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Abolishing OSHA

J. Kniesner and D. Leeth

J. Kniesner is a professor of economics at Indiana University in

Bloomington, Indiana. D. Leeth is an associate professor of economics at

Bentley College in Waltham, Massachusetts..

Workers at the Pymm Thermometer Company, the second largest manufacturer of

mercury thermometers in the United States, had no respirators or protective

clothing, and worked in a building with little outside ventilation. Worst of all

were the conditions in a windowless room in the cellar where people recycled

mercury from old thermometers. Exposure to mercury can permanently damage vital

internal organs such as the brain, lungs, liver, and kidneys. The basement

recycling room was filled with broken glass and noxious fumes from puddles of

mercury on the floor. In 1987 more than half of the Pymm Thermometer Company's

100 workers, and some of their children, showed signs of mercury poisoning. One

Pymm worker appeared to have permanent brain damage. Until a former employee

tipped off health and safety inspectors, the federal government's Occupational

Safety and Health Administration (OSHA) was unaware of the mercury recycling

room, but for five years the agency had known of other serious health problems

suffered by Pymm's employees.

At first glance, the Pymm Thermometer Company story might suggest to

policymakers that OSHA should be given bigger budgets, more personnel, and

greater authority to go after employers that endanger worker safety. But the end

of the story and the accompanying analysis suggests just the opposite: that OSHA

can never be expected to be effective in promoting worker safety; that an

expanded OSHA will cost jobs as well as taxpayer dollars; and that other means

currently keep workplace deaths and injuries low and can reduce them even more.

OSHA originally cited Pymm in 1981 for mercury-fume levels five times greater

than normal, levels that could cause severe neurological damage or death. The

agency fined Pymm $1,400 and ordered it to eliminate the mercury-fume hazard

within six months. Five years after the original elimination order, by which

time three additional OSHA inspections had taken place, the company still had

not installed the ventilation equipment necessary to reduce mercury exposure to

permissible levels.

The Pymm situation would have continued unchanged, except for the negative

publicity that resulted when the company fired Vidal . After doctors

treated Mr. for a fractured elbow, they reported to the health

departments of both New York City and New York State that Mr. suffered

from mercury poisoning. An asthmatic who was no longer able to walk without a

cane, Mr. applied for workers' compensation benefits and was quickly

fired by Pymm. Newspaper accounts of Mr. 's case included expressions

of concern by city and state health departments over the working conditions at

the Pymm Thermometer Company. OSHA still did nothing. Eventually, an article

describing the agency's dismal enforcement record goaded OSHA into reinspecting

Pymm in 1985.

The jobless Mr. , who lived only one block from the thermometer plant,

met the safety inspectors on the street and gave them the details of the

basement mercury-recycling operation. The safety inspectors searched the

building for more than a day to find the hidden mercury-recycling room; although

the inspectors said that the working conditions were a “nightmare,†they

fined the Pymm Thermometer Company only $30,100 for 16 violations of federal

workplace safety and health standards. A year later, two months after New York

State indicted Pymm's owners for assault for exposing workers to the high

mercury levels, OSHA again inspected the plant and issued another $75,000 in

citations. Even with federal involvement, health and safety inspectors initially

overlooked the deadly working conditions at Pymm and then let stand serious

health threats for over five years.

As the case of the Pymm Thermometer Company demonstrates, OSHA inspectors are

often reluctant to close down a company, or even impose dramatic fines, when

they find serious violations of health and safety standards. Other case

histories underscore that the situation at Pymm was far from unique. OSHA

inspectors frequently overlook dangerous working conditions, and even when they

find serious health and safety violations, inspectors often cannot compel firms

to eliminate the hazards discovered. To encourage timely compliance,

administrators often slash assessed penalties, further reducing the already

minor economic incentives for firms to observe health and safety standards.

Firms realize that it is unlikely that they will be inspected: recent inspection

rates mean that the typical American worker can expect to see an OSHA inspector

once every 75 years, or once every 13 years if working in a hazardous job. And

if they are inspected, firms can avoid paying severe fines by simply agreeing to

abide by OSHA's regulations in the future.

In spite of the ineffectiveness of OSHA, the agency still can impose costs that

are far out of proportion to any additional worker protection it provides. The

answer is not to give OSHA more money, personnel, and power. In fact,

work-related deaths have been declining since before the creation of OSHA in

1970. And there is no indication that OSHA's actions have led to any significant

reductions in injuries on the job. Most protection on the job comes from state

workers' compensation rules and programs, and tort law.

Rather than wasting more resources on an agency that cannot be effective,

policymakers would do better to shut down OSHA and allow state and local

officials to better utilize their own means to ensure worker safety.

U.S. Workplace Safety Policy

OSHA is the most recently constructed pillar of the U.S. safety policy system,

which also includes the set of tort laws, state workers' compensation insurance

programs (workers' comp.), and the research and public education concerning the

causes and consequences of work hazards by the National Institute of

Occupational Safety and Health (NIOSH). Interwoven with the four pillars of

safety policy are the labor-market forces establishing the wage premiums, known

as compensating wage differentials, that workers require to accept job-related

health hazards.

U.S. safety policy has evolved sequentially because of the perceived

deficiencies of each previous government effort. The initial common-law tort

system was largely supplanted by state workers' comp. legislation on the grounds

that courts' after-the-fact negligence determinations failed to prevent

injuries, left too many workers uncompensated for injuries, and created too much

uncertainty regarding payment of damages. The general erosion of the purchasing

power of workers' comp. benefits, due to inflation that outpaced legislated

benefit increases and the dramatic rise of injuries in the 1960s, built the

momentum that passed the Occupational Safety and Health Act of 1970.

In addition to creating OSHA and NIOSH to conduct the research necessary for

OSHA to establish specific mandatory workplace guidelines, the 1970 act also

established the National Commission on State Workmen's Compensation Laws, which

spurred many states in the 1970s to modify their workers' comp. programs and

raise income-replacement benefits. In turn, the increases in benefits have

raised the cost of buying workers' comp. coverage and may have resulted in

increased filing of fraudulent claims for benefits. Concern over cost

containment and safety incentives in the workplace health and safety policy

system are larger today than at any time in recent memory.

With an annual budget of about $300 million, OSHA is about one 20th the size of

the Environmental Protection Agency. The federal government has six times more

fish and game inspectors than workplace health and safety inspectors. Given the

comparatively limited federal commitment to worker health and safety regulation,

one might expect a high and growing frequency of workplace accidents and

diseases.

Workplace Accidents

How safe were workplaces before OSHA's creation, and how safe are they now?

Figure 1 shows that the frequency of workplace deaths has actually declined

dramatically over the past 64 years. In 1928, for every 100,000 workers there

were about 16 workplace fatalities. By 1993 the rate of fatalities had fallen

about 80 percent, to 3.5 per 100,000 workers. As a point of reference, in 1993

the chance of dying in an accident at home was over two times greater

(8.7/100,000) than the chance of dying in an accident at work.

Because of how it is pieced together from multiple sources, the National Safety

Council's data may undercount U.S. workplace fatalities. The Bureau of Labor

Statistics (BLS) has also calculated workplace fatality rates since the late

1930s, but the scope of its survey has changed so dramatically that one should

not use the BLS data to identify a time trend. Nevertheless, the BLS's recent

data are the most reliable source of information on fatal workplace accidents in

the United States. The BLS has conducted two censuses of fatal occupational

injuries using data from death certificates, workers' comp. claims, medical

examiners' records, autopsy reports, motor vehicle accident records, and OSHA

and Mine Safety and Health Administration fatal injury reports. For 1992 and

1993, the BLS estimated that the average worker in the United States faced a

five in 100,000 chance of dying in a work-related accident. Although higher than

the National Safety Council estimate for 1992 and 1993, the BLS figure leaves

unchanged the conclusion that workers currently face greater hazards at home

than at work.

More interestingly, the BLS also found that 40 percent of recent workplace

fatalities were from transportation accidents (almost half the fatal

transportation accidents were highway accidents), and about 20 percent of

workplace fatalities were from assaults and other violent acts (over 80 percent

were homicides and 15 percent were suicides). In other words, only 40 percent of

workplace fatalities were caused by dangers thought by most to be unique to the

workplace, such as the classic example of falling into a machine. The leading

causes of work-related deaths in recent years, transportation accidents and

assaults, are unlikely to be reduced much by OSHA inspections.

The self-employed face a much higher chance of dying at work than wage and

salary workers, which also has consequences for the effectiveness of OSHA.

Although the self-employed are now about 9 percent of the workforce, in the

period studied by the BLS they suffered about 20 percent of all workplace

fatalities. Differences between the occupational distributions of the

self-employed and wage and salary workers partially explain the higher fatality

rate for the self-employed; compared to wage and salary workers, the

self-employed are more likely to work in agriculture and construction,

relatively high-risk sectors, and they are less likely to work in manufacturing,

a relatively low-risk sector. The self-employed are also more likely to be

managers of food-serving and lodging services and sales supervisors and

proprietors, which are occupations where the risk of being a homicide victim

during a robbery is higher. In addition to the sources of work-related deaths,

the overrepresentation of workplace fatalities among the self-employed indicates

that OSHA's ability to reduce work-related deaths is severely limited.

The time-series of data on nonfatal workplace injuries and illnesses paints a

somewhat different picture than the data on fatal injuries. Figure 2 (page 50)

shows nonfatal workplace injuries and illness since 1973, which was the first

year firms were required to report industrial accidents and diseases. Unlike

death rates, injuries and illnesses do not show a marked decline over time.

Since 1975 the pattern of nonfatal workplace injuries and illnesses follows the

business cycle closely. Injuries and illnesses rose slightly during the business

upturn of the late 1970s, fell during the recession of the early 1980s, and then

rose again during macroeconomic expansion of the 1980s.

OSHA's Effect on Workplace Safety

Because the rate of workplace deaths has, in fact, fallen by about half since

1970, from 6.8 per 100,000 workers in 1970 to 3.5 per 100,000 workers in 1993,

both Reich, the secretary of labor, and ph Dear, the assistant

secretary of labor for occupational safety and health, have credited OSHA with

reducing workplace fatalities by 57 percent over that period. But that is

misleading. Figure 2 shows no downward trend in either the total frequency of

workplace injuries or the frequency of injuries resulting in at least one lost

workday. Figure 1 shows that the workplace fatality rate began its downward

trend well before the creation of OSHA. The trend was fueled in large part by

improvements in safety technology and changes in the occupational distribution

of labor. Specifically, the pre-OSHA drop in the frequency of workplace

fatalities from 1947 to 1970 was 70 percent larger than the post-OSHA drop from

1970 to 1993. OSHA might actually have slowed the downward trend in fatal

injuries.

The 1978 cotton dust standard is usually mentioned as OSHA's greatest success

story. The cotton dust standard established a maximum exposure limit on the

amount of respirable cotton dust particles allowed in the work environment. The

goal was to reduce the incidence of byssinosis, or brown lung disease, among

textile workers. The standard dictated a set of costly engineering controls on

cotton dust exposure, medical surveillance of workers for signs of byssinosis,

and the use of respirators in some situations. The frequency of brown-lung

disease has fallen from 20 percent of the workforce in 1978 to 1 percent seven

years later. Judged by the one-dimensional metric of reducing illness, the

cotton dust standard has been successful.

Whether the cotton dust standard is a success on an economic basis is another

matter. Most of the actual illnesses prevented by the dust standard were

relatively minor. The least severe category of byssinosis involves only

occasional chest tightness or breathing difficulty on the first day of the

workweek, yet the yearly cost of eliminating such a mild illness is about 40

percent of what workers are willing to pay to avoid a serious workplace injury.

OSHA also ignored much cheaper methods of reducing illnesses in favor of

engineering controls. Personal protective equipment such as masks and worker

rotation would have been equally effective in preventing byssinosis but

considerably less expensive than the engineering standards adopted. As evidence

of the inefficiencies created, we note that the engineering controls required by

OSHA reduced the stock market value of cotton firms by 23 percent.

To get a more accurate picture of OSHA's impact on workplace health and safety,

one must control for factors unrelated to OSHA that also affect industrial

accidents and diseases. Numerous sophisticated econometric studies have

attempted to isolate the effect of OSHA on workplace safety. Studies vary widely

in terms of samples used, risk measurements examined, and OSHA enforcement

activities studied. In total, multivariate statistical studies suggest that OSHA

has a small positive impact on worker safety.

One of the most widely cited studies, by Wayne Gray and Scholz in the 1993

edition of Law and Society Review, examined a large national cross-section of

establishments from 1979 to 1985. The study determined that OSHA inspections

with penalties reduced lost workdays due to injuries by 22 percent over three

years. Although a 22 percent reduction may appear impressive, remember that only

a few firms have ever been inspected by OSHA, and only a third of all

inspections have resulted in fines. Considering the frequency of inspections and

the fraction of companies found violating OSHA standards when inspected, OSHA's

abatement efforts have reduced workplace injuries in total by less than 1

percent.

Injuries may have been reduced by more than 1 percent because the threat of OSHA

inspections and fines encouraged firms not yet inspected to install additional

safety equipment or institute new safety programs. Based on the results from a

study by W. Kip Viscusi in the Rand Journal of Economics (Winter 1986), the

deterrence effect of OSHA lowered injuries by another 1.5 to 3.6 percent.

Combining Gray and Scholz's figure with Viscusi's, then, indicates that OSHA has

reduced injures by no more than 4.6 percent. OSHA's impact, however, may be

considerably smaller than 4 to 5 percent, considering that the majority of

studies have found neither an abatement nor a deterrence effect from OSHA

inspections.

Finally, estimates from a study by Hahn and Hird published in the

Yale Journal on Regulation place the cost of OSHA's current health and safety

standards at $11 billion per year—based on either changes in input

productivity or expenditures on OSHA-mandated capital equipment. A

back-of-the-envelope calculation, using the range of estimates of OSHA's

effectiveness in reducing injuries and the implicit values workers place on

safety, indicates that OSHA produces safety benefits of zero to $3.6 billion a

year. The most optimistic figures show OSHA currently creating three times more

costs than it generates in benefits.

Reinventing OSHA?

The Democrats' Way. Vice President Al Gore's Task Force on Reinventing

Government left no stone unturned, OSHA included. According to the task force, a

new, improved OSHA would emphasize partnerships with business, commonsense

regulations, and results instead of red tape.

The success of the Maine 200 program has paved the way for an increased

partnership between OSHA and business. In 1993 the 200 companies in Maine with

the highest number of injuries were offered the choice to either set up a worker

safety program in tandem with OSHA or face increased monitoring by OSHA

inspectors. Made an offer too good to refuse, most companies chose the worker

safety program. After two years employers were able to identify 14 times more

hazards than could have been identified by OSHA inspectors, and six out of 10

Maine employers involved reported reduced injury and illness rates.

A reinvented OSHA would use two approaches to encourage firms to establish

safety programs. The first follows the pattern set by the Maine 200

effort—firms will be offered the choice between a partnership with OSHA or

stepped-up enforcement of safety and health standards. The second approach is

less intrusive: firms with strong safety programs, as judged by OSHA, would face

lower fines for OSHA violations than firms with weak or nonexistent safety

programs. As further encouragement, OSHA would also focus scheduled inspections

on only a few of the top hazards for firms with effective safety programs. The

move towards common-sense regulation is an effort to eliminate obsolete,

duplicative, or confusing safety and health standards.

In addition to rewriting regulations, the new and improved OSHA would allow

firms greater flexibility in meeting safety and health targets. Instead of

mandating the design of equipment or the work process, OSHA would set

performance goals and allow firms to determine how best to achieve the desired

outcomes. In addition, the Gore Task Force recommends that OSHA identify ways to

improve communication among workers, employers, and the government concerning

hazards in the workplace.

The final Gore Task Force recommendation affecting OSHA, which is to eliminate

red tape and emphasize effectiveness, indirectly acknowledges the complaints of

small business owners who have argued that OSHA inspectors have been less

concerned with safety and more concerned with issuing citations. Until recently,

OSHA inspectors were evaluated by the number of violations found; consequently,

inspectors fined companies for minor paperwork violations and for failures to

put up required OSHA posters and warnings for common consumer products. OSHA

reinvented the Democrats' way would evaluate inspectors based on success at

finding and eliminating workplace hazards. OSHA has also directed inspectors to

encourage firms to eliminate workplace hazards quickly by agreeing to reduce

proposed fines for speedy compliance. OSHA will also attempt to target

inspections away from relatively safe toward relatively more hazardous

companies. Inspectors will concentrate on investigating employers with an

above-average frequency of workplace injuries and illnesses relative to their

industry or with a record of serious and repeated OSHA violations.

The Gore Task Force recommendations are a serious effort to improve workplace

safety and health regulation in the United States. Will they be implemented,

and, if implemented, would they be effective?

A comparison of the United States and Canada provides additional evidence of the

likely impact of strengthening OSHA enforcement powers. The Canadian system of

worker protection against injury is stronger than that in the United States. For

instance, Quebec province allows workers to refuse hazardous tasks, requires

firms to establish joint workplace safety committees with labor unions, and

makes firms initiate accident-prevention programs. The Commission de la Santé

et de la Sécurité du Travail, Quebec's equivalent of OSHA, spends over four

times more per worker in prevention activities than OSHA. Even with more

innovative safety measures and a much greater level of enforcement, the Quebec

system of workplace regulation has been no more successful than OSHA in

improving worker safety and health.

The Republicans' Way. The Republicans also propose to reinvent OSHA, and in many

respects their program differs from the Gore Task Force's recommendations only

by a matter of degree. In June, Rep. Cass Ballenger (R-N.C.) introduced the

“Safety and Health Improvement and Regulatory Reform Act of 1995.†Like the

Gore Task Force, Representative Ballenger and other Republicans argue that OSHA

fines should be reduced for firms making legitimate efforts to correct safety

and health problems. But Representative Ballenger's proposal goes further than

the Gore Task Force by arguing that fines should be lowered from $70,000 to

$7,000 for all but the most egregious violations of safety and health

regulations. The Republicans recommend that all companies be given the chance to

correct alleged deficiencies before they are fined, not just companies with

OSHA-approved safety programs.

To make workplace regulations understandable, the Republicans would repeal the

“general duty clause†of the Occupational Safety and Health Act, which

dictates that employers furnish each employee a job “free from recognized

hazards that are causing or likely to cause death or serious physical harm.â€

They claim that this clause currently allows OSHA inspectors to enforce

nonpublished and poorly understood regulations.

Similar to changes proposed by the Gore Task Force, Republican proposals would

encourage OSHA to form more of a partnership with business. Another Republican

idea is to allow OSHA to use only 50 percent of its budget for enforcement. By

necessity, OSHA would then have to abandon any heavy-handed dealings with

business in favor of less coercive techniques.

To reorient OSHA inspections toward more hazardous workplaces, the Republicans

would force workers to report their concerns about safety and health first to

their employer and then to OSHA. Republicans argue that OSHA inspectors now

spend too much time investigating false reports of safety hazards. By law, OSHA

must evaluate every formal worker complaint. A majority of complaints are

groundless, eating up staff resources without producing any improvement in

worker health and safety. Since 1989 more than half of the complaint-initiated

inspections uncovered no serious violations of OSHA regulations, and nearly a

third of such inspections uncovered no violations whatsoever. Although the

Republican proposal may be extreme, some effort to differentiate between

legitimate and illegitimate complaints should be made to allow inspectors to

concentrate on discovering truly hazardous workplaces.

Chronic Problems with OSHA

Questions about OSHA's future effectiveness—and the need for the agency's

existence—will persist in spite of proposed reforms. The leading causes of

work-related deaths are now highway motor-vehicle accidents and murders by

customers and coworkers, which are difficult to control using workplace safety

standards. A disproportionate share of work-related deaths occur among the

self-employed, who are ill-suited for OSHA's inspection/fine approach. It is

also the case that small business owners are the most vocal critics of current

operations. At a recent White House conference on small business, a survey of

attendees indicated that small businesspeople view OSHA as the second most

“frustrating†federal agency to deal with—the IRS was first.

OSHA's recently proposed, and then quickly withdrawn, ergonomic standard

demonstrates the continuing problems with the regulatory approach. Repetitive

motion disorders can cause serious and permanent health problems. The most well

known of the repetitive motion disorders is carpal tunnel syndrome, an illness

caused by strenuous or repeated use of the wrists. In the early stages, carpal

tunnel syndrome produces a tingling or intermittent numbness in parts of the

hand, and in the later stages, a permanent and painful inability to move the

thumb or fingers. The number of repetitive motion disorders has more than

quadrupled since 1987 and now represents about 60 percent of all reported

industrial illnesses.

OSHA's draft proposal covering repetitive motion disorders was 26 pages with

explanations, recommendations, and economic assessments of more than 500 pages.

OSHA claimed that the ergonomic protection standard would have saved businesses

about $100 billion annually in lower workers' comp. claims and lost work time

and, after subtracting the cost of compliance, would have netted firms $9.6

billion per year. Business did not accept the government's assessment of the

potential net profits to be made from OSHA's approach to reducing repetitive

motion disorders. Intense business pressure combined with the threat of

congressional intervention forced OSHA to withdraw the draft proposal only a few

months after it was released for comment.

Business opposition to OSHA's proposed ergonomics protection standard does not

indicate that the business community is unconcerned about repetitive motion

injuries. Either out of concern for their workers or to reduce costs of workers'

comp. claims, many companies have initiated their own programs to combat the

rise of repetitive motion injuries. Unfortunately, extensive training programs

and ergonomically designed equipment and work practices have not successfully

reduced repetitive motion injuries in all worksites. In some instances, personal

factors such as age, obesity, lack of exercise, pregnancy, vitamin deficiencies,

and stress may produce more repetitive motion injuries than the work

environment. Repetitive motion disorders are also more common among people who

face frequent deadlines, have little control over their jobs, and generally do

not find their work appealing.

The problem with OSHA's ergonomics protection standard, as noted by the National

Coalition on Ergonomics, was that it “assumed that every workplace and every

job is a potential disorder waiting to happen.†The ergonomics standard

demonstrates the fundamental difficulty with the regulatory approach as

practiced by OSHA: the standard would have imposed costs on firms regardless of

whether they had problems with repetitive motion disorders or whether their

problems could be successfully combated given our limited knowledge of

ergonomics.

The Future of Workplace Safety and

Health Policy

OSHA as originally conceived in 1970 is withering away. Since 1980 real

government expenditure per worker on safety-standards enforcement at both the

state and federal levels has fallen by a third. This is due in part to the rapid

rate of net job creation in the United States, especially in the 1980s. Because

the political process is downsizing OSHA at a fairly rapid pace, it is

worthwhile to discuss some future directions for the other three pillars of

workplace safety policy in the United States.

Workers' Compensation Insurance. The Clinton administration's recent health-care

reform proposal would have supplanted the state system of workers' comp. with

federalized medical benefits for workplace accidents and diseases. From the

standpoint of workplace safety policy, it is fortunate that Mrs. Clinton's

healthcare reform initiative failed, because it would have reduced the safety

incentives of workers' comp. by eliminating the current experience rating of

workers' comp. premiums (whereby insurance premiums reflect individual firms'

own injury experiences). At over $55 billion, state-level workers' compensation

insurance plans constitute the most influential public policy currently

promoting workplace safety, via the experience rating of insurance premiums.

Other than establishing separate risk pools for small businesses, there is

little room to expand the experience rating of workers' comp. premiums.

Econometric evidence indicates that workers currently find the level of workers'

comp. coverage optimal, so it seems unlikely that there will be any great push

for expanding either the level of benefits or extent of coverage.

As a bellwether of the future of workers' comp., consider the case of Oregon. In

1990, the Oregon state legislature passed a package of reforms; they set

objective criteria for determining compensability; limited workers' choice of

physicians to those participating in certified managed-care programs; mandated

workplace safety committees to facilitate worker input on possible quick and

effective safety enhancements; and reduced incentives for litigation by

requiring objective medical corroboration of injuries.

Prior to those changes, the Oregon workers' comp. program was headed for a

meltdown. Oregon ranked first in the nation in terms of the frequency of

workers' comp. claims and total cost per worker. The average Oregon firm paid

twice the national average to buy workers' comp. coverage, and the cost of

premiums was skyrocketing. Over the past five years the cost of workers' comp.

premiums in Oregon fell by about 40 percent, fueled by the legislated cost

controls and the decline in workplace injuries.

Like Oregon, most states are looking for ways to revamp their workers' comp.

programs because of escalating costs. A general movement in other states toward

clarifying the link between premium levels and workplace safety can be expected.

Separating legitimate from illegitimate workplace injury claims is a major

problem now confronting workers' comp. programs in most states, as they struggle

to contain insurance-premium inflation. Eliminating fraudulent claims will

strengthen the safety incentive in workers' comp. by making a closer link

between firms' actual workplace safety and the insurance premiums they pay under

workers' comp.

The Legal System. For some firms, the lower workers' comp. premiums and smaller

compensating wage differentials that accompany safer workplaces may be

insufficient to encourage a suitable concern for worker safety and health. As

the situation at the Pymm Thermometer Company demonstrates, firms may expose

workers to extreme hazards, in part because they do not fear legal liability for

damages. In 1991 in Hamlet, North Carolina, 25 people died and 55 others were

injured in a fire at a poultry processing plant. The needless loss of life

happened because the owner of the company locked six of the nine outer doors in

an effort to keep flies out of the plant and stop employees from pilfering

chickens. In 1989 in Hillsborough County, Florida, 112 farm workers and their

families were exposed to Phosdrin, a dangerous pesticide used to control worms,

because their employer disregarded labeled instructions to close sprayed fields

for 48 hours to anyone not wearing protective clothing. Although many of the

workers developed chronic illnesses from the pesticide exposure, efforts by the

workers to sue the employer largely failed. As in other states, Florida law is

that acceptance of workers' comp. benefits precludes worker suits for damages.

Most of us are outraged by such clear-cut cases of employer negligence. Many

argue that OSHA inspection efforts should be expanded to prevent such needless

tragedies. In the case of Pymm Thermometer Company, however, OSHA had inspected

and discovered violations, yet the shocking conditions persisted for over four

years. In light of the agency's record, it is unlikely that a beefed-up OSHA

would have prevented the North Carolina employer from locking the fire exits or

the Florida employer from exposing workers to a dangerous pesticide.

Many workplace hazards are momentary and require employers and workers to choose

the correct course of action quickly to guard against possible harm. Instead of

relying on OSHA, policymakers might give more thought to allowing workers to sue

their employers for clear-cut cases of negligence.

That would require changes in the no-fault insurance systems currently found in

many states. Under such systems, employers are liable for only a portion of the

total costs of injuries. Workers receive compensation for medical expenses and

income losses, but no compensation for their pain and suffering. Because

employers will eliminate workplace hazards if the expected savings from fewer

injuries exceed the necessary financial outlays, employers may spend too little

for safety under the current limited-liability scheme. Permitting workers to sue

for pain and suffering in situations where employers showed reckless disregard

for worker welfare would produce greater safety by making firms bear more of the

total costs of injuries.

The Indiana Supreme Court recently ruled that Indiana workers injured on the job

can sue their employers for civil damages if the workers can prove their

employers intentionally or knowingly harmed them. The Indiana ruling came from a

1991 lawsuit filed by workers who claimed neurological and central nervous

system injuries suffered from exposure to PCBs at Westinghouse Electric plants.

More generally, econometric evidence from product liability settlements suggests

that awards for pain and suffering will have the effect of deterring firms from

allowing dangerous practices that could cause injuries.

On the negative side, additional legal actions against employers for

work-related injuries will increase administrative and court expenses and add

uncertainty to compensation for injured workers. To minimize the legal costs,

worker suits could be strictly limited to cases of gross employer misconduct.

Safety and Health Research. Empirical studies show that riskier jobs offer

higher wages. All other things being equal, the typical U.S. worker in a job

with a likelihood of injury at about the labor market average earns 2 to 4

percent more than a person working in a totally safe job. The added compensation

firms must pay to entice workers to accept employment in hazardous worksites

provides an incentive for firms to expand their investments in safety programs.

Firms weigh the benefits of improved safety—smaller compensating wage

premiums, lower costs of purchasing workers' comp., fewer work stoppages, and

fewer fines for violating OSHA safety and health standards—against the costs

of expanded safety programs. In 1993 firms paid more than $55 billion for

workers' comp. and an estimated $200 billion for compensating wage differentials

to workers for accepting some job hazards. OSHA and the corresponding

state-level agencies assessed fines of only $160 million in 1993. With a ratio

of 1,594 to 1, the economic incentives to improve safety by reducing

compensating wage differentials and workers' comp. expenses far surpass the

safety-enhancing incentives from the relatively small fines imposed by OSHA for

violating its standards.

For compensating wage differentials to provide the necessary labor market

incentive for firms to provide the economically optimal working environments,

worker knowledge of work-related health risks is essential. Evidence indicates

that workers quit hazardous jobs more frequently than relatively safe jobs.

Increases in the probability of an accident also cause workers to search for new

jobs and reduce job tenure. Economist W. Kip Viscusi estimates that about

one-third of all workers leaving jobs do so upon learning of risks associated

with the job. Workers do have fairly accurate information on the frequency of

workplace accidents, and even when they do not initially have the correct

impression of the hazards they will face on a job, workers reevaluate their

beliefs relatively quickly.

Some critics argue that health-related hazards are more difficult for workers to

evaluate than accident-related hazards and, in turn, that market mechanisms such

as compensating wage differentials do not provide firms with the appropriate

motivation to eliminate or reduce health hazards. Certainly, workers have a

modicum of knowledge of risk—as demonstrated by the fact that they demand the

regularly observed compensating wage differentials for exposure to risk.

However, because of the public goods aspect of basic research and information

provision, in general the government has played a role in trying to uncover and

disseminate information on the causes and consequences of workplace health

hazards. But that does not preclude market mechanisms to deal with lack of

knowledge, especially with a workforce more conscious of health and safety

concerns.

Workers do react to new information about job-related hazards. In a study by

Viscusi and O'Connor published in the American Economic Review in 1984,

workers told that they would soon be working with sodium bicarbonate, a safe

chemical, reduced their assessment of workplace hazards by 50 percent. Workers

told that they would be working with either asbestos or TNT increased their

assessments of workplace hazards by 200 percent. No workers required extra

compensation to handle the sodium bicarbonate, but workers demanded an extra

$3,000 to $5,000 per year to handle the dangerous asbestos or TNT. No workers

said that they would quit their jobs because they would be handling sodium

bicarbonate, but a majority of workers said that they would quit because they

would be handling asbestos or TNT.

Although information can influence industrial safety by adjusting workers' risk

perceptions and their willingness to work in a given setting, the information

must be presented in a way that permits informed judgments. Recent research on

consumer behavior shows the extreme importance of the manner in which

information is presented. In particular, informational overload can occur if

precautionary labels present too much information or if too many products have

precautionary labels. Warning workers against relatively small risks, such as

the risk of cancer from silica (sand), may actually reduce workplace safety by

convincing workers that warning labels are irrelevant. A proliferation of hazard

warnings in the workplace will prove counterproductive if workers are led to

view all activities or products as equally dangerous.

Conclusion

We all would like safe jobs, just as we would like a clean environment, no

automobile deaths, and no crime. Unfortunately, a riskless society is not free.

People are generally unwilling to accept the severe restrictions on personal

freedoms plus the monumental economic expense needed to create a society free of

all risks to personal health and safety. Unlike the cartoon economist who is

ridiculed for knowing the price of everything and the value of nothing, we

believe our discussion has demonstrated that we are aware of both the price and

the value of greater workplace safety. We contend that citizens generally favor

a perspicacious government where policy costs and benefits are concerned—they

want an efficient government, one that does not pay more for something than it

is worth, including the cost of saving a statistical life.

We have discussed the directions in which the U.S. workplace safety policy

system is moving. One policy direction is toward a withering away of OSHA in the

long run, coupled with an immediate pruning of OSHA's approach of

standard-setting, inspections, and fines. We have also noted the possibility of

taking greater advantage of the ability of NIOSH to develop worker exposure and

activity guidelines and disseminate its research findings. Another policy

direction we described is the improved safety incentives for firms that will be

a byproduct of reducing the number of fraudulent workers' comp. claims paid. Our

discussion has emphasized what is happening now and what can be done

immediately, without the annoying, but always popular, call for further study as

a precondition for policy reform.

Telling OSHA horror stories is fun for many people. Some stories are blatant

exaggerations, and we are obligated to correct the story that OSHA regulations

prevent dentists from returning teeth to young children to put under their

pillows for the tooth fairy. OSHA standards only require dentists to treat

extracted teeth as hazardous wastes within the workplace. Nothing prevents a

dentist from returning a tooth to the person from whom it was extracted. Of

course, we are sympathetic to dentists who may be reluctant to return

“hazardous wastes†to small children because, were a child infected by a

blood-borne disease from a returned tooth, the dentist could face a costly legal

battle trying to avoid liability for damages in an increasingly litigious United

States.

Perhaps a good direction for workplace safety policy would be to phase out

OSHA—if the agency cannot be shut down at this time—with an immediate

revision of OSHA's current approach to standard-setting, inspections, and fines.

State policymakers in the meantime should work to reform their workers' comp.

programs. Insurance rules, when set by companies subject to market forces,

protect safety in the most cost-effective manner. As important, state

policymakers should reform their tort law systems to allow workers to seek

redress from employers in true cases of negligence and reckless endangerment.