No One Gets Hurt Is Profit Maximizing

Some professions are inherently more difficult than others. Unfortunately, many of America’s most dangerous occupations are construction trades. The most dangerous occupation, however, relates to the provision of key inputs to construction, but not construction delivery itself. In 2022, logging was the most dangerous occupation in the U.S., with a fatal work injury rate per 100,000 full-time workers of 101 according to the Bureau of Labor Statistics (BLS). But after loggers came roofers (58), workers involved with fishing and hunting (51), and construction trade helpers (39).

One might think that with the watchful eyes of the Occupational Safety and Health Administration (OSHA) and improving technology, that workplace deaths would be trending lower over time. But in 2022, the number of fatal work injuries rose 6% from 2021’s tally. Nationwide, there were nearly 5,500 fatal work injuries in 2022. That means that a worker perished every 96 minutes that year. In absolute terms, truckers are associated with the highest incidence of fatality, with more than 1,000 truck drivers dying due to work-related injuries in 2022.

According to OSHA, the leading causes of construction fatalities (the so-called Fatal Four) are falls, struck-by-incidents, caught-between incidents, and electrocutions. Over the past few years, falls have been responsible for nearly 2 in 5 construction deaths.

In recent years, many construction organizations, including the Associated Builders & Contractors and the Construction Financial Management Association have been laser-focused on safety. Often, those who focus on highlighting best job-site practices focus on the human element of safety, emphasizing how important it is for people to be able to rejoin their families after a hard day at work.

Of course, that is the most important aspect of infusing more effective safety protocols at construction job sites. But there is also an obvious economic incentive. Accidents at job sites can delay construction projects, produce workers’ compensation claims, increase insurance premiums, trigger lawsuits, damage reputation, and induce a worker to leave a firm out of anger. None of these things is good for the corporate bottom line. Such incidents are also not good for the construction industry, which continues to be buffeted by rampant skills shortages, having to compete for scarce human capital with other industries, including logistics, energy, and manufacturing.

Nonetheless, despite greater firm-specific and industry wide focus on safety, OSHA data characterizing 2021 indicate that while construction comprised 6% of the nation’s workforce that year, it accounted for a staggering 20% of worker deaths. Stated another way, that year, the fatal injury rate for all construction workers was 10.2 per 100,000 workers. That was nearly three times higher than the average (3.4) across all industries.

While fatalities capture headlines, non-fatal injuries can also produce a combination of personal and economic tragedy. In 2023, construction’s non-fatal injury rate reached 280 per 10,000 workers, significantly higher than the average across all industries. In the category of non-fatal injury, the most common related to musculoskeletal disorders, including back, shoulder, and knee injuries. These are more likely to happen due to repetitive tasks and heavy lifting, both of which are common motions at construction job sites. All told, musculoskeletal disorders account for approximately one in four of non-fatal injuries.

Respiratory illnesses are also common. OSHA data estimate that more than 2 million construction workers have been exposed to crystalline silica, which can produce a serious and occasionally fatal lung disease called silicosis. Asbestos also remains a lingering threat for many workers. It may be that the need to adaptively reuse many properties due to economic shifts such as the pervasiveness of remote work, artificial intelligence, e-commerce, and remote meetings will result in elevated levels of construction worker exposure to materials no longer permitted in construction due to public health considerations.

Injuries are costly. According to the National Safety Council, treatment costs often exceed $40,000. There is also lost time at work. On average, workers lose 12-14 weeks of wages due to injuries. Based on a survey conducted by the accounting and consulting firm Moss Adams, the average salary of a construction laborer was $60,387 in 2023, which means that lost wages can easily climb toward $15,000 or more. For many Americans, that level of lost income can translate into missed auto, mortgage, and other payments. Obviously, the presence of insurance coverage is an important element of worker financial safety.

Negative Financial Impact of Construction Industry is Massive

OSHA estimates that construction firms spend nearly $170 billion each year on work-related injuries and illnesses. This includes medical bills and worker compensation payments. Firms with high injury rates must pay higher worker compensation premiums, creating long-term burdens that both slice into profits and render it less likely that the firm can secure sufficient levels of work going forward due to problematic reputational effects, including those associated with delayed project deliveries.

Enhanced Safety Generates Lofty Rates of Return

According to the Liberty Mutual Safety Index, for every dollar spent on injury prevention, a company can on average expect to save between $2-$6 dollars in direct and indirect costs. Effective safety programs correlate to fewer injuries, diminished delivery delays, reduced legal entanglements, and less onerous costs. Hiring lawyers is expensive, and lawsuits represent a source of stress for management that compounds the stress associated with simply operating a business in a highly complex setting.

Construction safety represents yet another economic element that is susceptible to improved technology. For instance, wearable technology, including smart helmets and vests, allow supervisors to monitor the health and well-being of people at the job site and alert them of potential risks. Shimabun, a Japanese company that develops products relevant to construction, has released a kit that can be installed into the standard hard hat. The technology includes temperature monitors and motion detectors, providing exact coordinates of each worker. It can also detect if workers are light-headed or have collapsed. This seems of particular salience at large construction sites, where workers may occasionally be secluded from others.

Implementing OSHA-approved safety programs is also associated with positive outcomes. Annual savings among the roughly 500 firms that have participated in the Voluntary Protection Program have exceeded $100 million per annum. Not coincidentally, injury rates are less than half the national average.

Final Word

If construction is to cobble together a properly sized and skilled workforce of the future, industry safety outcomes must improve. Of course, each individual firm has outsized incentives to produce better outcomes along the dimension of safety, but industry efforts are still warranted in an effort to diffuse best practices among contractors and draw timely attention to the benefits of emerging technological advances.