Workers may face health hazards at their workplaces because facilities and equipment are improperly maintained, conditions are dangerous, and so on. The Occupational Safety and Health Administration (OSHA) is empowered to reduce risk in the workplace by setting safety standards, conducting inspections to see that workplaces conform to them, and assessing penalties on employers who do not. OSHAs sister agency, the Mine Safety and Health Administration (MSHA), performs these tasks for mines.
Figure 4-1a shows that the rate of occupational injuries in private industry has declined since the early 1970s, but OSHAs contribution to the decline is questionable. Schultze (1977) criticized OSHA because it failed to address the greatest influence on the injury rate, the employee turnover rate (this influence was reported by Oi 1974), and instead focused on easily identifiable and correctable hazards that could be addressed effectively by the market (that is, companies have to pay employees higher wages, or compensating differentials, to work in hazardous conditions) and workers compensation. Workers compensation, which requires employers to purchase insurance to compensate workers if they are injured at work, is designed to reduce the litigation costs that would arise if workers could sue their employers for job-related injuries. The system provides a powerful incentive for employers to maintain safe workplaces because workers compensation insurance rates are tied to a firms injury experience (accident performance). Moore and Viscusi (1990) estimate that in the absence of workers compensation, job fatality rates in the United States would be as much as one-third greater than they are.
Considerable empirical evidence, including time series studies by Bartel and Thomas (1985), Viscusi (1986), and Smith (1992) and simulations by Kniesner and Leeth (1999), indicates OSHA regulations and enforcement have had a modest effect, at best, and often a statistically insignificant effect on the workplace accident rate. Gray and Scholz (1993) contended that researchers have tended to underestimate OSHAs impact on safety, but their quantitative estimates are actually quite similar to Viscusis.8 Finally, Weil (1996) found that OSHA inspections of plants in the custom woodworking industry influence plants to comply with machine-guarding standards. But he failed to find a strong link between the inspections and lost days of work, which implies that the standards are not targeting the causes of the most serious injuries. As noted, workers compensation and market forcesand in all likelihood increasing societal wealthhave contributed to improvements in workplace safety. OSHAs ineffectiveness appears to be explained by poorly designed safety standards, weak enforcement, and a lack of a significant safety problem at most workplaces.9 Accordingly, the social desirability of OSHAs activity is clearly in question.
Notwithstanding the long-term decline in coal mine fatalities shown in figure 4-1b, recent tragedies in three mines have raised concerns about whether the Mine Safety and Health Administration needs to strengthen enforcement of mine safety standards. Industry observers assert that growing mechanization of equipment has contributed to mine safety and that MSHAs role has been minimal because fines for safety violations are small, negotiable, and often not even collected.
Siders (1983) assessment of mine safety attributed reductions in fatalities per man-hour to improvements in productivity rather than to changes in mining operations induced by regulation. Similar to workers in other occupations that face significant risks to their health from inherent working conditions, miners have received wage premiums to compensate them for the risks they take by working in mines, such as breathing harmful air matter, suffering injuries, or even dying if a mine collapses. Thus mine owners have a strong financial incentive to prevent wage premiums from rising by keeping their mines safe and preventing accidents that increase the perceived risks to health from working in a mine.
Kniesner and Leeth (2004) estimated that the costs of MSHAs activities are more than double the benefits. Its budget is largeon a per establishment basis, it is 400 times larger than OSHAs budgetand its deterrence is weak. MSHA could generate greater social returns by reallocating its funds to ensure that safety violations that contribute the most to injuries are corrected.
