When the prices of metals rise, U.S. mining companies are less likely to comply with safety regulations and miners are more likely to be injured on the job, according to new work by a group of American economists who say their findings could also be applicable across other less-dangerous private industries.
Specifically, a 1% increase in the price of a commodity produced by a mine in a given quarter will lead to a 0.15% increase in the amount of injuries and illnesses suffered by workers in that mine during the following quarter, the researchers found in a forthcoming paper for the Journal of Labor Economics.
The same 1% price increase will also lead to 0.13% more violations of health and safety regulations, the economists added.
“Let’s say you take a gold mine. When the price of gold goes up, the mining worker injury rates increase dramatically,” said co-author Matthew Johnson, an economist at Duke University. “We also show that violations of safety regulations go up.”
Mining is among the most dangerous jobs in the U.S., with about 10 workers per 100,000 dying on the job each year; across all private industries in the U.S., an average of 3.6 out of 100,000 workers die on the job annually, according to researchers.
But despite mining’s unique dangers, Johnson said his findings are likely applicable across industries.
When the price of a product produced by any company rises, the opportunity cost of slowing production in order to inspect equipment or conduct safety training also goes up, disincentivizing employers from taking such steps, according to Johnson.
“Workplace injuries go up in economic booms,” he said. “When I can sell a bunch of my product — this could be true for a pizza shop, a construction company — then it’s more costly for me as a firm to make these safety investments that could come at the expense of production.”
However, a countervailing force to opportunity cost is the fact that price increases give companies more money to spend on safety upgrades. This is backed up by research from economists like Jonathan Cohn and Malcolm Wardlaw of the University of Texas, Austin, who have found that firms experiencing negative cash flow shocks have worse workplace safety outcomes.
“If the price of what I produce goes up, that gives me more financial resources,” said Johnson. “Maybe companies can actually make these valuable investments [in safety] that they couldn’t make otherwise.”
Yet within the mining industry, the rise in injuries associated with price increases shows that opportunity cost ultimately outweighs any additional ability to invest in safety during commodities booms, the researchers found.
Johnson, a labor economist whose work generally focuses on health and safety regulations, wrote the paper alongside Kerwin Kofi Charles of Yale University, Melvin Stephens Jr. of the University of Michigan and Do Q Lee of New York University.
The researchers based their model on the prices of 16 metals — including gold, silver, uranium and aluminum — from 1983 to 2015, as well as workplace safety data gathered by the Mine Safety and Health Administration. Notably, the researchers did not consider mines that extract commodities that are generally traded locally rather than globally, such as coal and construction sand.
The U.S. mining sector is an ideal setting to study the effects of price shocks on worker safety, according to Johnson, because the actions of individual U.S. mining firms have relatively minuscule effects on global supply and demand. The U.S. is not the highest-ranking producer of any commodity, and for the majority of commodities it ranks fifth or lower, according to the economists. The price of a commodity like gold fluctuates far more based on the whims of central bankers and investors than the production levels of any U.S. mining firm.
“The price of the goods changes for random reasons, due to global forces that are completely out of the control of any given mine,” said Johnson.
In addition, government regulators collect vast amounts of data on relatively frequent workplace injuries, giving the researchers plenty of material to work with.
Johnson said his study shows U.S. regulators across industries should examine market conditions when planning inspections.
“Regulators should try to target their monitoring and enforcement efforts to firms and industries that are experiencing an economic boom,” said Johnson.
Mining companies should also give more power to internal safety managers to preempt injuries, he added.
Johnson had the idea for the paper in 2016 during a series of conversations with Charles, his co-author from Yale. The paper took nearly five years from conception to acceptance for publication, he said.
The researchers were inspired in part by the work of University of Virginia economist Christopher Ruhm, who has examined relationships between recessions and mortality, Johnson said.
The paper, titled “Demand Conditions and Worker Safety: Evidence from Price Shocks in Mining,” is forthcoming in the Journal of Labor Economics. The authors are Kerwin Kofi Charles of Yale University, Matthew S. Johnson of Duke University, Melvin Stephens Jr. of the University of Michigan and Do Q Lee of New York University.