The Folly of Workplace Regulations
by William Scott Dwyer
In an effort to provide workers with a better environment, the government has instituted numerous workplace regulations, such as requiring ergonomically correct work stations with proper chairs and lighting, which businesses are forced to follow. Since these improvements cannot be made at little or no expense to the employer, they increase costs of production, and reduce the amount of labor that the employer can afford to hire. Such improvements have the same effect as a mandatory increase in wages: The employer has less money available to hire more workers. In fact, in certain marginal cases, he may be forced to lay off some of his workers, or even to go out of businesses if he cannot meet his expenses. This is especially true for small businesses just getting started. But it applies to larger businesses as well.
A law passed in San Francisco regulating the use of computer terminals implicitly recognized this deleterious effect on business, as it exempted companies with 15 employees or less. Such an exemption was a clear, if inadvertent, admission that the law represents a cost to larger businesses as well. Indeed, the cost to employers of the San Francisco law was estimated at more than $100 million. And that was only a city ordinance. Some economists estimate the total cost of federal regulations at well above $200 billion a year for all businesses and consumers.
The fact that business regulations increase unemployment is also supported in a 1992 study by two economists, Lowell Galloway of Ohio University, and Gary Anderson of California State University at Northridge. The study, done for the Joint Economic Committee of Congress, concluded that an explosion of new federal regulations since 1989 is curbing the ability of small business to grow and create new jobs. Again, these regulations undoubtedly affect larger businesses too.
The most burdensome piece of workplace legislation to be passed in recent times is the Occupational Safety & Health Act of 1970, which created a new department, the Occupational Safety and Health Administration (OSHA) to pass safety regulations and inspect workplaces. OSHA has over 4,000 detailed regulations, yet safety in the workplace is not much better now than it was in 1970 when OSHA was formed, despite the fact that several hundred billion dollars have been expended by industry in order to comply with the regulations -- money that could otherwise have been used to expand productivity and employment. Filling out OSHA's material safety data sheets alone takes 54 million hours per year, which at $20 per hour amounts to about $1 billion dollars annually.
Lest anyone think that OSHA is a fair and reasonable organization, consider just one of its regulations: that bags of ordinary beach sand bear the cautionary label "POISON" to warn anyone foolish enough to go near it. The reason for the warning is that sand contains silica, a mineral that some scientists believe causes cancer under certain industrial conditions.
If the kind of inane governmental regulations drafted by OSHA do little to improve safety in the workplace, then what does? The very thing that government regulators are so fearful of: capitalism and the profit motive! Take the case of Glen-Gery Brick Factory near Reading, Pennsylvania. In 1988, Ron Smeal, the manager of Glen-Gery, calculated that his company was losing over $30,000 per injury in health and unemployment benefit costs. So he instituted safety contests between workers. At the end of each quarter, prizes are given to workers who have not lost a workday. In addition, the company distributes a tax-free cash sum by lottery. The lower is the overall injury, the higher is the reward. In response to these incentives, the number of workdays lost by his employees has declined by a whopping 75 percent!
Not only do OSHA's money-wasting regulations fail where profit-motivated voluntary programs succeed, but the very idea that the government has a right to prohibit hazardous conditions in the workplace is itself unfounded. So long as an employer is candid about existing hazards, he should be free to offer employment to anyone willing to work for him under these conditions. The complete elimination of risk -- which is itself an unattainable goal -- cannot serve as a standard by which to judge the fairness of an employer. The only standard can and should be an employer's honesty in disclosing whatever risks are entailed by a particular job, so that an applicant can then make an informed choice.
As an adult, every person has the right to make his own choices, regardless of the risks they entail. People risk their lives every day in countless ways -- from riding motorcycles, to driving cars, to flying in airplanes. The government has no right to prohibit freedom of choice in a futile endeavor to eliminate all risk from human behavior. On the contrary, what the government can and should do is protect a person's freedom of choice by prohibiting fraud and misrepresentation in the employment contract. If the employer intentionally conceals job hazards or misleads workers, then he should be prosecuted to the fullest extent of the law, but if he is forthcoming on the particular dangers of a job, then he should be free to offer the job to whoever is willing to take it.
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