Did OSHA save lives?

Matt Yglesias recently had this to say about the decline in workplace injuries since  OSHA:

All-in-all, though, it looks like an impressive achievement to me and one the hard-working folks at the National Institute for Occupational Safety and Health deserve some credit for, along with overall economic progress and structural shifts into safer occupational categories.

Update 3/20/11:  Matt pointed out in the comments that I didn’t read his post very carefully:

The agency I actually mentioned in my post is the National Institutes of Occupational Safety and Health (part of the CDC) not OSHA.

NIOSH is an agency dedicated to collecting and disseminating information about workplace industries. They do statistics, they do some of the “information brochures being distributed to workers” stuff you recommend, and they do some kind of training.

[So whatever value the rest of my post might or might not have, it shouldn’t be viewed as a comment on Yglesias.]

This reminded me of a graph I saw years ago in a paper by John Leeth and Tom Kniesner:

They look at a wide variety of evidence (much of which is in other papers, not this one) and conclude that OSHA should be cut back, or perhaps abolished.  Just so you don’t think they are mindless anti-government libertarians, they also argue that workplace compensation insurance is somewhat effective in reducing injuries.  They argue that compensating wage differentials (a market force) is the single most effective deterrent to injuries:

Alternatives to OSHA

In light of its ineffectiveness, giving OSHA more money, personnel, and power is not the way to cost-effective workplace safety. Most protection on the job comes from state workers’ compensation insurance programs and market-determined compensating wage differentials.

State-run workers’ compensation insurance programs are currently the most influential public attempt to promote workplace safety. Insurance premiums that take account of workplace safety encourage firms to establish safe and healthy work environments. As the frequency of claims rises, the price of workers’ compensation insurance increases, thereby penalizing firms for poor safety records. Michael Moore of Duke University and W. Kip Viscusi of Harvard University estimate that, without workers’ compensation insurance, the number of fatal accidents and diseases would be 48 percent higher in the United States.

BTW, there is no obvious “market failure” that would call for regulation.  (And please don’t drag out the tired old argument that companies know the risks, but workers don’t.  That’s not true, and if it were it would call for government information brochures being distributed to workers, not OSHA.)  I find a lot of safety regs to be very annoying.  When I was young I often worked up on ladders.  The newer Skilsaws required two hands to operate, presumably so you wouldn’t cut off some fingers.  That necessitated gripping the ladder with one’s knees.  Power mowers can no longer be operated without holding the handle–forcing contorted body positions when trying to clear debris in the mower’s path.

Matt Yglesias also has a very interesting post on the similarities between some “big government” models (such as the Nordic states) and some “small government” models, such as Singapore, Hong Kong and Chile.  He points out that Singapore’s mandatory savings plan, which has a 35.5% rate, is something like a tax, and the money is deposited in a government run investment fund. I don’t entirely agree with his post (he underestimates the difference between taxes and forced saving), but it’s hard to disagree with the general thrust of his argument .  There isn’t all that much difference between the Nordic economies and the economy cited by the Heritage Foundation as the second most economically free country in the world (and number one if one recalls that HK isn’t really a “country.”)  My initial reaction is to despair that the US is simply too big to adopt either model.  But maybe that’s giving up too easily.

Update:  Commenter Joe pointed to a Bryan Caplan post that cited a David Henderson encyclopedia entry that discussed some Kip Viscusi research on OSHA (did I miss anyone?)

Fun facts from Kip Viscusi‘s article on “Job Safety” in David Henderson’s encyclopedia:

Annual OSHA penalties for safety violations (2002): $149,000,000

Annual Workers Compensation Premiums (2001): $26,000,000,000

Estimated Annual Wage Premiums for Risky Activities (2004 dollars): $245,000,000,000

Bryan suggests that OSHA probably has little effect on injuries.


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16 Responses to “Did OSHA save lives?”

  1. Gravatar of W. Peden W. Peden
    19. March 2011 at 06:32

    Prof. Sumner,

    “My initial reaction is to despair that the US is simply too big to adopt either model.”

    I don’t see how size is an issue. There are a number of steps towards a savings-orientated society that would be easier than the status quo in the US, not more complex. For example, replacing capital gains taxes with a simple federal sales tax would be simpler, wouldn’t it?

  2. Gravatar of Joe Joe
    19. March 2011 at 06:39

    Professor Sumner,

    You’re gonna love this… the following is from a post from econlib a long time ago……………….

    What’s Keeping American Workers Safe?

    Fun facts from Kip Viscusi’s article on “Job Safety” in David Henderson’s encyclopedia:

    Annual OSHA penalties for safety violations (2002): $149,000,000

    Annual Workers Compensation Premiums (2001): $26,000,000,000

    Estimated Annual Wage Premiums for Risky Activities (2004 dollars): $245,000,000,000

    His point: Market incentives for worker safety dwarf legal incentives, which in turn dwarf regulatory incentives. The level of safety we see in the workplace today is about the same as the level we’d see if government just looked the other way.

    ——–

    Finally Viscusi’s own studies estimate that OSHA decreases yearly fatalities by 2-4% a year…

    Best,

    Joe

  3. Gravatar of Dan S Dan S
    19. March 2011 at 07:23

    Prof. Sumner,

    It seems that that graph does not attempt to control for the shift toward service sector/white collar jobs which are much safer. I imagine that if the data were restricted to say, manufacturing or industrial jobs, the curve would be less steep.

    Best,

    Dan S.

  4. Gravatar of OGT OGT
    19. March 2011 at 08:12

    I made the same argument about Singapore’s system when I first encountered it here a year or two ago. (Has the recession really been going on that long?) Basically, the degree to which it is a tax-like is determined by the amount of control the individual has over both investment and withdrawal.

    I wouldn’t despair too much, the US is doing fine, especially if you remove the old confederacy from your metrics.

  5. Gravatar of ssumner ssumner
    19. March 2011 at 09:46

    W. Peden, Yes, it’s worth a shot. And I agree those policies can work if enacted. But I think our large size makes our political system quite dysfunctional. We need to decentralize to make our government more efficient.

    Thanks Joe. Is there a link?

    Dan, Yes, the graph doesn’t show much in and of itself, but they look at lots of other evidence. All the graph shows is that one can’t assume OSHA has helped merely because workplace injuries have fallen.

    OGT, Many parts of the old confederacy are doing much better than the North. Compare North Carolina, Georgia and Texas to Ohio, Pennsylvania and Michigan.

    Forced saving doesn’t deter working and investing like taxes do. That’s why Singapore has much higher rates of labor supply than the European countries.

  6. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. March 2011 at 09:50

    ‘It seems that that graph does not attempt to control for the shift toward service sector/white collar jobs which are much safer….’

    Except that’s relatively recent, it doesn’t explain the decline in fatalities in the 40s and 50s. Speaking as someone old enough to have been out in industry before OSHA was enacted, workplace safety was a BIG DEAL even then. One of the first things one saw upon entering the grounds of a shipyard or steel mill was a big sign saying something like, ‘It’s been X number of days since we’ve lost production hours due to a workplace accident’. Updated daily.

    Also, Sam Peltzman found something like this when he tracked auto safety; cars got safer after the Nader-inspired changes to auto design at about the same rate as they had been getting safer in the 20 prior years.

  7. Gravatar of TGGP TGGP
    19. March 2011 at 10:42

    Some some social scientists say there is little evidence for compensating differentials:
    http://www.stat.columbia.edu/~cook/movabletype/archives/2004/12/what_is_the_val.html

  8. Gravatar of OGT OGT
    19. March 2011 at 12:23

    It’s true people in Singapore work alot, which may be why they are also spectacularly unhappy given their GDP. And I suspect your labor force participation rates on Europe are a bit out of date. France now has a higher level than the US in the prime years. To the extent that their way of doing things influences labor, it’s on the benefit side.

    http://krugman.blogs.nytimes.com/2011/01/22/eurosclerosis-then-and-now/

    25% of people in Texas do not have health insurance. It’s per capita income is well below average is lower than PA (though higher than Ohio or Michigan). Georgia and NC are lower than all three. Texas is an oil state, though, and the proper comparison isn’t Michigan it’s Norway. But, given the oil Texas is the one part I’d keep.

    http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita

  9. Gravatar of Joe Joe
    19. March 2011 at 12:23

    Here is the links

    http://econlog.econlib.org/archives/2008/02/whats_keeping_a.html

    http://www.econlib.org/library/Enc1/JobSafety.htmlk

  10. Gravatar of Old Whig Old Whig
    19. March 2011 at 13:26

    There is no difference between authoritarian Singapore and democratic, but extreme paternalistic Sweden.

    Sweden has high government spending and high taxes close to 50 % of GDP. That said 80 % of the taxes paid in Sweden goes back to the individual in form of payments i.e. the Swedish system as well as the Singaporean is in effect only a forced savings plan. Its born out by the fact that Sweden has the worlds most regressive tax system, with Germany. There is virtually no income redistribution what so ever. The top 10 % of income earners pay 14 % of overall taxes compared to 70% in the US.

    When it comes to comparing the authoritarian imposed morals of Singapore to the “voluntary” imposed morals in Sweden there is virtually no difference.

    In Sweden according to law most anything goes but because of the mono culture and harsh Lurheran morals no one acts outside norms. That means that norms do not have to be reinforced by legislation, they are unforced by informal social norms. You don’t go to jail, you get shunned become a social outcast.

  11. Gravatar of Mark A. Sadowski Mark A. Sadowski
    19. March 2011 at 15:31

    A few observations.

    1) The period of OSHA coincides with decreased unionization in the private sector. How much of the continuity of the rate of decrease is due to this fact?

    2) This is one of the rare occasions where I wholeheartedly agree with something Patrick has said. My father worked for the safety obsessed DuPont Company. Being a professional employee (a textile chemist) he had no union but safety was such a quest at DuPont I still have pencils with slogans on them all around the house (e.g. “Arrive alive, drive 55”). Anytime anybody had an accident, at work or otherwise, he became a total pariah at the company because he pulled down that department’s safety rating.

    3) @Whig
    I have no quarrel with supply side tax reform but your stats are pure apples to oranges. The top 10% pay 70% of personal income taxes in the US, not all taxes. And the tax distribution is a function of income distribution. Sweden has one of the most egalitarian income distributions on the earth (almost as egalitarian as Denmark). In contrast the US has the least egalitarian income distibution of any advanced nation.

  12. Gravatar of Scott Sumner Scott Sumner
    19. March 2011 at 15:34

    Everyone, I added an update with Joe’s info.

    Patrick, I agree.

    TGGP, That’s new to me. I was taught that the finding was pretty robust. Either way, I think the risks are well understood, so I don’t see a market failure. Maybe some people simply like risk.

    OGT, I strongly disagree about Singapore. I did a study of happiness in developed countries, and Singapore was the happiest Asian country (GDP/person above $20,000) among five countries. Keep in mind that Asians tend to say they are less happy for cultural reasons. Or maybe they really are less happy, I can’t say.

    Never rely on Krugman data, it is almost always misleading. The key is hours worked, not labor force participation. They work many fewer hours than Americans. And Americans work many fewer hours than Singaporeans. Between Singapore and Europe it’s not even close.

    The Texas data is meaningless without adjusting for ethnicity. Once you do that, Texas shoots up the charts. Whites, blacks and hispanics in Texas tend to do well compared to people of the same ethnicity in other states.

    Thanks Joe.

    Old Whig, Didn’t Tolstoy say all happy families are alike? Maybe all successful countries are alike.

  13. Gravatar of Scott Sumner Scott Sumner
    19. March 2011 at 15:37

    Mark, It’s hard to say, but various studies have employed a number of techniques, and there doesn’t seem to have been much effect. Even if there was a modest effect, I’d oppose OSHA. Where’s the market failure?

  14. Gravatar of Matthew Yglesias Matthew Yglesias
    20. March 2011 at 06:50

    The agency I actually mentioned in my post is the National Institutes of Occupational Safety and Health (part of the CDC) not OSHA.

    NIOSH is an agency dedicated to collecting and disseminating information about workplace industries. They do statistics, they do some of the “information brochures being distributed to workers” stuff you recommend, and they do some kind of training.

  15. Gravatar of ssumner ssumner
    20. March 2011 at 09:37

    Matthew, Well that’s kind of embarrassing for me. Nevermind . . .

  16. Gravatar of The Simple Reason Most Regulations Are Harmful – TKList The Simple Reason Most Regulations Are Harmful - TKList
    26. May 2016 at 13:20

    […] a few areas where OSHA understands health risks better than workers and companies, but there is no statistical evidence that OSHA has actually improved worker safety. Nor do externality or information asymmetry […]

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