Workplace hazard pricing: On paying the cost of unsafe workplaces

By | 2018-01-22T20:29:56+00:00 August 7th, 2015|0 Comments

My husband and I (along with our 70 pound golden retriever) recently spent 26 hours in our car driving from Texas to Michigan. That’s lots of time to kibitz on all sorts of topics.

He heard me rant about four workers killed on the job last fall at DuPont’s LaPorte, TX plant because of gross safety violations. At the same time, the corporate giant earns millions selling its safety “expertise” to other companies. My husband heard me repeat my complaints about the small financial sanctions imposed on companies for violating fundamental safety regulations, even in cases of a worker’s death. The nationwide average for a serious violation of an OSHA standard is less than $2,000, and the median penalty for violations related to worker fatalities is less than $5,000.

My husband’s an economist and financial analyst, and he wears that hat when I bemoan these things.  On the long car trip he said: there needs to be a shift that “puts a price on workplace hazards.” He talked about combining safety measures with market forces, and creating financial motivations for companies to ensure workplaces are safe.  He offered a couple of examples:

First, OSHA penalties have to be raised to meaningful levels. By meaningful, he said, the penalties should not be so small “that they are mere rounding errors for companies.” Before retiring, he worked as a consultant to major corporations. He saw these firms address safety because of ethical, legal and public relations reasons, but for big firms, he doesn’t see major financial incentives to keep workers safe. Congress could set up a new penalty structure for OSHA that, as he described “incentivize management to actively create genuinely safe workplaces.” The paradigm would shift if a firm faced OSHA penalties, scaling up from serious to repeat and willful violations,  that are based off a fraction of corporate-parent revenues. My husband noted that this would bring OSHA penalties more in line with assessments for  toxic chemical releases (EPA sanctions) and automaker transportation maleficence (NHTSA sanctions.)

Second, putting a price on workplace hazards would mean setting minimum, non-negotiable penalty amounts for certain types of violations. Pick, for example, the top five hazards that injure or kill worker, such as an unshored trench or rickety scaffolding. These violations would come with an automatic OSHA minimum penalty of $10,000 for a small business, and indexed by a percent of revenue for larger firms. Employers who challenge citations of these well-recognized safety hazards would have to cover non-negotiable penalties, as well as the agency’s legal and administrative costs if a judge rules in OSHA’s favor.

I’m always interested in hearing ideas on how we can change the status quo in workplace safety. It’s mind-boggling the kind of safety hazards that OSHA inspectors still find over, and over, and over again in workplaces: machines with guards bypassed, inadequate protections from toxic gases in confined spaces, failure to provide appropriate fall protection (here, here, here).

My husband says we should change the conversation—and the policies—to create market incentives for the private sector, in his words “to treat worker casualties as a cost to be avoided.” He explained: “The health and very lives of workers should not be treated as what economists call a negative externality,” where firms do not pay the actual cost to society.

His concluding remark, before we changed the subject to listen to a podcast of Freakonomics, was:

“If the cost of workplace hazards is fully born by companies, they will measure it, manage it and pursue policies in the best interests of both themselves and their workers.”

Now, how do we get Congress to see the economics in that?

About the Author:

Celeste Monforton, DrPH, MPH
Celeste Monforton is a fellow in the Collegium Ramazzini; a lecturer at Texas State University; and professorial lecturer at the Milken Institute School of Public Health at George Washington University. She receives funding from the Public Welfare Foundation.

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