An Analysis of Wage Differentials Received by Workers on Dangerous Jobs

Abstract

This study examines the wage differentials received by workers on hazardous jobs. The hypothesis that workers are compensated for the risk of experiencing a nonfatal or fatal accident was confirmed using BLS industry accident rates and a sample of full-time workers. The estimated value of a life at the average risk level for the sample implied by the estimated risk premium was about $3.2 million. However, the estimated value of a life declined as risk increased. This was explained by the fact that individuals found on riskier jobs are collectively less risk averse than individuals on safer jobs. An important interaction was also found between fatal accident risk and union status. Compared to nonunion workers, union members received substantially higher fatal accident premiums. These premiums imply that union members collectively place a higher value on life. Various explanations for this difference are discussed.

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