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
    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)
    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"
    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"
    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"
    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"
    This January 2001 online article provides a detailed description of the proposed OSHA ergonomics standard.
  • OSHA, "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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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"
    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
    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"
    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: "
    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"
    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"
    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"
    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.