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January 19, 1979 Bum RapForOSHA? 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. Fatalitiesand injuries 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 assessthe 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 wouldhaveoccurredthis year in the absenceof the program. This suggeststhat 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()ut1978?VVealreadyknow 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 MichaelGorham WORK !NJUR!ES AND THE BUSINESS CYCLE % 20 Work injury rate in mfg. 15 10 \ I I, Unemployment i!.,. \ /\ 5 \ / \ r- --' \ I \ \/ I \ \ I I "" 1\' /\ I '-../ \... I ---'" -.,.;.... rate ! \... I I /' , ) / '----- ...... -1 , "', \. v ...... j I 1940 *The work injury rate is the number of work injuries per one million hoursworked 1940-1970and per 100 full-time workers after 1970.The two time periodsare not directly comparablebecauseof a 1971 change in reporting and definition of a work-place injury. 3 lleMeH • epeAaN • o4epi euozpv " e>jselV 4em • e!uJoJ1 W:) " G 'J!IE') 'OJSput! J:B ut!s (;SL 'ON GIVd 39\1150«1's'n llVW SSV1) BA.NKING D ATA-TWE LfTH FEDIERALRESERVE DISTRICT (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 Change from 12/27/78 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 Change from year ago Dollar Percent - - - - 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.
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