Do workers undervalue COVID-19 risk? Evidence from wages and death certificate data

When mortality risks of a job increase, economic theory predicts that wages will rise to compensate workers. COVID-19 became a new source of mortality risk from close contact with other workers and customers. Real wages have risen during the COVID-19 era, but research to date has been sparse on how much of this increase reflects compensating wage differentials for COVID-19 risk on the job. We use 2020–2021 death certificate data which for the first time includes the decedent’s occupation and industry, together with other occupational and industry mortality for previous years from the Census of Fatal Occupational Injuries (CFOI) and wage data from the Current Population Survey (CPS) to examine whether compensating wage differentials for COVID-19 occupational risks are in line with prior estimates of Values of Statistical Life (VSL). First, we find that there are substantial differences in the compensating differentials associated with COVID-19 vs other sources of job-related mortality risk. Full time workers’ pay is higher by \(\$24\) $\mathrm{\$}24$ per week in jobs with a 1 in 1,000 higher risk of COVID-19 mortality, but their pay is \(\$320\) $\mathrm{\$}320$ higher in jobs with 1 in 1,000 higher risk of non-COVID-19 workplace mortality. The non-COVID-19 mortality wage premiums imply that workers trade off money and mortality risk using a VSL of about \(\$18\) $\mathrm{\$}18$ million, which is near the upper range of the most cited VSL estimates in the literature. In contrast, the COVID-19 wage premium implies that workers make decisions using a VSL of the range \(\$1.24\) $\mathrm{\$}1.24$ – \(\$1.54\) $\mathrm{\$}1.54$ million, much lower than standard VSL measures. The results are consistent with workers substantially underestimating or undervaluing the risk of COVID-19 mortality.