Regulation versus economic incentives

An extreme version of the economic rationalist approach to OHS holds that the optimal outcome with respect to safety will be achieved if markets are left to operate freely without any government intervention. 

Such a system does provide some incentives to employers to reduce risks to employees. In particular, in dangerous industries employers may find it advantageous to invest in safety rather than pay ever higher wages to entice workers to risk their lives. But in principle the system provides only as much safety as the market dictates. Putting the matter more emotively, it allows employers to provide as little safety as they can get away with. 

In practice, of course, even the limited safety incentives inherent in the model are illusory. Workers do not have any satisfactory way of assessing risks and making cost/benefit calculations (Slovic, Fischhoff and Lichtenstein 1985). Indeed, they may be quite unaware of the risks. And if the risks concern matters of health (e.g. cancer), where the costs may have to be borne years later, these costs may be discounted in ways which lead to outcomes which are very far from optimal for the individual worker. Furthermore, the costs will be borne not only by the worker concerned but also by members of his or her family, who may have had no part in the original decision, and by the wider society, which is called upon to provide health services, disability pensions and the like. 

Perhaps most importantly, the empirical evidence is against the free market model (Robinson 1991). On the whole the most dangerous jobs are the worst paid, contrary to presumption. And despite this, workers in the most dangerous jobs generally show no greater propensity to quit than do those in safer jobs. (See also Cunningham 1984, ch. 12, for a useful account and critique of the free market model.) 

These arguments tend to lead even the most dedicated free marketeers to concede that occupational health and safety cannot be left entirely to the unfettered operation of the market. Most would concede that this is an area where the market fails that is. 

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