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January 19, 1979

Bum RapForOS
HA?
Grisly statistic: some 4,760 American
workers died at their desks or on the
assembly line in 1977. But to put that
figure in context, roughly 1.8 million
Americans died off the job in 1977,
which might suggest that the factory or
. office is actually a much safer place to
be than the highways and homes of the
nation. Still, one government agency is
very concerned about those 4,760
Americans, especially because their
deaths represented a 21-percent
increase over the previous year.
This agency is the Occupational Safety
and Health Administration (generally
. referred to as OSH A), which was established in mid-1971 to "assure a safe and
healthful workplace" for all Americans.
Such a charge is no simple matter, and
OSH A's efforts to achieve this goal have
sometimes antagonized both business
people (who complain that OSH A undermines the efficiency of the nation's factories) and labor leaders (who complain that
OSH A fails to ensure improved safety
and health conditions).
When the Department of Labor report
emerged with the 1977 statistics, the
media found good copy in the 21-percent
rise in fatalities reported for the year. "Big
Increase in Work Deaths Mystifies Federal Officials," trumpeted one newspaper.
BusinessWeek spoke of the "atmosphere of gloom" that the new report
had cast over OSH A.

Fatalities injuries
and
Despite the validity of other complaints
about OSH A operations, the agency
may have taken a bum rap on that particular charge. To see what has actually

happened in the nation's workplaces,
we shou Id fi rst look beyond a one-year
change in the number of fatalities.
While workplace deaths did rise in 1977
by 21 percent, most media reports failed
to note that this rise followed an even
larger 2 6-percent decl ine the year before.
Moreover, we shou Idlook at a more relevant measure - the number ofworkplace
fatal ities as a percentage of tbe workforce
- just as we look at the unemployment
rate rather than the number of unemployed. Indeed, this fatality rate was
lower in 1977 than in all but one other
year of OSH A's existence .
In assessing OSH A's performance, we
should remember also that a workplace
fatality is a rare occurrence. A much
more reliable indicator of the safety and
healthfulness of our nation's
anp
factories is the work-injury rate, or the
number of workplace injuries related to
the total number of workers or the total
amount of worktime (seechart). The large
number of work injuries (roughly 1200
times the number of workplace fatalities)
makes this a more statistically reliable
indicator. Also, since this measure is
expressed relative to the size of the workforce, it allows us to eliminate the scale
effect. It must be noted also that post-1970
data cannot be compared directly with
earlier data, since the law that created
OSH A liberalized the definition of "work
injury," and also established a more
comprehensive and mandatory system
of data collection. Furthermore, the
post-1970 data also include work-related
ill nesses,but these account for on Iy about
3 percent ofthe total.

(continued on page 2)

8usiness-cyde
effect
But even more importantly, to assess
the
performance of OSH A - or any other
program for that matter - we must avoid
the before-and-afterfallacy. The relevant
comparison is not betweenwhat occurred
this year and lastyear,but betweenwhat
did occurthis year with the programand
what wouldhave
occurredthis year in the
absenceof the program. This suggests
that
if there are other factors systematically
influencing the program'stargetvariable,
then these factors must be considered.

the youngest and least experienced - a
group which tends to be the most accident-prone. This shift in composition of
the still-working population away from
accident-prone individuals also tends to
lower the work-injury rate.
During expansions, both theseeffects
work in precisely the opposite direction.
Managersare reluctant to rehire workers
as rapidly as new orders increase, for
fear they may have to turn around and
fire them should the increase be only
transitory. The result is an increase in the
pace of production, more pressureon
workers and lesstime for maintenance
of machinery. Moreover, new hires are
lessexperienced, and even the skills
they do have may be a bit rusty due to an
extended period out of work. Both of
these effects combine to push up the rate
at which workers get injured.

In the case of work injuries, there is a
fairly well established,albeit little known,
relationship between the rate at which
workers get mangled on the job and the
rate of businessactivity. Studiesof the
relationship between work injuries and
the businesscycle have appearedon and
off in the economic literature at least
since the 1930's, but generally in fairly
remote publications.

Mirror image

The logic behind this pro-cyclical
pattern in work injuries goes something
like the following. During a cyclical
downturn in a firm's new orders, the
manager is uncertain whetherthe decline
is temporary or will be sustainedover a
period of time, so he is somewhat reluctant to layoff workers whom he may
soon have to rehire. Thus workers get
laid off at a slower rate than the rate at
which output declines, and there is a
consequent slowdown in the general
pace of production. But at the slower
pace of output, there is more time for
maintenance and repair of equipment.
The result is fewer accidents. In addition,
the workers who get laid off are typically

The work-injury rate is almost a mirror
image of the unemployment rate - a
reasonable business-cycle proxy although the statistical relationship
between the two series is not always
stable (seechart). Roughly speaking, a
one-percent (not percentage point)
decline in the unemployment rate tends
to generate a quarter-percent rise in the
work-injury rate,according to our experience over the 1942-70 period. Thus the
9-percent drop in the unemployment rate
between 1976 and 1977 (from 7.7 to 7.0
percent) should have led to a 2-to-3 percent rise in the work-injury rate, other
things equal. In fact, the work-injury rate
in manufacturing actually declined by
0.8 percent and the rate for the whole

2

economy in 1977 alone. Severalfactors
may have contributed to this improvement, but in absenceof evidence to the
contrary, OSH A should certainly beable
to take some credit for the increasing
safety of the American workplace.

private sector rose by only 0.8 percent.
This suggeststhat there were almost 1
million fewer workplace injuries in the
total private economy in 1977 than
would have been expected based upon
movements in the businesscycle alone.
This fact contrasts sharply with the
impression left by the 1/21-percent
increase" in workplace deathsheadlined
by the media.

What aco()ut
1978?VVe
alreadyknow that
the unemployment rate lastyearwas 14.3
percent below the 1977figure becauseof
a strong businessexpansion.This should
have caused the work-injury rateto rise
by about 3.5 percentif you believe our
estimates.The data won't beavailable
until almost year end, but they should
show some increase.If the ?ctual injury
rate risesby lessthan 3.5 percent,or if
there is an actual decline, OSHA may
deserve a pat on the back.

Indeed, in all but two yearsof OSHA's
existence, the work-injury rate fell by
more than would have been predicted by
the business-cycleeffect.Thus, the workinjury rate in 1977 was roughly 3 percentage points lower than would have been
expected from the 1971-77movement of
businessactivity. This translatesinto
about 2.8 million fewer injuries than we
would have expected in the total private

Michael
Gorham

WORK !NJUR!ES AND THE BUSINESS CYCLE

%
20

Work injury rate in mfg.
15

10

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Unemployment
i!.,.

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1940

*The work injury rate is the number of work injuries per one million hoursworked 1940-1970 per
and
100 full-time workers after 1970.The two time periodsare not directly comparablebecause a 1971
of
change in reporting and definition of a work-place injury.

3

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BA. KING D ATA-TWE LfTH FEDI
N
ERALRESERVE STRI
DI
CT
(Dollar amounts in millions)

Selected Assets and liabilities
Large Commercial Banks
Loans (gross, adjusted) and investments*
Loans (gross, adjusted) - total
Security loans
Commercial and industrial
Real estate
Consumer instalment
U.s. Treasury securities
Other securities
Deposits (less cash items) - total*
Demand deposits (adjusted)
U.s. Government deposits
Time deposits - total*
States and political subdivisions
Savings deposits
Other time deposits:t
Large negotiable CD's
Weekly Averages
of Daily Figures
Member Bank Reserve Position
ExcessReserves(+)/Deficiency (-)
Borrowings
Net free(+)/Net borrowed (-)
federal Funds-Seven Large Banks
Interbank Federal fund transactions
Net purchases (+)/Net sales(-)
Transactions with U.s. security dealers
Net loans (+ )/Net borrowings (-)

Amount
Outstanding

12/27/78

Change from
year ago
Dollar
Percent

Change
from

12/20/78

124,283
100,951
1,776
29,080
35,265
18,977
8,475
14,857
117,285
31,553
309
83,517
7,229
31,366
42,472
20,628

-

-

137
40
351
1
40
66
67
30
403
293
287
390
62
152
220
146

-

-

-

-

Weekended

Weekended

12/27/78

12/20/78

11
108
119

+

+
+

39
13
26

694

+

721

+ 369
+ 398
*lncJudes items not shown separately. :tlndividuals, partnerships and corporations.

17,459
18,440
97
3,638
7,910'
4,298
955
26
11,842
2,123
413
10,416
561
24
10,459
5,732

-

-

16.34
22.35
5.18
14.30
-28.92
29.28
10.13
0.17
11.23
7.21
57.20
14.25
8.41
0.08
32.67
38.48

Comparable
year-ago period

+

58
25
33

-

414

+

176

+

fditorial comments may be addi'essed to the editor ( William Burke) or to the author •...
Free copies of this and other Federal Reserve publications can be obtained by calling or writing the Public
Infonnation Section, Federal Reserve Sank of San francisco, P. O. Box 7702, San Francisco 94120. Phone
(415) 544-2184.