Compensating Wage Differentials for Job Fatality and Injury Risk in Australia*

Abstract

This study explores whether compensating wage differentials (CWDs) are still found for Australian workers using data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, and risk data from Safe Work Australia. Our study finds evidence of CWDs for the risk of workplace fatalities that are smaller in magnitude compared to the estimates previously reported in the 1990s for Australia. We find limited evidence of CWDs for the risk of workplace non‐fatal injuries. Using panel data and a risk variable that varies by both the worker’s industry and occupation of employment, we find that Australian workers who face the mean level of fatality risk receive a CWD of between 0.13% and 0.44% for a unit increase in risk, depending on the model specification. These estimates correspond to a value of statistical life of $9.7 million and $34.9 million.