Health, Safety, and Environmental Regulation
Gray, Wayne B., NBER Reporter
Since the early 1970s, the United States has seen a substantial increase in federal government regulation, through the establishment of several new regulatory agencies. The Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) have aroused particular controversy, attacked by some for being too strict and imposing large costs on business, and by others for being too lenient and allowing many hazards to remain. Congress is currently considering legislation affecting both agencies, and the debate about how much regulation is appropriate continues.
My research on OSHA and EPA has considered both the benefits and costs of regulation. I have examined the effectiveness of OSHA enforcement in reducing injuries, violations, and worker exposures to health hazards. My studies of the costs imposed by regulation have focused on the impact of regulation on productivity.
OSHA Safety Regulation
Traditionally, U.S. regulatory agencies have followed a "command and control" strategy, establishing standards designed to reduce hazards and requiring firms to meet them. Since compliance is costly, some firms are likely to violate standards unless the agency's enforcement activity provided a sufficient deterrence. Critics of OSHA's safety regulation have argued that infrequent inspections and small penalties provide little deterrence. In addition, many injuries are caused by factors not covered by standards, so even complete compliance would not eliminate injuries completely.
John T. Scholz and I have found evidence that OSHA inspections do reduce injuries.(1) This impact appears to be restricted to inspections followed by penalties; not being penalized means OSHA found nothing gong, and nonpenalty inspections had little or no effect on injuries. Plants penalized by OSHA averaged a 22 percent reduction in injuries over the following few years. We argue that the presence of penalties serves to focus the firm's attention on safety issues, eventually leading to hazard abatement. Having multiple inspections of the same plant within the same year, with or without a penalty imposed, does not seem to reduce injuries further. Imposing larger penalties also does not seem to have much impact on injuries, at least within the range that OSHA usually employs.(2)
We also have examined the effectiveness of different types of inspections. For example, many inspections are based on worker complaints rather than being planned by OSHA. Some have argued that if workers are ignorant of true hazards and simply use complaints to harass employers, then these inspections may be a waste of OSHA resources. However, we find that complaint inspections are about as effective as planned inspections in reducing injuries.(3) Complaints appear to be especially effective in larger plants, which tend to be more heavily unionized. Complaints also seem to be less reliant on penalties for their effectiveness, perhaps because the complaining workers can take advantage of the inspection to force hazard abatement, even when the firm is not penalized.
OSHA Health Regulation
Measuring the effectiveness of OSHA regulation for health hazards is difficult, since work-related illnesses can take years or decades to develop. This means that we must rely on indirect indicators of potential future illnesses, such as worker exposure to hazardous substances, rather than direct measures of current injuries. Since OSHA's health standards often are aimed precisely at lowering worker exposures to hazards, violations of health standards also could indicate future health problems.
In work with Carol A. Jones, I examined OSHA's effectiveness, using dam that linked all OSHA inspections at a given plant over time. First inspections tend to find the most violations, and subsequent inspections of the same plant find progressively fewer problems, suggesting that plants are responding to the earlier inspections by reducing hazards. …