risk is estimated using a hedonic wage model and a risk variable that is matched by occupation and state of residence. This study is the first to use the hedonic wage approach to estimate the value of safety in a single industry. Industry-specific estimates will help researchers and labor policymakers better understand the distribution of compensating wage differentials across industries. Our estimated value of job safety for railroad workers is between $21,000 and $26,000 (1980 dollars) per statistical disabling injury, which is somewhat larger than the average of values estimated in previous studies that use cross-industry or crossoccupation aggregate risk data.     

Dirty money: Is there a wage premium for working in a pollution intensive industry?

Within a compensating wage differential framework we investigate whether there is a wage premium for working in a pollution intensive industry. Our results for the economy as a whole suggest a small wage premium of approximately one quarter of one percent associated with the risk of working in a dirty job. This premium rises to over fifteen percent for those individuals who work in one of the five dirtiest industries. We also find evidence of a fatal risk wage premium, providing estimates of the value of a statistical life of between ￡12 million and ￡19 million (2000 prices).     

Compensating wage differentials for fatal injury risk in Australia,Japan, and the United States

Our research infers the effects of institutionalized wage setting and lengthy worker-firm attachment by comparing estimated compensating wage differentials for fatal injury risk in Japanese, Australian, and U.S. manufacturing. Hedonic labor market equilibrium regressions for Japan reveal a statistically fragile compensating wage differential of 0% to 1.4% for exposure to the average fatality risk compared to employment in a perfectly safe workplace. Australian workers receive a statistically robust 2.5% estimated wage premium. Using new data on work-related fatalities, we find a 1% compensating wage differential in U.S. manufacturing that becomes more positive and statistically less significant as data are aggregated.     

Racial Differences in Labor Market Values of a Statistical Life

This article constructs measures of job fatality rates for black and white workers using information on job-related fatalities from 1992–1997. The fatality rates for black employees are somewhat greater than those for whites. Each of these groups receives significant compensating wage differentials for fatality risks, controlling for nonfatal risks and expected workers' compensation benefits. The implicit value of a statistical life is lower for black workers than for whites. These results in conjunction with evidence that blacks receive less annual compensation for fatality risks than do whites imply that black and white workers face different market offer curves that are flatter for blacks than for whites.     

Unions,employment risks,and market provision of employment risk differentials

The role of unions in providing compensating differentials for wage and hours risk is analyzed. Unions are shown to increase wages for workers in more risky jobs. A negative compensating differential for nonunion workers is taken as evidence of worker-specific, or supply-side risk. This component of risk is removed by controlling for union status, based on the belief that unionized firms will be more likely to filter out high-risk unproductive workers. Hours risk is compensated for in the labor market, while wage risk is not.     

Compensating Wage Differentials for Fatal and Nonfatal Injury Risk by Gender and Race

Our research examines risk compensation by gender and race using occupation, gender, and race specific fatal and nonfatal injury rates and a data set sufficiently large to produce accurate estimates across fairly narrow groups. The data provide strong evidence that men earn compensating differentials for both fatal and nonfatal injury risk and women earn compensating differentials for nonfatal injury risk. Female wage premiums for nonfatal injury risk exceed male wage premiums by a factor of more than three. Nonfatal injury risk compensation is widespread among the various demographic groups although largest for white women. Fatal injury risk compensation is more isolated with only white and Hispanic males earning significantly higher pay for greater amounts of fatal injury risk.     

Risk-taking activities and heterogeneity of job-risk tradeoffs

Using data from a large national sample, this article examines how individual differences in risk attitudes affect wage-risk tradeoffs. Smoking and seat belt use are used as proxies for individual willingness to bear risk. Workers who by their behavior indicate a high value of safety-e.g., nonsmokers and seat belt wearers-receive a higher compensating differential per unit of job risk than do workers who engage in either one of the risky behaviors. For the overall sample, the implicit value of a lost workday injury is $79,632. This value ranges from $54,878 for smokers who do not wear a seat belt, to $102,552 for nonsmokers who wear a seat belt.     

Compensating wage differentials for workplace accidents: Evidence for union and nonunion workers in the UK

This article measures compensating wage differentials for job risks for union and nonunion workers. Job risk is made endogenous to avoid a selectivity bias arising if more able people choose safer jobs. We find that this adjustment has a considerable effect on the union group, raising their fatal risk premium above that of non union workers. This implies that there is more variation in unmeasured ability in the unionized group, and that job risk is an inferior good. The fact that unionized workers are also found in safer jobs might therefore be attributable to their greater wealth, rather than to greater“knowledge” in the unionized plant. The estimated statistical value of a life is £8.8 million in 1990 prices for union workers, with nonunion workers about 20% lower.     

Do Wages Compensate for Risk of Unemployment? Parametric and Semiparametric Evidence from Seasonal Jobs

Due to unique institutional and technological factors, seasonal agricultural jobs are characterized by much higher risk of unemployment than similar permanent jobs. I estimate compensating differentials for risk of unemployment and compare those with unemployment insurance benefits provided by the government. I use two sets of estimators. First, I calculate parametric estimates with Heckman correction. Second, I compute three versions of a distribution-free semiparametric estimator which is robust to misspecification of the residual distribution. The main finding of the paper is that there exists a positive compensating differential of 15.5% of the average wage. This corresponds to an implicit replacement rate significantly larger than the typical unemployment benefit.     

Willingness to accept equals willingness to pay for labor market estimates of the value of a statistical life

Our research clarifies the conceptual linkages among willingness to pay for additional safety, willingness to accept less safety, and the value of a statistical life (VSL). We present econometric estimates using panel data to analyze the VSL levels associated with job changes that may affect the worker’s exposure to fatal injury risks. Our baseline VSL estimates are $7.7 million and $8.3 million (Y$2001). There is no statistically significant divergence between willingness-to-accept VSL estimates associated with wage increases for greater risks and willingness-to-pay VSL estimates as reflected in wage changes for decreases in risk. Our focal result contrasts with the literature documenting a considerable asymmetry in tradeoff rates for increases and decreases in risk. An important implication for policy is that it is reasonable to use labor market estimates of VSL as a measure of the willingness to pay for additional safety.     

Did We Overestimate the Value of Health?

Adam Smith's idea that wage differences reveal preferences for risk rests on strong theoretical foundations. This paper argues, however, that the dominant approach to identify compensating wage differentials—regressing individual wages on aggregate measures of risk—may lead to arbitrary estimates of these risk differentials. In a dataset with information on both, the incidence of illnesses or injuries across firms and industries, I calculate an implicit value of one injury or illness of about (1990) USD 18,800 pursuing the dominant approach. In contrast, regressing wages on the incidence of risk across firms produces a value of one injury or illness of about USD 11,300.     

Valuing the risk of workplace sexual harassment

Using data on sexual harassment charges filed with the Equal Employment Opportunity Commission, I calculate the risk of sexual harassment by gender, industry, and age and establish that white females, but not nonwhite females, receive a compensating wage differential for exposure to a higher risk of sexual harassment. I use this risk premium to calculate the value of statistical harassment (VSH) in a manner analogous to the calculation of the value of statistical life (VSL). The VSH is around $7.6 million, about three-quarters of the size of the most-commonly cited levels of the VSL, and far above the maximum damages award for sexual harassment available under federal law. Boosting the maximum damages award to equal the VSH would create the appropriate economic incentives for organizations to deter sexual harassment.     

The heterogeneity of the value of statistical life: Introduction and overview

The refinement in worker fatality risk data used in hedonic wage studies and evidence from new stated preference studies have facilitated the exploration of the heterogeneity of the value of statistical life (VSL). Although the median VSL estimate for workers is $7–$7–8 million, the VSL varies considerably within the worker population. New estimates of the income elasticity of VSL are 1.0 or above, which are consistent with theoretical models linking VSL to the coefficient of relative risk aversion. The specific relationship between VSL and risk aversion is, however, more complex than previously understood. Age differences in VSL are substantial, with young children being accorded especially high VSL amounts. The public’s willingness to pay to reduce risks is reduced if those being protected are perceived as being blameworthy due to their responsibility for contributing to the risk.     

Dynamic decomposition of regional wage differentials in Korea

Using a Juhn–Murphy–Pierce (JMP) decomposition, this study analyses the dynamic changes in regional wage differentials between the Seoul Metropolitan Areas and other regions in South Korea. Data from the Korean Labor and Income Panel Study for three years (2000, 2004, and 2008) is used. JMP decomposition provides information about the components that explain changes in regional wage differentials over time. Between 2000 and 2004, the variations in observed and unobserved components are associated with counteracting effects on regional wage differentials. While changes in observed components contribute more to widen regional wage differentials, those in unobserved components narrow them. However, between 2004 and 2008, both observed and unobserved components move in the same direction to narrow regional wage differentials. Based on our empirical results, we discuss some policy implications.     

The Impact of Institutional Change on Compensating Wage Differentials for Accident Risk: South Korea, 1984–1990

Institutional change can lead to substantial changes in the size of compensating differentials for workplace accident risk. The South Korean labor market experienced two major institutional changes between 1984 and 1990. First, a relaxation of restrictions on Korean labor unions in 1987 led to a sharp jump in the extent of strike activity and bargaining rounds which was associated with a reduction in the size of compensating differences. Second, reform of Korean workers' compensation in 1989 led to a substantial rise in benefits that also served to reduce the extent of compensating differentials.     

Estimating Fatalities Induced by the Economic Costs of Regulations

Regulatory costs are paid by individuals, which leaves them with less disposable income. Since individuals on average use additional income to make their lives safer and healthier, the regulatory costs lead to higher mortality risks and fatalities. Based on data from the National Longitudinal Mortality Study relating income to the risk of dying, approximately each $5 million of regulatory cost induces a fatality if costs are borne equally among the public. If costs are borne proportional to income, approximately $11.5 million in regulatory costs induces a fatality. Cost-induced fatalities disproportionally burden the poor and minorities, particularly blacks.     

Age,autos, and the value of a statistical life

The value of a statistical life (VSL) is used to assign a dollar value to the benefits of health and safety regulations. Many of those regulations disproportionately benefit older people, but most estimates of the VSL come from hedonic wage regressions with few older workers and no retirees. Using automobile purchase decisions, I estimate a VSL for individuals from the age of 18 up to the age of 85. Combining information on vehicle holdings and use, household attributes, used vehicle prices, crash test results, and yearly fatal accidents for each make, model, and vintage automobile, I calculate a separate willingness to pay for reduced mortality for different age groups. I find a significant inverted-U shape to the age-VSL function that ranges from $1.5 to $19.2 million (in 2009 dollars). The shape and magnitude of the vehicle-based age-VSL relationship corroborate labor market estimates and extend the age range of revealed preference evidence on the relationship between age and the VSL.     

Self Selection Bias in the Estimates of Compensating Differentials for Job Risks in India

This study contributes to the hedonic wage literature in developing countries by estimating the collective willingness to pay of a statistical life/injury, using an original data set from the Indian labor market. As self-selection by workers results in biased estimates of the wage premium for job risks, the study uses a modified selectivity bias correction technique. Empirical results indicate substantial heterogeneity in returns to risk. The estimated value of life without selectivity bias is Rs. 56 million (US $3 million), which is substantially larger than the value with selection bias. The estimates provided by the study can aid policy makers, international agencies and other researchers in evaluating health projects in India and other developing countries.     

Models for estimating discount rates for long-term health risks using labor market data

This article utilizes evidence from job choices involving fatality risks to estimate individual discount rates for adverse health outcomes. The study compares the results from five distinct models for estimating discount rates from labor market data. The estimated discount rates range from 1% to 14% with confidence intervals that usually include financial market rates for the same period. This result, and consistent findings of significant compensating differentials for fatality risk, provide strong support for life-cycle models of individual rationality in the choice of job risks. Discounted value-of-life estimates are also developed and compared to the crosssection estimates that are more prevalent in the literature.