Compensating wage differentials for risky jobs: evidence from Australia

The theory of compensating wage differentials (CWDs) postulates that workers need to be compensated with higher earnings for job disamenities. The risk of death and injury at work are examples of such disamenities. Combining recent fatality and injury data from Safe Work Australia with data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, this research updates the earlier work of Kniesner and Leeth (1991) and Miller, Mulvey and Norris (1997) who found evidence that Australian workers that are exposed to fatal risk are compensated with higher earnings. Constructing a risk rate that varies according to the worker's industry and occupation, and using panel techniques to control for unobserved heterogeneity, CWDs for job risk are estimated. It is found that only female workers who belong to a union receive CWDs for fatal risk. The study finds no evidence that Australian workers receive CWDs for non-fatal risk. The estimated CWDs are used to infer the value of statistical life (VSL) for Australian female union members -- abstract.