Academic studies show that OSHA has done little to improve the health and safety of America’s workers. For that reason alone it should probably be abolished. But even if it did improve the health and safety of America’s workers, it should still be abolished. That’s because there’s no market failure here large enough to justify costly and intrusive regulation.
Companies have an incentive to provide the optimal level of health and safety, because workers will demand higher wages where there are dangerous working conditions. If the safety situation can be improved at a cost lower than the extra wage bill, then firms will have an incentive to do so. If it cannot, then they should not do so.
Here’s Noah Smith:
Waiving legal liability would simply discourage companies in essential industries, such as grocery stores or delivery services, from providing their workers with adequate protection equipment. That in turn would raise the amount of compensation that workers demand in exchange for staying on the job, making it harder for essential businesses to stay open.
Actually, companies are more likely to remain open if they are able to voluntarily choose the most cost effective method of producing their goods and services. Smith is right that companies would have to pay higher wages for unsafe working conditions, but that’s precisely why there is no market failure calling for regulation.
Some people might disagree with Smith’s claim that companies would have to pay higher wages. One argument is that information is “asymmetric”. Companies understand the risk while workers do not. In that case, there may be an argument for legal liability. But it seems very unlikely that companies know more about the risk of Covid-19 than do workers. Nor is there any reason to assume that workers underestimate the risk, on average. Firms should be allowed to have employees sign a contract promising not to sue if they contract Covid-19 (in which case it would be basically impossible to know where they caught the disease in any case.)
America has a lot of economic problems right now. The last thing we need is our courts to be tied up with hundreds of thousands of lawsuits from workers who became sick with coronavirus from God knows where, bankrupting our small businesses that are already reeling from this economic crisis. That would be crazy.
READER COMMENTS
Alan Goldhammer
Apr 8 2020 at 3:41pm
“Companies have an incentive to provide the optimal level of health and safety, because workers will demand higher wages where there are dangerous working conditions. If the safety situation can be improved at a cost lower than the extra wage bill, then firms will have an incentive to do so. If it cannot, then they should not do so.”
There is a long history of workplace abuse prior to the reform laws of the early 1970s that show this to be wrong. For some industries it was only the presence of a strong trade union movement that led to higher wages and improved working conditions.
Scott Sumner
Apr 8 2020 at 6:08pm
I don’t deny that labor unions can improve worker compensation in particular industries, but that has no bearing on this post.
robc
Apr 9 2020 at 9:36am
In fact, unions would be a part of the incentive process.
Phil H
Apr 8 2020 at 11:22pm
Alan’s historical point does, though. Work got a lot safer in every developed country in the 20th century (21st in China), and it was through two mechanisms: either unions or government safety rules. The libertarian claim would have to be that that is a massive coincidence, and I wouldn’t find that credible.
As a reductio ad absurdum, you realise that your argument could equally well apply to murder laws? If murder was really bad, then private action would prevent it happening… that’s the blood feud culture of Sicily! It absolutely *can* happen that way. But rule of law has proved to be better. Safety regulations have also proved to be better.
Mark Z
Apr 9 2020 at 12:19am
There’s a third mechanism that you’re leaving out: as wages go up and standard lof living improves, employees are more willing to trade some of their wages for safer working conditions. The libertarian contention (which I agree with) is that this component is greater than regulations and unions. And this is why it’s not a ‘coincidence’: not only regulated safety standards, but also productivity and worker compensation have gone up during periods when workplace injury and death have declined. Why attribute the affect to regulation rather than rising productivity and compensation? Incidentally labor unions have been becoming increasingly irrelevant over the past 60 years and workplace safety has continued to improve.
And murder is in remotely analogous to working conditions. Murder isn’t transactional. Working conditions are determined by what conditions workers are willing to tolerate at a given wage. Murderers and murder victims don’t bargain or shop between different murders/victims based on the relative cost of murder.
Phil H
Apr 9 2020 at 12:28pm
“Why attribute the affect to regulation rather than rising productivity and compensation?”
Well, the principle of assuming that the obvious answer is the right one guides me here! I agree that what you suggest is *possible*. But it requires some pretty odd assumptions. For example, in your mechanism, you have to assume that workers are *less* willing to risk their lives for *more* money. That’s prima facie pretty odd! Or perhaps you are suggesting that in general, poor(er) people are more careless with their lives than rich(er) people. I personally haven’t witnessed much evidence of that.
Whereas my explanation says: safety rules made things safer. It does what it says on the tin. No fancy explanatory mechanisms required.
I also think that in many ways, the “rising prosperity makes safety” argument fails to follow the logic of increasing knowledge. As knowledge increases, it gets more specialised. It’s not surprising that today we should have safety specialists, nor that they should coordinate centrally.
Mark Z
Apr 10 2020 at 1:08am
It’s not odd at all, it’s actually pretty obvious: if you’re starving, you might be willing to do some pretty dangerous stuff for $20k a year. If you make 20k a year, you’ll be far less willing to do the same dangerous stuff to get to 40k. If you make 100k a year, you’re willingness to tolerate danger for another 20k is even lower still. The principle of diminishing marginal utility predicts that as people become wealthier, they become less willing to risk life and limb at the margin. This isn’t counterintuitive at all. If anything it’s pretty odd that you’re suggesting the most economically desperate will be the least willing to take risks for a given increase in wealth. That doesn’t seem very consistent with reality.
robc
Apr 9 2020 at 9:39am
Unions are part of a free market, so that is a point in favor of the libertarian argument, not against it. And government safety regs are usually a lagging indicator, they are passed only after industry has started changing (but before it has completely changed).
Matthias Görgens
Apr 10 2020 at 1:47am
In principle, yes. In practice, unions often come with special legal privileges, like that you can’t be fired for your union activity, up to participating in strikes.
Scott Sumner
Apr 9 2020 at 3:11pm
Phil, You said:
“Work got a lot safer in every developed country in the 20th century (21st in China), and it was through two mechanisms: either unions or government safety rules.”
That’s false. Work gets safer when countries get richer. Read the paper I linked to.
Phil H
Apr 9 2020 at 8:38pm
“Since the OSH Act was passed, workplace fatalities have fallen substantially, as can be seen in Figure 1 on the next page, but this decrease is a continuation of a trend that began long before 1970.”
I looked, Scott. The main argument seems to be, safety was improving before this American act was passed, therefore the act had little impact on safety. I know there’s a bit more than this, but that’s the big point.
Conceptually, this is… dodgy. Slatestarcodex had a great post on this last year: https://slatestarcodex.com/2019/03/13/does-reality-drive-straight-lines-on-graphs-or-do-straight-lines-on-graphs-drive-reality/
Statistical arguments just aren’t going to cut it. We need to see examples of unregulated safety in order to know that this works. And I’m not sure that I see any.
Mark Z
Apr 10 2020 at 1:12am
This argument cuts both ways: we need an example of an unregulated society to prove that the regulation is the cause of increased safety in the regulated society. If you take dismissing statistical arguments as license to just fall back on your prior, well then I see no reason why someone of the opposite position shouldn’t fall back on theirs as well.
Scott Sumner
Apr 10 2020 at 2:48pm
If you have some evidence to support your claim, then please provide it. But you were simply pointing out that things were worse in the old days, and as the paper shows that’s not useful evidence.
Russ Abbott
Apr 8 2020 at 6:11pm
Alan Goldhammer makes a very important point. Were our labor unions stronger, perhaps they could protect their workers. But given how successful companies have been at weakening labor unions, other sources of protection are needed.
In the long run, e.g., may years, wages and safety may find an equilibrium. But how many lives are you willing to sacrifice to achieve that result?
Mark Z
Apr 8 2020 at 9:18pm
How did companies weaken unions? Most of the decline in unions in the US seems to be due to the change in composition of jobs, i.e., industries that used to be heavily unionized are still fairly unionized, but they’ve declined dramatically in relative terms, while industries that were never highly unionized have grown.
And this suggests something important: that unions drive up effective compensation – wages, benefits, safety – are not getting a free lunch for workers, it’s coming at a cost, which is reducing demand for labor, which is part of why industries that have historically been dominated by strong unions (and succeeded in driving compensation well above the market rate) have declined as sources of jobs, while regions dependent on those industries have had higher unemployment and been more economically depressed.
Russ Abbott
Apr 8 2020 at 9:50pm
I should have assigned blame more widely. It’s the anti-union Republican establishment that has succeeded in weakening unions. It’s usually done through anti-union laws and regulations, which, of course, requires government. But look at who is pushing govt to pass those laws and make those regulations.
Mark Z
Apr 9 2020 at 12:23am
Are you referring to things like right to work laws? Those aren’t anti-union, they merely remove special privilege enjoyed by unions. Allowing firms to refuse to negotiate with unions, eliminating privileges or requirements for hiring union labor just make unions to engage with employers and prospective members on a voluntary basis.
robc
Apr 9 2020 at 9:45am
I oppose right-to-work laws as a company and union should be able to negotiate a closed shop if they wish. But, at the same time, we should be eliminating most of the federal and state laws that prop up unions. For example, there should be no requirement for good faith bargaining, and all jobs should be at will*, unless they have been negotiated otherwise.
*I am an absolutist on this, meaning no protected classes. At will means at will, for even the most horrible possible reasons.
Scott Sumner
Apr 9 2020 at 3:12pm
Russ, You said:
“In the long run, e.g., may years, wages and safety may find an equilibrium.”
I see no evidence that it takes a long time for wages and working conditions to reach equilibrium.
J T
Apr 8 2020 at 7:06pm
As a former OSHA inspector myself, I fully agree. Employers, owners, bosses, supervisors are human…and when you regulate a humans ability to do something that helps them live, and even enjoy life, they simply find loopholes. Saw it everyday, “Well the standard says we can’t do (blank) but we figured this was OK.”
The other part to all that, is businesses are more afraid of a fine than and the OSHA history for marketing, than they are about the fact that an inspector just told them, “I’m writing you a serious citation, cause that guy could of been killed.” When I’d site large companies, construction is best example, more than 1 time I had them call and say, “look we’ll pay the full fine, can you just reclassify the citation to other than serious?”
Then we get to the bureaucracy of the thing…holy geeze the politics within an agency that is supposedly focused on life safety…confusing standards, too many standards…to make a new standard rather than fixing the old ones they’ve resorted to a new game of simply writing a whole new standard then just starting it with, “that law you’ve been using since 1970, yeah its now void, heres the entire new one! Good luck!”
Oh, and let’s talk about OTI, the prestigious OSHA Training Institute…but fact. While we go through months to years of classes and training…the tests we take, we don’t even put our names on. Somebody sued them about it because attending the training was a work requirement, passing the test was not.
And the political swings in the agency are nuts. Depending on who’s in the White House, enforcement policies shift from “help them of you can, cite them if you have to.” (Bush) To “Put them out of business if you can.” (Obama).
Most of your inspectors are good people, who joined the agency for good reason. Then the politics and all gets them to the point they just don’t care.
Shut it down.
Scott Sumner
Apr 9 2020 at 3:13pm
Thanks, very interesting comment.
Dylan
Apr 8 2020 at 10:06pm
This is a timely post, it is the kind of thing I want to agree with, having had to go through some pretty useless OSHA training sessions for jobs in the past, and it agrees with most of my priors. However, my wife just started a minimum wage job in NYC that seems fairly high risk. She’s working with about 50 other people in a pretty confined space, none of whom wear are wearing masks. This is a high volume restaurant that seems to have only gotten busier during the crisis. She’s working up front, so she’ll also have a lot of exposure to customers.
This week we’ve unfortunately started to get the reports of acquaintances that have passed away from complications related to covid-19, and so far those have all been from people younger than we are. We’re both relatively healthy, but my does seem to get sick more often and hit harder than most people, so the working situation feels like a definite risk. Yet, after we’ve both been unemployed for a long time, and with little in the way of job prospects, we also feel like we can’t say no to any job, even one that has a relatively high risk of illness and/or death.
The thing is, even with all of this, we’re still in better positions than most. We’ve got some savings left, and family and friends that we could turn to if we absolutely had to…yet there is still immense pressure to take the job and just hope for the best. Should we be free to make that decision for ourselves? Probably? But I’m not as sure about that as I once was. After searching unsuccessfully for a job in a good market for a long time, and consistently getting turned down for everything, it is hard to feel you have any leverage in the process at all.
Phil H
Apr 8 2020 at 11:30pm
I think there’s something worth saying about your observation here:
“having had to go through some pretty useless OSHA training sessions for jobs in the past”
I’ve had them, too! But I think you’re perhaps drawing the wrong conclusion for them. Imagine if health and safety rules basically work, but aren’t perfect. What would you expect as a result? Sometimes they undershoot, and the workplace still isn’t safe enough. People have accidents (but fewer and less serious than they used to be), firms get sued. Sometimes the rules overshoot, and you end up with some pointless rules and training.
That sounds to me exactly like the world we live in, in the developed world! Overall, safer than before; some accidents still (and a thriving legal system to take care of it); some inefficient regulation.
Nothing’s perfect. The fact that some rules are not correct does not indicate a fundamental flaw with the system.
Dylan
Apr 9 2020 at 9:03am
My OSHA training roughly fell into 3 buckets:
1. Common sense precautions that workers would have taken anyway
2. Rules that might have made sense in a limited context, but were made universal and enforced in contexts that didn’t make sense. Case in point, when I was working in a paper mill where there was a rule that when you were on plant property you had to wear a hard hat and steel toed boots. Never mind that I was working half a mile from the mill out on the open water with nothing above me, and wear my biggest risk was falling into the pond and needing to be able to swim to safety.
3. Rules that probably made workers more safe if they were followed, but that also made it impossible to work in anything close to an efficient way, so were uniformly ignored.
Yet I’ve also been on job sites where the managers have forced people to work for 24 hours straight operating heavy equipment because they needed to get a job done in a certain time frame or they wouldn’t get paid, and seen accidents that could have killed someone (but luckily didn’t) because people were so tired. Those all happened despite OSHA rules, but honestly I’ve got no idea if things would be even worse without them.
Phil H
Apr 9 2020 at 10:44pm
“Common sense precautions that workers would have taken anyway”
The problem is that this really isn’t true. Historically, people have always taken risks with things like hard hats and harnesses for work at height. This stuff is known, and can’t be wished away.
Russ Abbott
Apr 8 2020 at 11:36pm
Dylan makes the point very well. When the employer has all the leverage but the potential employee needs the job, who will ensure that working conditions are humane, not to mention safe?
As I said above, perhaps after many injuries and deaths, no one will take the job for fear for their lives. Is that how you want the market to work? The job kills off the most desperate until no one is left who is in dire enough straits to take the job. Then, perhaps, the employer will improve working and safety conditions. Or, perhaps by then, the employer will have made enough money to retire and will simply leave the market.
That’s a market economy, but it’s not the kind of market economy I want to see in my country.
Mark Z
Apr 9 2020 at 12:38am
Unless the employer is a monopolist, then it doesn’t have all the leverage, and it would become pretty clear when no one is willing to work for him that he has to either improve conditions or raise wages. What jobs are out there that are killing off vulnerable people at such high rates today that this would be the only mechanism by which employers would have to improve standards?
The ongoing pandemic has certainly made a lot of jobs more dangerous, but that also likely makes it a lot more expensive to make jobs safer. For most service sector jobs, maintaining six feet distance between everyone is just undoable; rubber gloves and masks are the next best thing, but if the healthcare system is having shortages of those, non-essential businesses will probably have even more trouble finding them. If we were to, say, require businesses to provide these things every day to employees, even before the cost itself becomes an issue, the actual limit on how many masks or gloves the employer can get a hold of at any cost may require them to cut back the workforce. Considering how bad things are for many non-essential service sector businesses right now, it’s hard not to believe such requirements wouldn’t reduce the number of jobs available. In which case, for a many workers, the state isn’t solving the dilemma between unemployment and a hazardous job by making the hazardous job less hazardous; it’s just forcing them to ‘pick’ unemployment. Maybe that’s a good, paternalistic decision made on behalf of workers, but especially during a time when businesses themselves are cash-strapped, I suspect that that tradeoff is very real, and regulations that raise safety standards do so at the expense of reducing employment opportunities.
Dylan
Apr 9 2020 at 9:32am
Sure, on a macro scale, the company doesn’t have all the leverage, but I think that is the wrong way to look at it, instead look at it from the individual marginal worker that has trouble finding any job. The best workers are able to find jobs that are both safe and well paid. Other people might take a job that is dangerous, but that pays well in order to compensate for that risk, like a deep-sea oil rigger. But, then there are jobs that don’t pay well, are unpleasant to do, and dangerous which are left to the people that don’t have better options. Think of jobs like working in a poultry processing plant where you’re not even allowed a bathroom break because it means shutting down the line. I know the standard answer is that the worker voluntarily chose to work there, so it must be better than whatever their alternative was, and there’s certainly something to that…but it is still pretty unsatisfactory.
At the root, I think there is a knowledge problem that regulation partly steps in to fill. As a consumer, I’d prefer to buy products where the workers are treated well, that they have a bathroom break, that they have relatively safe working conditions, at least as safe as is practical for that job. If I’m buying meat, I’d like to know that the animals were treated humanely. I’d like the stuff I buy to have minimal impact on the environment, etc… I’m willing to pay more for all of this if I can be assured that it is actually happening. But, I don’t want to pay more for nothing. I don’t want to pay more to companies that are greenwashing, but aren’t really doing anything useful for the environment. I don’t want to pay more for “free range” chickens, if all that means is that they are together in one large cage where they are free to peck each others eyes out. And price isn’t a great signal for these things. A company could do all of the things I want, and still be the cheapest because they are really efficient, or have better economies of scale, or because they skimp in another area that I don’t care about. Regulation can help make the job of a consumer easier by setting a floor of what’s allowed and what isn’t.
robc
Apr 9 2020 at 9:55am
Or, instead of regulation, you could use private certification.
How do jews know what is Kosher without government regulations?
If the same solution that works for kosher foods would also work for X, then X isnt a market failure and doesn’t need regulation.
Things that could easily be replaced by a kosher style certification:
Restaurant inspections, FDA, etc.
Dylan
Apr 9 2020 at 12:14pm
@Rob – They can and do to some degree. Of course you end up with a lot of competing certification programs which leads to some definite customer confusion. At my store I’ve got eggs that are branded by the same company, one is labeled Organic and one Natural. The price is the same, the bullet points on the container are the same, and there is no information given about where to go to get more info about the certification program. I’m assuming though that there is likely some difference between the two products, but it isn’t easy for me to find out what that difference is.
For the record, kosher is apparently pretty confusing too, with over 500 private companies providing kosher certification, and each one just a little bit different than the others.
I’m not saying that the government is the best solution to the problem, it’s unlikely that they are. Whatever they pick as the lowest common denominator allowed won’t match my preferences completely, they will be overly strict in some areas and not as strict as I’d like in others. Private companies give the benefit of more diversity, but require a higher amount of effort from the consumer to educate themselves.
robc
Apr 9 2020 at 12:49pm
Dylan,
I think organic (not sure about natural) is defined by the federal government, so has all of the problems associated with that as opposed to having private organic certification.
And, yes, there are a ton of kosher orgs, but you pick out the 1 or set of ones you consider proper and go with that. Some are stricter than others, so you choose the level you accept.
dylan
Apr 9 2020 at 3:36pm
@Rob – Thanks, looks like you are right, and that the term organic is defined by USDA, and that private third parties are the ones that do the certification. Hadn’t realized that, just recall a number of years ago some competing definitions over what organic meant, but it could be that I’m thinking of other terms like “Natural.”
Shayne Meadows
Apr 8 2020 at 11:34pm
Stop.
Stop.
Stop.
Stop propagating ideas that somehow purport that we, as a society, have forgotten the past 200 (or even 2000) years of established history pertaining to social experiments. Companies have an economic inventive to provide their workers a safe working environment? Right. In the same way that the “free market” should provide workers the ability to “raise the tide” of benefits by simply changing jobs when they don’t like the conditions in which they’re working. But that doesn’t happen because most of the workforce can be replaced; and are looked at as such. Occam’s razor here would say that you provide the carrot and the stick to gain compliance. We can debate these things in a vacuum where human beings’ can’t bring to the table their inherent nature to cut corners, but it’s disingenuous at best. Yes, killing someone may the company millions, so there’s a carrot dangling to possibly prevent that from happening. Humans, however, push the bar as far as they can (as history has shown us), and are more likely to see the carrot posteriori. This is where OSHA fills the gap.
No one is a fan of OSHA, nor the EPA when the proverbial doorbell rings. But the reality is that they’re a necessary evil (or more accurately, the stick in our anlogy).
This is coming from a tenured EHS professional.
ChrisA
Apr 9 2020 at 1:39am
I would bet that companies with high standard of HSE probably pay more than companies that don’t. Imposing high HSE standards requires competent well trained managers who understand what they are doing. You will only find those kind in companies that are well managed and can afford to hire workers whose performance is above average. Think of companies like DuPont, Exxon and so on. From personal experience the HSE standards in those companies well exceed any OSHA standards, and since they operate internationally, far exceed some local standards in many countries. They do this because they know it is good business, accidents, especially fatalities, are extremely expensive and disruptive.
Daniel Klein
Apr 9 2020 at 10:20am
I agree.
If we can’t abolish faux “consumer protection” restrictions, we should roll them back as much as possible.
Thaomas
Apr 9 2020 at 11:38am
Isn’t that the exact purpose of OHSA, to protect firms from unreasonable tort claims for occupational risk? Regulation/Pigou taxation vs tort are two different ways of dealing with risks of harm. In a suddenly changed environment, who knows which is best?
robc
Apr 9 2020 at 12:50pm
Tort is best. This is exactly what common law is good at.
Scott Sumner
Apr 9 2020 at 3:17pm
But it’s important that companies be able to offer contracts where workers wave the right to sue over Covid-19
Kevin Erdmann
Apr 9 2020 at 5:30pm
Prejudicial observation is so embedded in all of us, it’s like the proverbial fish in water.
Notice how, in this conversation about whether employers should be liable for workers that catch Covid-19, it doesn’t seem to have occurred to anyone that the obvious target of the lawsuit would be the person that gave you Covid-19. But, the idea that you could do that is so unthinkable that it doesn’t even bear mentioning.
The idea that firms are legally responsible for “x”, in the end, has little to do with whether they should be responsible. They are simply the institutions that we have deemed to be acceptable targets for punishment.
Mark Z
Apr 10 2020 at 1:23am
Part of this instinct is likely because it’s practically impossible to identify who precisely gave you the illness, so many people assume they most likely got the illness at work. And other institutions they might sue – their children’s schools, the DMV, etc. – aren’t viable targets. Assigning liability for a highly contagious disease seems pretty difficult. But per Coase theorem, it may not matter too much how we assign it, whether to firms, landlords, spouses, as long as the assigned party can pay the other party to have responsibility waived.
Scott Sumner
Apr 10 2020 at 2:50pm
Mark Z., Remember the “transactions costs” part of the Coase Theorem. If tort lawyers earn massive amounts of money, then the transactions costs are really high.
Matthias Görgens
Apr 10 2020 at 1:50am
Seems like most of OSHA could be replaced with private insurance company’s eager inspectors and perhaps some rules requiring companies to disclose statistics about accidents?
Tom West
Apr 11 2020 at 3:36pm
Culture matters.
And it matters more than our rational self-interest.
I think one of the reasons why safety has gotten better as prosperity has increased is not only that we can afford more safety. It’s also that the fights by unions and governments to mandate more safety made it something one *could* ask for, and just as importantly, something that was not perceived as irrational by employers for employees to demand.
Anyone who has travelled has met with conditions where they ask “why do people here accept this as ‘just the way it is’?” (And then we come back and ask “why do we accept this as ‘just the way it is’?”)
Drunk driving regulation is my go-to for this. When it first became serious, almost everyone I knew (except a few health professionals) considered its enforcement and penalties completely out of proportion with the damage. Drunk driving was unfortunate, but it was ‘just the way it is’. We just accepted that the cost was just part of reality.
Now, it’s not just fear of enforcement, but fear of social shunning that keeps people off the roads when intoxicated. Regulation gradually changed culture and that was what *really* changed results.
I have no doubt that health and safety regulation has done much the same to make safe work conditions one of the things it is culturally acceptable to ask for (or demand) in the work place.
I bet on culture over economics three times in four.
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