Policy
Debate: Do OSHA regulations benefit or harm workers?
Issues and Background
Over the past three decades
job-related fatalities have been cut in half. Injuries and illnesses have
declined by 40 percent. OSHA, its state partners, employers and employees
together share the credit for the progress that has been made.
~Secretary
of Labor Elaine L. Chao
OSHA, whether upsized or
downsized, reengineered or left alone, has little value to add to the worker
safety picture. But its costs, measured in lower productivity and wages as
well as higher prices and taxes, are significant. This is one more area where
Congress needs to rethink the need for federal government involvement.
~John
Hood
The Occupational Safety and Health Administration (OSHA)
was created in 1971 in response to concerns over what were perceived to be
relatively high rates of workplace injuries in many occupations. OSHA is
charged with studying the causes of workplace injuries and fatalities,
formulating regulations to improve workplace safety, and inspecting firms to
ensure compliance with these regulations. Fines are assessed against firms
that are in violation of these regulations.
To examine whether OSHA benefits or harms workers, it will be useful to
first discuss how labor markets would respond to differences in job risk in
the absence of OSHA. In The
Wealth of Nations (1776), Adam Smith observed that wage differentials
across jobs may compensate workers for differences in nonwage job
characteristics:
THE whole of the advantages and
disadvantages of the different employments of labour and stock must, in the
same neighbourhood, be either perfectly equal or continually tending to
equality. If in the same neighbourhood, there was any employment evidently
either more or less advantageous than the rest, so many people would crowd
into it in the one case, and so many would desert it in the other, that its
advantages would soon return to the level of other employments. This at least
would be the case in a society where things were left to follow their natural
course, where there was perfect liberty, and where every man was perfectly
free both to choose what occupation he thought proper, and to change it as
often as he thought proper. Every man's interest would prompt him to seek the
advantageous, and to shun the disadvantageous employment. (Book 1, Chapter X)
This argument suggests that, in equilibrium, jobs that are
more pleasant will offer lower wages while less pleasant jobs must offer
higher wages. In particular, the existence of these "compensating wage
differentials" implies that labor markets automatically adjust to
differences in risk of injury across jobs by offering higher wage rates to
workers in riskier occupations and lower wage rates to workers in safer
occupations.
If workers possess perfect information about the risk of on-the-job injury,
all workers could select the combination of wage rates and risk that is
optimal given their preferences. Those who are risk-averse would select safer
jobs that offer lower wage rates. Workers who are less concerned about risk
would select riskier jobs that offer a higher wage.
Let's consider the effect of the introduction of OSHA into this
environment. Since OSHA regulations are effectively designed to place a limit
on the maximum risk that workers may face, they will have little or no effect
on the risk-averse workers who voluntarily choose to work at relatively safe
low-wage jobs. By eliminating the availability of high-risk jobs, OSHA would
reduce the utility level of workers who initially found it optimal to work in
a high-risk, high-wage occupation. (Note that wages will fall as risk
declines in these jobs.) So, if workers possess perfect information, OSHA
will have no effect on the wellbeing of workers who already work in safe
occupations and will reduce the utility level of those who prefer high-risk /
high-wage occupations. Since OSHA regulations are expected to increase
production costs and product prices while lowering the wage rate received by
some workers, critics argue that OSHA harms both workers and consumers.
Supporters of OSHA, though, suggest that there are two problems with the
argument above:
- workers do not have
perfect information about job risk, and
- there are negative
externalities associated with on-the-job injuries and fatalities.
OSHA supporters often suggest that workers systematically
underestimate the true amount of risk that they face on the job. If a new
worker asks his or her employer about the probability of a job-related injury
or fatality, it is not uncommon for employers to state that people are only
injured when they are careless or do not follow the firm's safety procedures.
Since most workers believe that they are more careful than the
"average" worker, workers in high-risk occupations believe that
they are getting high wages while facing only a moderate level of risk. OSHA
supporters argue that OSHA regulations reduce the level of risk closer to
that which workers would have preferred if they had perfect information about
the level of risk.
Even if workers are aware of the risk they face, an argument for OSHA regulations
can also be based on the negative externalities associated with job-related
injuries or deaths. While each worker might select a combination of risk and
wages that is optimal given only his or her own costs and benefits, this
choice does not take into account the external costs imposed on others when a
work-related injury or death occurs in the workplace. The existence of these
negative externalities provides another argument for the existence of OSHA
regulations designed to reduce job risk.
In general, supporters of OSHA argue that the benefits from saving lives
and reducing work-related injuries outweigh the costs. OSHA critics argue
that the costs resulting from OSHA regulations outweigh the benefits.
One of the current areas of debate involves the ergonomic standards that
were proposed by OSHA on November 22, 1999 and were overturned by Congress in
early March, 2001.
Primary Resources and Data
- Occupational
Safety and Health Act of 1970
http://www.osha-slc.gov/OshAct_data/OSHACT.html
The Occupational Safety and Health Act of 1970 established OSHA. This
web page contains the full text of this Act, along with subsequent
amendments.
- Occupational
Safety and Health Administration (OSHA)
http://www.osha.gov
The OSHA web site contains a listing of OSHA requirements, a discussion
of the operation of OSHA, and online studies, press releases and reports
dealing with OSHA programs.
- OSHA, "OSHA
at 30: Three Decades of Progress in Occupational Safety and Health"
http://www.osha.gov/as/opa/osha-at-30.html
This document is a condensed online version of an article that appeared
in the Spring 2001 issue of JSHQ Magazine. It provides a good
discussion of the history of OSHA and the evolution of its role over
time.
- OSHA,
"Explosion of DeBruce Grain Elevator"
http://www.osha-slc.gov/as/opa/foia/hot_6.html
This online document describes the OSHA investigation of the explosion
of a grain elevator on June 8, 1998. An examination of this document
helps provide an introduction to the role that OSHA plays in
investigating hazards in the workplace.
- OSHA,
"Ergonomics Final Rule -- Information Kit"
http://www.osha-slc.gov/ergonomics-standard/informationkit/archive-index.html
This website provides information on the final version of the ergonomics
standard that had been adopted by OSHA (and subsequently overturned by
Congress).
- Edwin G. Foulke
Jr., Roger S. Kaplan, and Paul J. Siegel, "The New OSHA Ergonomics
Standard"
http://www.irmi.com/expert/articles/siegel005.asp
This January 2001 online article provides a detailed description of the
proposed OSHA ergonomics standard.
- OSHA,
"Asbestos"
http://www.osha-slc.gov/SLTC/asbestos/
This online document, provided by OSHA, describes the adverse health
effects associated with exposure to asbestos. It provides links to an
extensive collection of online resources dealing with this issue. OSHA
regulations related to the handling of asbestos are also described.
- Building-Construction
Trades Department of the AFL-CIO, "Hazard Alert: Asbestos in
Construction"
http://www.cpwr.com/hazasbes.html
In this online document, the Building-Construction Trades Department of
the AFL-CIO provides information on the health risks associated with
asbestos exposure. OSHA requirements dealing with work in areas in which
asbestos exposure is a possibility is described.
Different Perspectives in the Debate
- Elaine L. Chao,
"Statement on OSHA's 30th Anniversary"
http://www.osha.gov/media/oshnews/apr01/national-20010427.html
This April 27, 2001 statement by Secretary of Labor Elaine L. Chao
argues that OSHA has been responsible for substantial improvements in
worker safety. She suggests, though, that workplace injury and fatality
rates remain too high and that more needs to be done.
- Employment
Policy Foundation, "Reinventing OSHA"
http://www.epf.org/polosha.htm
This executive summary of an Employment Policy Foundation study examines
proposals for OSHA reform. It is argued that labor markets work well in
reducing on-the-job risk and that improvements in workplace safety would
have occurred in the absence of OSHA. The article suggests that
empirical evidence suggests that workers are highly compensated in the
labor market for job risk. It is recommended that OSHA play a less
costly and intrusive role in the workplace.
- John Hood,
"OSHA's Trivial Pursuit: In Workplace Safety, Business Outperforms
the Regulators"
http://www.policyreview.org/summer95/thhood.html
John Hood provides a case against OSHA in this article appearing in the
Summer 1995 issue of Policy Review. He argues that the existence
of compensating wage differentials and pressure from insurance companies
provides firms with strong economic incentives to reduce risk. OSHA
regulations, he suggest, have had little impact on risk reduction in the
workplace. Hood cites studies that indicate that OSHA has raised
production costs while reducing productivity growth. He notes that an
OSHA inspector visits a typical firm, on average, only once in 10 years.
Hood suggests that OSHA inspections, therefore, are unlikely to explain
much of the improvement that has occurred in workplace safety since the
inception of OSHA. He also notes that workplace safety has been
improving at the same rate after the creation of OSHA as it had prior to
OSHA.
- Nicholas
Ashford, "Compliance Costs: The Neglected Issue"
http://agency.osha.eu.int/publications/magazine/en/mag14.html
Nicholas Ashford argues, in this online document, that there is a
growing body of evidence that suggests that stringent health and safety
standards result in technological innovation that lowers compliance
costs while further improving worker safety. He suggests that
traditional cost-benefit analyses do not take these factors into
account, thereby underestimating the net benefits associated with safety
regulations.
- Carla Stovall,
"Environmental Tobacco Smoke Issues Relative to the June 20
Agreement"
http://www.senate.gov/~epw/105th/stovall.htm
In this April 1, 1998 testimony before the Senate Environment and Public
Works Committee, Kansas Attorney General Carla Stovall discusses the
problems associated with secondhand smoke. She notes that the adverse
health effects are well documented, yet there is no federal standard
restricting the levels of secondhand smoke in the workplace. She argues
that OSHA should issue regulations dealing with this situation.
- OSHA,
"Proposed Standard for Indoor Air Quality: ETS Hearings, January 13,
1995"
http://www.tobacco.org/Documents/osha/950113osha.html
This rather large document contains the transcript of public hearings on
proposed regulations on indoor air quality. Economic arguments for and
against OSHA restrictions on secondhand smoke in the workplace are
presented and discussed.
- National Cancer
Institute, "Environmental Tobacco Smoke"
http://cis.nci.nih.gov/fact/3_9.htm
This online document, provided by the National Cancer Institute
describes the health hazards associated with secondhand smoke from
cigarettes. Studies are cited that indicate that secondhand smoke is
responsible for approximately 3,000 lung cancer deaths for nonsmokers
each year. It is argued that secondhand smoke meets OSHA criteria for a
potential carcinogen.
- W. Kip Viscusi,
"Secondhand Smoke: Facts and Fantasy"
http://www.cato.org/pubs/regulation/reg18n3e.html
W. Kip Viscusi discusses the effect of secondhand smoke in this 1995
online article appearing in Regulation. He argues that most
studies of the effect of smoking in the worst place only measure the
costs associated with smoking and do not take into account the benefits.
Viscusi observes that while smoking results in some additional insurance
payouts and health care costs, it also saves society money by reducing
the amount of time that smokers will spend collecting social security.
He notes that 10 of the 11 studies of the effect of secondhand smoke on
family members did not find any statistically significant results.
Viscusi observes that these studies did not control for other risk
factors that may be correlated with the decision to smoke. He argues
that market forces will correct for any problems associated with the
externalities resulting from secondhand smoke. In fact, he suggests that
compensating wage differentials are expected to result in excessive
restrictions on workplace smoking since the public appears to
overestimate the health risk associated with secondhand smoke. Viscusi
argues that OSHA restrictions on smoking in the workplace will result in
more harm to smokers than benefits to others.
- Raphael Metzger,
"Benzene: A Human Carcinogen"
http://toxictorts.com/benzene.htm
In this online document, Raphael Metzger discusses the health problems
associated with exposure to benzene. He suggests that the current OSHA
standard for benzene exposure is too high and places workers at risk.
- Brayton Purcell,
"Benzene"
http://www.braytonlaw.com/practiceareas/benzene.htm
The law office of Brayton Purcell discusses the adverse health effects
of benzene exposure in this online document. It is argued that the
current OSHA standard for allowable exposure is too high and exposes
workers to a substantial risk.
- Carol Smith and
Andrew Schneider, "Company Blocked OSHA's Efforts to Establish
Exposure Standards"
http://seattlep-i.nwsource.com/uncivilaction/osha12.shtml
Carol Smith and Andrew Schneider, in this February 12, 2000 article
appearing in the Seattle Post-Intelligencer, describe the efforts
by the W.R. Grace Company's efforts to block OSHA from imposing stricter
standards on asbestos exposure. It is argued that efforts such as these
resulted in a 20-30 year delay in imposing more appropriate regulations
on asbestos exposure levels. They note that many workers died as a
result of these delays.
- Jerome K.
Bowman, "Beware the Stresses and Strains of OSHA's Ergonomics
Proposal"
http://www2.rosshardies.com/publication.cfm?publication_id=130
Jerome K. Bowman examines OSHA's proposed ergonomics program in this
December 1999 online document. He notes that while OSHA argues that
these requirements will save firms money, there are substantial costs
associated with the program.
- John F. Licari, "Understanding
Provisions of OSHA's Proposed Ergonomic Safety Standard"
http://www.stradley.com/asp/publications/res_articledesc.asp?ArticleID=231
John F. Licari provides an overview of the requirements of OSHA's
proposed ergonomic standards. He argues that these standards would
impose substantial costs on many employers. Licari suggests that nearly
all firms will be affected by these regulations since a single reported
case of a musculoskeletal disorder may trigger the implementation of a
mandatory safety program. He also notes that the compensation mandated
by this program is higher than that of many state workers' compensation
programs.
- Manufactured
Housing Institute, "OSHA Ergonomics Proposed Rule"
http://www.mfghome.org/TR_ergonomics.html
In this online document, the Manufactured Housing Institute describes
the expected effects of the proposed OSHA ergonomics rule in their
industry. It is suggested that these regulations would affect all firms
producing manufactured housing. Compliance requirements are discussed in
this document.
- National Grocers
Association, "NGA Tells OSHA Drop Ergonomics Standard; Pursue
Voluntary Efforts"
http://www.nationalgrocers.org/NewsReleases2000/NR2000-8.html
The National Grocers Association argues against the ergonomics standards
in this March 28, 2000 online document. They argue that these standards
could drive many firms out of business. It is noted that many nonwork
activities can cause the musculoskeletal disorders that would trigger
the introduction of an ergonomics program. They also suggest that full
pay for light work activities is not justified.
- Chaundra
Frierson, "The Economics of Ergonomics"
http://atlanta.bcentral.com/atlanta/stories/2001/02/05/smallb1.html
Chaundra Frierson discusses the potential effect of the OSHA ergonomic
standards in this February 2, 2001 article appearing in the Atlanta
Business Chronicle. She observes that the regulation would cover 4
million business that have fewer than 20 employees. Anecdotal evidence
of possible adverse effects is provided.
- Lisa Larson and
Kevin Juhász, "OSHA Ergonomics Standard Goes Into Effect Under Fire
http://www.newsandtech.com/issues/2001/03-01/nt/03-01_osha.htm
In this March 2001 article appearing in Newspapers & Technology,
Lisa Larson and Kevin Juhász discuss concerns over the impact of the
OSHA ergonomics standards. They note that the standards would impose
significant costs on newspapers and would require significant changes in
the nature of many of the jobs associated with newspaper publishing.
- Federation of
Public Employees, "Health and Safety Issues"
http://www.aft.org/fpe/healthandsafety/health.html
The Federation of Public Employees expresses its support for the OSHA
ergonomics standards in this online document. It is noted that while
women make up 46% of the labor force, they account for 63% of repetitive
motion injuries. They argue that ergonomics standards would benefit many
workers.
- David G.
Sarvadi, "The Continuing Safety Debate: Cost vs. Benefit: "
http://www.khlaw.com/comply300.htm
David G. Sarvadi discusses the cost-benefit tradeoff facing OSHA in this
online version of an article appearing in the August 1999 issue of Compliance
Magazine. He notes that the Supreme Court, in the Cotton Dust
decision, held that OSHA is charged with placing the benefit to workers
over all financial costs of obtaining that goal as long as the
attainment of the goal was feasible. Sarvadi suggests that the OSHA
ergonomics standards goes further than the cotton dust decision in that
it requires firms to "eliminate the aches and pains of daily life...."
- AFL-CIO,
"Good Ergonomics is Good Economics"
http://www.aflcio.org/safety/ergo_infopack_goodergo.htm
This AFL-CIO online document cites several cases in which firms have
discovered that the introduction of an ergonomics program has generated
savings that exceed the cost of the program. They argue that the absence
of ergonomics programs impose substantial costs and hardships on
workers.
- AFL-CIO,
"National Academy of Sciences / Institute of Medicine Report
Supports a Standard to Prevent Ergonomic Injuries"
http://www.aflcio.org/safety/ergo_infopack_nas.htm
This AFL-CIO document suggests that the introduction of OSHA ergonomics
standards are increasingly important as a result of the changing nature
of work and the aging of the workforce. They cite a study conducted by
the National Academy of Science and the Institute of Medicine that
suggests that rising rates of musculoskeletal disorders are the result
of changing work and employment patterns.
- Jerry White, "US Congress Eliminates New
Workplace Safety Standards"
http://www.wsws.org/articles/2001/mar2001/osha-m09.shtml
In this March 9, 2001 online article posted on the World Socialist Web
Site, Jerry White describes the action taken by Congress to reject the
OSHA ergonomics standards. It is argued that this Congressional action
will harm workers while benefiting firms.
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