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OSHA's Trivial Pursuit

Thursday, June 1, 1995

It was a horrible tragedy, as much for the mental images it generated as for the death toll. On September 3, 1991, at around 8 a.m., a fire broke out at a chicken plant in Hamlet, North Carolina. As the grease fire started on a chicken fryer and spread quickly inside the Imperial Foods Products building, workers tried desperately to escape the smoke and flames, clawing at locked exit doors in panic. Twenty-five Imperial employees didn't make it. Fifty-six more were injured in the blaze. The event made national headlines and attracted everyone from network news reporters to Jesse Jackson, who visited in an attempt to link the chicken-plant tragedy to the national civil-rights movement. "I see the same faces here that I saw in Memphis, Tennessee, with Dr. [Martin Luther] King," he said. "Just basic, humble people who want to work and get a fair day's wages for a fair day's work."

Furious voices denounced state and federal safety inspectors, as well as the state's business community. During 1992 and 1993, the Hamlet fire became the cause célèbre of politicians and activists seeking tougher workplace-safety laws in Congress, including a greatly expanded Occupational Safety and Health Administration and new mandates on businesses. As Hamlet became a national symbol for corporate irresponsibility in workplace safety, one small but significant detail escaped the notice of many in Congress and the media. Those exit doors that sealed the deathtrap had been ordered closed and locked by the federal government.

The problem with the Imperial plant, a U.S. Department of Agriculture poultry inspector had said the previous June, was flies. "Both doors at the [trash] compactor was [sic] open when I arrived at 8:45 p.m.," the inspector wrote in a deficiency report. "Several flies [were] observed in all areas of the plant." Imperial's response, also written into the deficiency report, was to promise that the outside doors "will be kept locked." The inspector verified that corrective action had taken place.

Imperial Foods was hardly blameless in the tragedy—various safety problems existed at the time of the fire—but heavy-handed government regulation was also partly responsible. The chicken plant was one of the few employers in a poor, rural community. It ran on a very thin margin, using an old building and struggling every week to keep production going. Installing state-of-the-art alarm doors at the side and rear of the plant was an expensive proposition. When forced by federal edict to make a tradeoff between food quality and worker safety, plant managers chose the former, with disastrous results.

Fast forward to 1995. A new Republican majority in Congress, intent on balancing the federal budget, has targeted the Occupational Safety and Health Administration for cuts. In an attempt to defend OSHA, the Clinton administration announced a plan in May to make compliance less onerous to business and to judge safety inspectors on the basis of safety records for companies they oversee, not on the number of citations they write. "This is the new face of OSHA," said Elaine Kamarck, senior policy advisor for Vice President Gore and director of his "reinventing government" initiative.

But a Congress committed not only to budget savings but also to sound policymaking should go far beyond redesigning OSHA's inspection program or, as some GOP lawmakers have suggested, simply cutting its budget in half. There is no need for the federal government to inspect American workplaces, issue regulations, and fine employers for violating federal safety rules, and the attempt to do so has accomplished virtually nothing for American workers except burden their employers with regulations.

A 1991 study by Wayne B. Gray of the National Bureau of Economic Research found that OSHA regulations have "significantly reduced productivity growth in the U.S.," even more than those from the Environmental Protection Agency. Some OSHA standards have put a search for completely risk-free workplaces above common sense. Benzene standards, for example, have cost firms and consumers $23 million per life saved; arsenic standards, $24 million. Standards for asbestos, EDB, and formaldehyde have also cost many millions of dollars per life saved. These huge sums might better be spent publicly or privately on other measures that save lives at dramatically lower costs. Screening programs for cervical and colon cancer, for example, cost about $50,000 per life saved, while measures to increase highway safety—such as improving lighting, upgrading guard rails, installing median barriers, and improving bridges—cost between $100,000 and $200,000 per life saved.

OSHA has required employers to label machines and substances at the workplace with little regard for reason or significant risk. Dr. Michael Segal, of Harvard Medical School, reports that OSHA regulators have ordered suppliers of many of his laboratories' chemicals to label them as workplace hazards, including sodium chloride (table salt): "WARNING: CAUSES IRRITATION. Avoid contact with eyes, skin, or clothing. Avoid breathing dust. Wash thoroughly after handling." Similarly, another chemical's label provides a "Waste Disposal Method: Dissolve or mix the material with a combustible solvent and burn in a chemical incinerator equipped with an afterburner and scrubber. Observe all federal, state, and local environmental regulations." The hazardous material in question, Dr. Segal says, is candle wax.

This year, OSHA will spend about $300 million and send out some 2,000 inspectors across the country. As large as this effort is, its main task is even larger: to inspect 6 million workplaces with 93 million employees. On average, a company can expect to see an OSHA inspector once every 10 years. Even doubling or tripling the number of inspectors, in other words, wouldn't accomplish very much if the means of ensuring worker safety is to be workplace inspection. No doubt when OSHA was created in 1970, with the strong backing of labor unions, the impossibility of its task wasn't yet evident.

In a smaller, performance-oriented, "reengineered" federal government, OSHA would survive only as an advisory agency, or perhaps wouldn't survive at all. Its role in promoting worker safety has been and will always be dwarfed by private-sector incentives. Companies make bad decisions on occasion, of course, sometimes endangering the safety of their workers. But as the Hamlet case shows, so do regulators. The difference is that companies pay an economic price for their mistakes.

The Workplace Safety Record

The Hamlet fire, and a few other workplace disasters, are tragic and make good copy or news footage, but they tell us virtually nothing about worker safety in the United States. And the reality is that worker safety has been improving for decades. Companies have undertaken massive campaigns of training, coordination, technological investment, and management innovation to realize tremendous safety gains. Businesses have huge incentives to promote safety, such as lost productivity and workers' compensation or liability insurance costs, that swamp the prospect of regulatory violations. They have found that safe workers are happy workers, and happy workers are productive ones.

Northern Indiana Public Service Company's Dean H. Mitchell Generating Station is far more typical of corporate America's record on safety than Imperial Foods. Each year, all employees must attend two safety-education classes. In addition, the plant holds weekly "safety tailgate sessions" with all its workers to discuss specific safety topics. Accidents and "near-misses" prompt an intensive incident review, whose results are discussed at weekly safety sessions. Workers and managers alike think of safety not as a program but as a process. The plant's motto typifies everyone's commitment: "Safety, Pride, Teamwork." "We were able to make significant strides by having our employees buy into our cause," says J.N. Kocsis, personnel and safety supervisor at the Mitchell station. In just 10 years, from 1982 to 1992, the rate of accidents at the plant fell by 57 percent.

Nationally, the number of people injured annually, at work and home combined, fell by 15 percent from 1970 to 1990, with most of the decrease occurring during the 1980s. Accidental deaths show an even steeper decline; both the rate and the actual number of deaths have been falling for more than 60 years. The number of workplace accidental deaths fell from about 20,000 in the 1930s to less than 10,000 in 1993. Factoring in population growth, the National Safety Council reports that accidental-death rates at work fell from 15.8 to 3.5 per 100,000 people—a 78 percent drop. Measures of specific hazards also show a steady downward trend. In just the 10 years from 1983 to 1992, the number of firefighters and civilians killed by smoke and flames fell by 34 percent and 20 percent respectively.

Accidental-death rates may well be a better overall guide of safety trends than reports of all injuries and illnesses. There is good reason to believe that the latter may understate safety gains because companies, workers, and individuals have become more likely to report accidents and injuries over time.

These safety gains can't be attributed to regulatory efforts on the part of federal, state, and local governments. Accidental deaths at work adjusted by population, declined at roughly the same rate before and after the passage of the 1970 Occupational Health and Safety Act.

One way to think about the relative efforts of government and business in the safety arena is this: On any given day in America, thousands of local, state, and national safety regulators are inspecting businesses, studying test data, issuing regulations, and adjudicating violations.

But on that same day, millions of American workers, managers, designers, and engineers are working to make their workplaces safer, to maximize sales and revenues, minimize losses, and maintain good, long-term relationships with productive employees. The magnitude of private-sector safety efforts, both in time and money spent, far exceeds that of even today's bloated regulatory bureaucracy.

Safety gains have occurred across the economy, from highway fatalities to child poisonings, but it is at the workplace, over which businesses have greater direct control, where safety gains have been the largest. While accidents still happen and some jobs remain more dangerous than others, there have been very few years in the past six decades in which workplace accidental deaths have risen rather than fallen. To understand why firms might spend a great deal of time and money improving worker safety, you must first get a clear picture of how costly it is to have a serious accident in a workplace.

There are two main private-sector "regulators" of occupational safety. The first is the labor market itself. In the market for workers, perceptions of risk have a significant impact on the wages employees demand. If a profession or individual business is known to be unsafe, potential workers will want more salary or benefits to compensate for the higher risk. Even if workers don't know going in how dangerous a particular workplace is, their subsequent discovery can cost firms a bundle. For example, when a business loses a proficient worker in an accident, even for a relatively short time, that worker must be replaced with a new one, often needing training. The injured employees' coworkers also reappraise their own job risks, sometimes resulting in higher wage demands. The firm's hiring and training costs rise again if disaffected workers quit. The resulting turmoil can wreak havoc on production, costing the firm sales.

The safety risks posed by businesses differ dramatically, but studies have estimated that the labor market adds an average risk premium of about $1,000 to each worker's salary—meaning that, on average, workers demand $1,000 more in salary than they otherwise would to compensate them for the workplace risks they perceive. Finding ways to reduce that cost is clearly a desirable goal for any business, large or small—and keep in mind that this $1,000 is only the mean. Some firms face very high risk premiums and save a lot of money from even modest safety improvements. Occupations such as logging, meat-packing, mining, and construction continue to pose a higher-than-average risk of injury. For these occupations, says Duke University economist Kip Viscusi, "the marketplace generates enormous wage premiums for risk on the order of $80 billion a year in terms of higher wagesÖthat's where firms get their financial incentive for safety."

In the search for safety gains, employers have a strong ally: the insurance industry. By law, most employers must have workers' compensation insurance for their employees, but can purchase their coverage from the private insurer of their choice. The workers' comp system is at least partially "experience rated"; that is, the premiums bear some relationship to a business's rate of accidents. Firms that find ways to cut their accident rates pay lower insurance premiums. Insurers who help their subscribers cut accident rates and costs are more likely to keep their customers in the future. So both business managers and insurance underwriters have huge financial incentives to improve workplace safety (although unwise state regulation still keeps the system less efficient and safety-promoting than it could be). "If you're a good company with a good safety record, insurance companies are knocking on your door for your business," says Steve Reynolds, safety supervisor at Crowder Construction Company in Charlotte, North Carolina. Many workers' comp insurers employ armies of consultants, engineers, and designers to help their subscribers reduce accident rates and cut the costs of claims.

The cost of mandated workers' compensation coverage on American business skyrocketed during the latter half of the 1980s, not so much because of an actual increase in danger at the workplace, but because of federal court decisions liberalizing eligibility requirements. Workers found it easier to file claims, while state governments made mandatory benefit levels more generous. The result was a surge in workers' claims, pushing the total bill for workers' compensation insurance to $70 billion a year. While this development had many negative consequences for economic growth, particularly for states with higher benefit levels, it also meant that the insurance market became more competitive than ever, as American companies sought ways to cut down of one of their most explosive labor costs.

Compared with the risk premium imposed on firms by the labor market and workers' comp premiums imposed by insurers, the prospect of being fined by OSHA is almost laughably tiny in dollar value. Average OSHA fines per U.S. worker were about 50 cents in the early 1990s—up from 35 cents in 1983 but below the peak of 65 cents in 1978, according to Duke's Viscusi. Considering that the likelihood of being inspected, much less found in violation, is low in a given year, these fines obviously play little to no role in business decisions about safety. Increasing OSHA inspection or increasing fines aren't likely to change that underlying economic calculation very much.

Gains Through Innovation

Innovative and responsible companies and insurers have spent years learning how to reduce safety-related costs by reengineering workplaces, training employees, and using new technologies. Even small changes can reap big rewards. Take Rosendin Electric, Inc., a San Jose, California-based electrical contractor. Linda Johnson, Rosendin's benefits administrator, says that when she first came to the company in 1991, it wasn't tracking workers' compensation costs in an efficient manner. Rates of accident frequency and severity were soaring to worrisome levels.

Teaming up with the firm's safety director and risk manager, Johnson employed a new computer software package to track the type and total number of injuries, as well as dollars being spent in premiums. She found that approximately 50 percent of total claim costs were for back- and eye-related injuries. Back injuries alone were costing the company an average of $15,000 to $20,000 for each instance. "Many of the injuries could have been prevented if they'd been tracked effectively," Johnson says.

Supplied with up-to-date reports on how and where accidents were happening, Rosendin managers were able to find their biggest risks and address them. The company started a program to train workers about the importance of back-support belts (providing them to the workers for free) and how to work with the least amount of stress on the back. Rosendin managers also found that a major cause of eye injuries was that workers weren't wearing their safety glasses when they needed to. Much of the company's work was done on high ladders, but safety glasses were needed only some of the time. Workers ended up leaving the glasses at the bottom of the ladder rather than balance them precariously at the top, but then didn't bother to climb all the way down to retrieve the glasses when their use was warranted. "Employees needed something to keep their glasses around their necks when they weren't wearing them," Johnson explains. A simple solution followed: Each pair of glasses was equipped with a cord to go around a worker's neck. That one seemingly minor action reduced eye injuries by 20 percent. Between October 1992 and October 1993, Rosendin workers' comp claims decreased in frequency by 35 percent. The severity rate fell by 10 percent, and the company saved 27 percent in claims.

Subaru-Isuzu Automotive found another simple way to achieve safety gains at its Lafayette, Indiana, plant. Twice a day for five minutes, all employees are encouraged to participate in group exercise workouts. Twisting to workout standards like the theme from Rocky, employees stretch their arms, legs, necks, and backs before beginning work assembling cars, moving materials, or even typing on computers. New employees also learn about exercise and physical exertion during their two-week orientations. Of 80 hours of orientation, 45 hours are devoted to physical training. Employees participate in various exercises depending upon their upcoming responsibilities in the plant. In-house physical therapists coordinate these programs, and more than pay for themselves in reduced workers' compensation costs, say Subaru-Isuzu officials. "Our goal is to prevent injuries," says Mark Siwiec, manager of safety and environmental compliance. "If injuries do occur, however, they should be less severe."

Other companies have found similar results from modest changes in operation or training. When too many AT&T workers were getting injured working on telephone poles, the company started a "pole-climbing school" to teach the three-point contact method—meaning that workers should keep three limbs touching the pole at all times. Once AT&T workers mastered the method, accident rates fell. Similarly, Coca-Cola Bottling Group cut accident rates among its truck operators by instituting warm-up exercises, improving interior lighting in company trailers, adding more trailer hand grips, and lowering the trailers two inches to make it easier for workers to pull out the cases of drinks.

LSG/Sky Chefs, an in-flight caterer based in Arlington, Texas, has realized significant safety gains by experimenting with financial incentives. In the late 1980s, the firm was logging 1,000 injuries a year and losing more than 18,000 workdays—this at a company with 8,000 employees. Sky Chefs kitchen workers were constantly straining their backs lifting heavy objects, an injury that costs $25,000 in workers' comp claims on average.

New president Michael Kay introduced a safety program in 1991 to address the problem. Employees were taught how to lift objects without back strain. Kitchen workers got a weekly five-minute "safety short" taught by one of their coworkers. And the firm began offering financial rewards to workers with good safety habits. Supervisors passed out $20 Sears gift certificates to employees who lifted or cut in an exemplary way or who took the initiative to clean up a spill. Supervisors, in turn, saw their own compensation change to make safety a priority. A quarter of their bonus was tied to their unit's safety record. These and other changes helped reduce lost workdays at Sky Chefs to 8,500 in 1993 and about 5,000 in 1994. Focusing on rewards rather than punishments was the key to the new program's success, says Kay. "Our old approach was called the Stop program. It was designed to catch employees doing something wrong. This one's had a remarkably better effect."

Insurers Play Role

Some of the most sizable gains in workplace safety have take place in recent years under the tutelage of insurance companies. Insurance broker Johnson & Higgins, for example, helped one of its clients, a book publisher, set up a worker safety program that included routine monitoring, goal setting, active involvement by management, strategic planning, and bonuses tied to safety performance. The publisher had seen its accident rate rise and its workers' comp costs shoot up by 41 percent from 1987 to 1990. After Johnson & Higgins helped the company install its new safety program, workers' comp claims dropped by 35 percent and dollar losses by 63 percent the first year. Georgia-Pacific Corp., the forest-products company, worked with insurers in Georgia to reduce accidents by 31 percent in 1991 and 1992, with Georgia-Pacific's sawmills experiencing only one half of the industry's average number of incidents.

Hartford Steam Boiler Inspection & Insurance Company in Connecticut has made a $562 million business out of reducing workplace accidents. The firm is now the leading provider of boiler and machinery insurance in the United States. "Our interests and our customers' interests are aligned," says Wilson Wilde, president of Hartford Steam Boiler. "Both of us are going to be hurt financially if an accident occurs, so we can justify investing time and money in loss prevention." Most of the company's 4,000 employees are scientists, engineers, and technicians, who work with electric utilities, chemical plants, and paper manufacturers. They have developed an array of devices, processes, and designs to enhance safety, including a device introduced in 1990 to examine hard-to-reach boiler tubes for corrosion. The company has worked with utilities to detect problems with steam-turbine rotors to head off high replacement costs. It used new sensor technology to diagnose a turbine's vibrations and signal when to weld cracks shut. Fixing rather than replacing rotors saved millions for the insurer's utility subscribers while reducing the danger of faulty rotors coming apart in generators.

Reengineering workplaces using principles of ergonomics has become a common strategy for businesses and insurers to reduce worker injuries, particularly cumulative trauma disorders (CTDs) such as wrist strain, elbow strain, or the more serious carpal tunnel syndrome. CTDs are a fast-growing category of both occupational illnesses and workers' comp claims, but the severity of the injuries has been exaggerated significantly by the media. (Carpal tunnel syndrome is the seriously debilitating illness so often mentioned, but it accounts for only 1.4 percent of all work injury or illness cases, according to the Bureau of Labor Statistics.) Nevertheless, muscle strains caused by repetitive motions or poor posture do cause discomfort and pain, limit mobility, and reduce worker productivity. To address the problem, companies consult ergonomics experts and buy redesigned office furniture and machinery from manufacturers such as Michigan's Haworth Inc., which makes motorized tables that adjust height during the course of a working day, and Nova Office Furniture of Effingham, Illinois, which sells desks with computer monitors built into them so workers peer down at them like newspapers rather than up at them like televisions.

OshKosh B'Gosh, a Wisconsin-based manufacturer of children's clothing, used several strategies to reduce CTDs at its main plant in Oshkosh. The company's employees were performing numerous tasks involving small, awkward motions that require force. Inspectors checked the snap crotch of each pair of pants, pinching 600 snaps per hour. Machine operators developed back trauma from twisting and turning heavy garments, and sustained shoulder and hand problems from bending over to reach different-sized clothing.

The company's safety team decided to purchase 7,000 padded, adjustable chairs at $100 each and redesign many of its own machines. Company engineers devised an air-driven, automatic "crotch-snapper." Mechanical "feed dogs" were installed to dig their metal "teeth" into fabric and pull it through sewing machines. Plant workers were encouraged to report minor pain or discomfort so company engineers could address the problems. They were also rotated through several different jobs within plants, to reduce constant stress on one part of the body. After an initial surge in reported injuries—workers were being told, after all, to report even minor problems more often—workers' comp claims fell as did the severity of reported injuries. From 1992 to 1993, workers' comp costs at OshKosh B'Gosh fell by a third, more than paying for the company's safety innovations.

In the search for workplace safety, even industries considered to be "dangerous" have made great strides. Consider the mining industry, which has posted the most dramatic decline in injury rates during the past 20 years. In 1976, mining had the third-highest rate of total injury cases and the highest rate of any industry for injuries with lost workdays. By 1992, its rate of all injuries and of injuries involving lost workdays had dropped below the rates not only for all the other goods-producing industries but also for parts of the service sector. The efforts of enterprises like Kerr McGee Coal Corp.'s Jacob's Ranch Mine in Gillette, Wyoming, have contributed to this impressive record. The mine's incentive program for zero accidents is a quarterly award of $100 in gift certificates from local merchants. For every accident, each of the mine's 400 workers loses $10 from their awards. "Everyone gets penalized so there's a real incentive to wear safety glasses and do the right things," says safety supervisor Lenny Altenburg. The company spends $205,000 a year on the gift certificates, but the investment is paying off: The firm had no lost-time accidents at all from 1991 to 1994. Other mining firms have introduced new technologies, begun safety training programs, and used similar financial-incentive systems to minimize accidents. Compare the mining industry's typical death toll today (97 in 1992, for example) to the 3,500 annual deaths typical in the first part of the century, and you have some idea of the progress that's been made.

Rail safety is another area where the incentives of the private-sector marketplace dwarf those of the public sector. The E.H. Harriman Memorial Awards, given for railroad safety since 1913, helped to illustrate this point in 1994, as privately owned railroads took prizes and publicly owned or publicly subsidized railroads posted mediocre or poor safety records. Among the largest railroads in the country, Norfolk Southern took first place while Amtrak, the federally subsidized national passenger rail system, came in last. Similarly, among nine medium-sized railroads, the three publicly owned lines ranked 5th, 7th, and 9th. Guilford Transportation Industries Inc., which operates lines in New England, won its category (small railroads) despite allegations of safety problems over the past few years by labor unions and federal regulators (whose ranks are dominated by union veterans). Colin Pease, executive vice president at Guilford, explains that while many publicly owned or subsidized railroads rely on "feel-good programs" to promote safety, private lines must operate safely or go out of business. Insurance costs, replacement costs, and disruption of freight deliveries all skyrocket when lines are unsafe. "There is a major economic impact to whether your workers perform their jobs the right way or not," he says. "But the motive breaks down in the public sector." Pease believes that when workers are working safely, they're working productively—and naturally, in a competitive enterprise like transportation, productivity gains are the only way to stay ahead of competing rail or trucking firms. Guilford supervisors provide daily safety instruction and perform "test and observation" procedures 24 hours a day, seven days a week.

The efforts of these and many other American companies to reduce accidents and injuries are ongoing and massive. But conscious decisions by corporate managers and workers to address safety aren't the only cause of safety gains. Larger trends in the economy, reflecting innovation and productivity gains linked to goals other than safety, have also contributed to lower rates of accidental deaths and safer workplaces. For example, it now takes fewer employees to manufacture goods in America—and that means fewer chances for injuries and accidental deaths. Also, the quality of medical care provided both at the workplace itself and in hospitals and urgent-care centers has steadily improved, reducing the severity of injuries and the risk of death from accidents. Furthermore, a great deal of recent job growth has occurred among the smallest businesses in the country, which also have tended to post the best safety records (large businesses post the second-best safety records, while medium-sized firms have traditionally reported the most accidents).

While interpreting safety data and identifying causes and effects of particular trends can sometimes be challenging, the overall message about corporate responsibility in this area shouldn't be obscured. Driven by the pressures of the market to lower costs, keep skilled workers, minimize legal and insurance costs, and avoid bad publicity, American businesses have toiled endlessly to make their workplaces safer.

To a large extent, they've done so. In a real sense, the tremendous reduction in accidental deaths accomplished in the past 60 years represents an advance in the quality of life of workers and consumers no less significant than pay raises or price reductions. Horrible accidents such as the Hamlet chicken-plant fire are human tragedies, but in the context of corporate decisionmaking in a market economy they are also economic disasters. That's why responsible firms today are investing so much time and money trying to avoid them.

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.

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