Workplace Safety Policy

Most OSHA standards require firms install specific types of safety equipment or institute specific safety programs. Besides specification standards OSHA also uses performance standards to set maximum levels of exposure to particular hazards. Both specification and performance standards impose considerable financial burdens on firms. The National Association of Manufacturers calculated OSHA standards cost about 103,000 (1993 dollars) for an average firm with 1-100 employees and 1,026,000 for an average firm with 501-1,000 employees (Smith 1976). Within certain industries the costs are even larger. The 1978 cotton dust standard, for instance, increased operating expenses in the textile mill products industry by more than 50 million per year (Viscusi 1992). Clearly, only if regulations are backed by financial penalties for noncompliance will firms install the safety equipment or institute the safety programs dictated by OSHA. 

On a conceptual basis the easiest way to view OSHA s impact on injuries is through its impact on expected profits (equation 2.3). Firms compare the costs of complying with health and safety standards to the costs of not complying. By inspecting more firms or levying higher fines for a given class of violations OSHA increases the costs of non-compliance. The expansion in enforcement raises expected fines for 

The offer wage function through represents lower profits than the offer wage function tangent to (0i 02 . The expansion in safety via OSHA s direct effect reduces firm profitability — the wage decrease does not compensate for the increase in safety expenses. 

Ultimately the movement of workers and firms to alters the relationship between wages and risk. By installing additional safety 

The resorting of workers and firms along the risk spectrum mitigates to a substantial extent OSHA s initial effectiveness in reducing work-related accidents and diseases. 

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