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Are Small Businesses Less Safe?

On 4 April, the workplace health and safety legislation comes into force. It contains many significant steps for the better. But we were very disappointed that the right of working people to participate in protecting and improving their own health and safety was weakened in many ways. One way was to allow employers with fewer than 20 employees, in all but a short list of “high risk” industries, to refuse requests to have Health and Safety Representatives.

That’s bad enough, but an international finding is that working for small employers is less safe in any case. I analyse ACC claims data and find that in many industries, that is true here. Looking at all workplaces and industries, someone working in a small firm of around 20 workers is almost a quarter (23%) more likely to suffer a severe injury than one in a large firm, and over half (57%) more likely to suffer any injury.

This could be because high risk industries happen to be mainly small firms, rather than because small firms are in themselves more dangerous. However the most dangerous industries are a mixture:  Agriculture, Forestry and Construction for example are dominated by small firms, but Mining, Manufacturing, the utilities (electricity, gas, water) and transport are not. In all these except Manufacturing, the data shows higher severe injury rates in small firms.

If we drill down into each of these groups further, the pattern of smaller firms being less safe continues for most, though not all subsectors. For example in Agriculture the risk of severe injury in a small firm (e.g. a farm) is on average 60% greater than in a large one. In Forestry and Logging, it is 40% greater, in Heavy and Civil Engineering Construction it is two thirds (67%) greater, in Water Transport Support Services (which includes ports) the risk is almost tripled.

An exception is in food processing, the largest sector of manufacturing where risk increases with firm size. In the meat industry, the largest subsector, the risk in large firms (at 52 severe injuries per 1,000 workers) is almost double the risk in the smallest firms (28 per 1,000).

While the pattern of risk varies, the data provides strong evidence for small workplaces on the whole being higher risk than large ones. That means that policies that reduce the health and safety requirements of small firms are misguided: they may increase an already higher risk. More positively, these findings could be used to target assistance and monitoring of higher risk workplaces more effectively.

Download the full bulletin: CTU Economic Bulletin 177 – March 2016