Stock image of a worker in safety gear

A study by a global team of researchers including John Gray, professor of operations management at Fisher College of Business, found that companies that provided safe workplaces were more likely to go out of business than those that did not.  

The study, published in the journal Management Science, examined the short- and long-term survival of more than 100,000 Oregon-based organizations over a 25-year period (1989-2014). The study defined “survival” as ongoing operations, even in the face of an ownership change. 

The study was an international collaboration between Mark Pagell, Mary Parkinson, Michalis Louis and Brian Fynes of University College Dublin in Ireland; Anthony Veltri of Oregon State University; and Frank Wiengarten of Universitat Ramon Llull in Spain. 

“Our unique 25 years of longitudinal data, linking information about employment and safety for every organization in the U.S. state of Oregon, allowed us to test competing arguments about employee safety and organizational survival," Gray said. "Most of the research team expected to find that reduced injuries would increase organizational survival, postulating that providing a safe workplace would lead to the attraction, development, and retention of the best human capital."

"The other argument is that, from the firms’ perspective, the costs of providing a safe workplace outweigh the benefits, even with current safety regulations. We found convincing evidence that injuries generally tended to relate to improved organizational survival, up to a very high level of injuries, consistent with the latter argument.” 

Researchers determined whether a company provided a safe workplace by examining disabling claims using data provided by the Oregon Department of Consumer Affairs. Disabling claims include those in which a worker suffers a temporary disability that forces her/him to miss at least three days of work, or where there is the expectation of a permanent disability. Using such severe incidents decreases concerns with under-reporting driving the observed relationship. More costly claims stem from more severe incidents, and higher costs indicate more frequent or more severe claims. 

Results from the study indicated that providing a safe workplace generally hindered organizational survival. The effects were practically significant, as organizations with worker injury claims survived up to 56 percent longer than safe organizations. To try to rule out alternative explanations, the researchers controlled for, sometimes via proxy, organizational turnover, growth, output-per-worker, industry, and calendar time.  

The effect was strongest among larger, older companies — those most likely to have the resources to invest in safety practices. For example, companies with more than 100 employees and claims filed against them were more likely to survive compared with similar-sized companies without claims. That outcome held until quarterly claims reach just over $9 million, a level unlikely to be reached.

Conversely, companies with less than 30 employees got no or minimal benefit from having claims relative to similar sized companies without claims. More generally, for younger or smaller companies, or companies that are growing quickly, high claims costs were more likely to harm their survival. These companies, according to the researchers, thus have a greater incentive to protect their workforce, but likely fewer resources to do so. 

Despite the presence of regulatory bodies like the Occupational Safety and Health Administration (OSHA) and Oregon’s regulations that meet or exceed the national standard, “Our results imply that the regulations of a developed economy are not enough to incent the elimination of poor safety,” the study says. This suggests that regulation and policy should make it more costly to have injuries, or more rewarding to not have them. 

While the dataset did not allow researchers to uncover the mechanism by which having disabling claims makes a business more likely to survive, it did allow them to refute the idea that improving worker safety improves profits, in general. Prior research by part of the author team has shown that there are businesses that do provide safe workplaces and also improve their competitiveness; but this study shows that such businesses are not the norm. 

The research was completed before the COVID-19 pandemic began. It is unclear to what extent the pandemic and the aftermath will affect the relationships found in this study.  

John Gray Professor of Operations, Associate Director, Center for Operational Excellence
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