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Chapter 3 MethodologyThis chapter details the methodology used in this update of the cost ofaviation accidents and incidents.THE COSTING FRAMEWORKThe Human Capital approach puts the major value of a person’s life as theproductive output of that individual over their working life. This assumesthat productive output of the economy would be foregone if a significantinput to the production process—one employed person—were removed. Theloss is valued at the wages that would have been earned—during recuperationfor people injured, or over a persons expected remaining life for fatalities.To this losses of paid work base has been added an estimate of the valueof work in the household and volunteer work, values for lost quality oflife, and other costs associated with accidents and incidents.This framework is the one used in BTE (1998) and other recent BTRE work.Some minor variations to the detailed approach in BTE (1998) are describedbelow in APPROACH VARIATION.9Life years lostBy using age and gender specific life expectancy tables, an estimate ismade for each fatality of the probable expected length of life if their deathhad not occurred. Life expectancy is taken from ABS (2004b).EarningsLife expectancy data is combined with wage rate data to model typicalperiods of earnings over life. The value of labour used is the dollar amountan employer pays for a unit of labour as an input to production. Averageearnings data is used from ABS (2005).
Cost of Aviation Accidents and Incidents | btre report 113Wages growthWeekly earning figures are annualised and a 1 per cent real annualgrowth rate was applied to take account of real increases in labour costsover time. This is discussed under the heading KEY PARAMETERS, below.EmploymentAt each age, only a proportion of the population hold paid positions. Ingeneral, the remainder are unemployed persons, voluntary workers andother people who are not part of the labour force. To represent this, theearnings stream over time was adjusted using age and gender specificemployment rates 10 . The estimated losses were then discounted totheir present value. (Discount rates are discussed in KEY PARAMETERSbelow.)Unpaid work10Average hours of unpaid work outside the workplace were obtainedfrom time use data, from ABS. This is the same source as in BTE (1998)and provides average hours per week spent in work in the home andwork for the community by age group, gender and employment status.Wage rates derived from the ABS were applied to obtain estimates ofthe total value of unpaid work. The value per hour for those in the formalworkforce has been used to value the loss of household and communityactivities.Lost quality of lifeIn BTE (1998), compensation paid to road crash victims in Australiawas used to estimate the value of lost quality of life. Except for valuingfatalities, the values used in BTE (1998) have been used in this analysis,increased in line with the Consumer Price Index to bring them to currentdollars.In BTE (1998), a cost for lost quality of life was attributed to injuries aswell as fatalities. Loss of quality of life for a fatality was based on courtawards for damages in cases of the most extreme health impairment.In that report 11 the value used was $214 000 in 1996 dollar values.The same philosophy was used in BTE (2000), using more recent dataand correcting for an apparent anomaly. In that report the lost quality10 ABS (2004a).11 BTE (1998), page 31.
Page 2 and 3: Cost of AviationAccidents and Incid
Page 4 and 5: ForewordIn 1998, the Bureau of Tran
Page 6 and 7: ContentsFOREWORDIIIEXECUTIVE SUMMAR
Page 8 and 9: Executive summaryThis report provid
Page 10 and 11: Chapter 1 IntroductionBACKGROUNDIn
Page 12 and 13: tre report 113| Cost of Aviation Ac
Page 14 and 15: Chapter 2 The Major TrendsThis chap
Page 26 and 27: Chapter 4 Cost EstimatesThis chapte
Page 32 and 33: Chapter 5 ResultsCOST OF AVIATION A
Page 38 and 39: Appendix AACCIDENT & INCIDENT REPOR
Page 46 and 47: Appendix BATSB INVESTIGATION CATEGO
Page 54 and 55: APPENDIX CSUMMARY OF ACCIDENTS, 200
Page 56: ReferencesAbelson, Peter 2003, “T

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