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November 5,1976

Dangerous Work
A book published a couple of years
back carried the title "Work is
Dangerous to Your Health/' It was
neither an attack on the American
work ethic nor an entreaty to drop
out of mainstream society. It was
rather an explanation by a physician
and a physical chemist of the vari­
ous ways in which the modern
workplace can kill, maim or other­
wise impair the health of American
workers.
The Bureau of Labor Statistics re­
cently noted that occupational inju­
ry or illness affects one out of every
ten workers at one time or another
during their lives. The incidence of
injury or illness varies significantly
with both industry and firm size.
The best advice is to become a
broker and not a hod carrier; the
number of cases per 100 workers
ranges from 2.4 in the financeinsurance-real estate sector to 18.3
in contract construction. Also, stay
out of medium-sized plants; the
safest plants are generally those
employing less than 20 or more
than 2,500 workers.
Measuring the problem
Nonetheless, statisticians differ sig­
nificantly about the extent of the
problem. Estimates of the annual
number of occupationally related
deaths range from 5,900 (Bureau of
Labor Statistics) to 100,000 (Presi­
dent's Report on Occupational
Safety and Health). This dramatic
difference shows the difficulty of
identifying just what we mean by
occupational illness.
1




The BLS number is based upon a
survey of employers and includes
only what they report as occupa­
tionally related deaths. However,
because of long incubation periods
for many industrial illnesses and the
great mobility of the labor force,
the relationship between job and
illness is often tenuous. Coal had
been mined for more than 200 years
in this country before pneumoconi­
osis (black lung) was officially rec­
ognized. The asbestos industry was
a good 40 years old before it was
realized that asbestos fibers can
become imbedded in the lungs and
cause lung cancer. Only in 1974 did
angiosarcoma (a rare liver cancer)
begin to appear among workers
exposed to vinyl chloride—the cor­
nerstone of the 65-year-old plastics
industry. And just this year, poten­
tial genetic damage was traced to
chloroprene, an important ingre­
dient in synthetic rubber since the
1930's.
The basic problem is neither the
maliciousness of employers nor the
carelessness of workers. Rather, it is
a case of medical ignorance accom­
panied by a lack of market incen­
tive to enlightenment. When a new
product is developed, such as as­
bestos or vinyl chloride, employers
are chiefly concerned with meeting
the new public demand, while
workers are mainly concerned with
moving either from unemployment
or low-paid work to the higherpaid jobs in the growing industry.
Individual workers have neither the
training nor resources to test new
(continued on page 2)

Opinions expressed in this newsletter do not
necessarily reflect the views of the management of the
Federal Reserve Bank of San Francisco, nor of the Board
of Governors of the Federal Reserve System.

substances for their effect on hu­
man health. Employers also have
little economic incentive to do so,
since testing is costly both in terms
of actual expenditures and the op­
portunity costs associated with pro­
duction delays.

at rates similar to those of the late
1930's, and this situation plus the
growing attention to occupationally
induced diseases led to demands
for a more effective approach. The
result was the Occupational Safety
and Health Act of 1970.

Liability and legislation
During the nineteenth century a
worker's health and safety was gen­
erally considejed to be his own
responsibility, based upon several
common-law principles. One gov­
erning principle, consistent with a
free-market determination of
wages and working conditions,
held that when a worker accepts a
job he also accepts any risks asso­
ciated with it. But by the early twen­
tieth century the concept of em­
ployer liability emerged in the form
of workmen's compensation legis­
lation. These laws created, on the
part of the employer, an incentive
for accident prevention.

Living with OSHA
The Act established the Occupa­
tional Safety and Health Adminis­
tration in order to improve working
conditions through the creation
and enforcement of health and
safety standards. Labor leaders have
criticized OSHA for being under­
staffed and ineffective, and industry
leaders have criticized it for adopt­
ing unnecessarily stringent stand­
ards and sending unqualified in­
spectors into the field. Such battle
lines are inevitable in what is often
a zero-sum game.

With these laws in place and with
growing attention paid to the costs
of accidents, work-injury rates in
manufacturing declined by almost
half between 1926 and the begin­
ning of World War II. Injury rates
fluctuated considerably thereafter,
falling during peacetime but rising
during war periods such as World
War II and the Vietnam conflict, as a
reflection of the wartime intensifi­
cation of economic activity and the
mass entry of inexperienced work­
ers into the workforce. Indeed, by
1970 work injuries were occurring




New legislative demands arose
during the early 1970's, sparked by
lack of satisfaction with OSHA's
effectiveness— it has established
standards for only a handful of the
30,000 substances now on the
market—and by the recent head­
line stories about kepone and PCB's
(polychlorinated biphenyls). The
result was the Toxic Substances
Control Act, which was signed by
the President last month. The Act
requires manufacturers to notify
the Environmental Protection
Agency 90 days before a chemical is
produced or put to a new signifi­
cant use. The Toxic Substances
Control Office (within EPA) has the
task of reviewing notification forms

for 50 to 1,500 newly developed
chemicals each year and determin­
ing which require testing. The bill
nonetheless was watered down
from its original wording. For exam­
ple, one deleted section of the bill
would have required pre-market
testing of all substances, which
chemical firms claim could cost
$100 to $200 million annually and
slow down the introduction of new
improved products.
How safe? How healthy?
An assessment of the new Toxic
Substances Control Act—along
with its companions, the Environ­
mental Protection Act and the O c­
cupational Safety and Health Act—
really involves two questions. First,
to what extent do we want to take
our productivity gains in the form
of a cleaner environment and a
healthier workplace, as opposed to
higher incomes? To the extent that
the market process fails to translate
individual preferences on this
trade-off into a socially desirable
resolution, the political process be­
comes the appropriate arena for
decision.
But can the market work in these
cases? We know that environmental
damage is external to the price
system and requires a collective
solution, but the situation is not the
same for workplace hazards. When
workers accept employment they
accept a certain wage and a certain
set of working conditions, includ­
ing a level of risk of injury or dis­
ease. If the worker were aware of




another job with a better package
of wage plus job conditions, then
he could move to that job. Theoret­
ically, for any given skill level,
compensating wage premiums
would emerge for jobs with less
desirable working conditions. How­
ever, even in theory, the worker
would not be able to take advan­
tage of those compensating wage
premiums if he were not aware of
the various health risks involved.
So, while workplace hazards are not
externalities like environmental
hazards, the market still does not
reduce them to an optimal level—
nor compensate for them in an
optimal fashion— if workers are not
fully aware of their presence.
But just because a healthier work­
place is a good thing does not mean
that every attempt to achieve that
goal is an equally good thing. That
brings up our second question—are
our present efforts to produce a
healthy workplace (and a clean
environment)—actually efficient?
That is, are the net benefits created
by legislation both positive and
greater than those which could be
created by alternative methods? It's
still too early to tell, although we
should continue to press for an
answer from the people who make
health and safety decisions. The real
payoff may be 20 years down the
road, with the reduction in occupa­
tionally related health problems as
a result of today's research and
standard-setting in the field of toxic
substances and workplace design.
Michael Gorham

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BANKING DATA—TWELFTH FEDERAL RESERVE DISTRICT
(Dollar amounts in millions)
Selected Assets and Liabilities
Large Commercial Banks

Amount
Outstanding
10/20/76

+
+
+
+
+
+
+
+

Loans (gross, adjusted) and investments*
Loans (gross, adjusted)—total
Security loans
Commercial and industrial
Real estate
Consumer instalment
U.S. T re a s u ry s e c u ritie s
O ther 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!
Large negotiable C D ’s

90,212
68,816
1,588
22,356
20,901
11,553
8,758
12,638
90,068
25,809
446
62,364
5,067
28,224
26,745
10,814

Weekly Averages
of Daily Figures

W eek ended
10/20/76

Member Bank Reserve Position
Excess Reserves
Borrowings
Net free(+)/Net borrowed (-)
Federal Funds—Seven Large Banks
Interbank Federal fund transactions
Net purchases (+)/Net sales (-)
Transactions of U.S. security dealers
Net loans (+)/Net borrowings (-)

Change
from
10/13/76

-

+
+
-

+
-

-

616
351
14
170
53
23
118
147
870
923
136
30
22
268
140
238

Change from
year ago
Dollar
Percent
+ 4,274
+ 4,550
+ 727
392
+ 1,249
+ 1,273
+
7
283
+ 3,497
+ 2,088
+
58
+ 1,564
747
+ 6,888
- 3,349
- 5,062

W eek ended
10/13/76
+

-

37
1
38

+

+

12

+

424

+

114

4.97
7.08
84.44
1.72
6.36
12.38
0.08
2.19
4.04
8.80
14.95
2.57
12.85
32.28
11.13
31.88

Comparable
year-ago period

18
0
18

-

+
+
+
+
+
+
+
+
+
+
+
-

+ 1,164

+
+

18
7
11

+ 1,029
+

354

♦Includes items not shown separately, in d iv id u a ls , partnerships and corporations.
Editorial comments may be addressed to the editor (William Burke) or to the author. . . .
Information on this and other publications can be obtained by calling or writing the Public
Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120.
Phone (415) 544-2184.