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Job Killer? Try Bottom Line Booster: Workplace Safety Inspections Save Money, Jobs, Limbs

The views expressed are those of the author and are not necessarily those of Scientific American.


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Image courtesy of iStockphoto/lisafx

Costly safety upgrades, nitpicky government inspection and resulting fines are often blamed as being bad for business. But a new study shows that when government job-safety inspectors make a surprise visit, they actually enable companies to save money—and jobs—for years to come.

Occupational safety has improved immensely over the decades, but in industries with traditionally high injury rates, such as manufacturing, lumber or food processing, work is still dangerous, putting employees at risk and leaving employers vulnerable to expensive accidents. But how much can just one safety inspection help?

Quite a bit, the new analysis suggests: Just one inspection saved companies 26 percent on workers compensation claims over five years.

Of 818 companies with more than 10 employees, the 409 that were randomly selected for inspections saved an average of $355,000 over five years in worker injury claims and compensation at each firm, compared with the other 409 similar companies that were not inspected.

And that’s no small potatoes for most of these places of business. In the sample, that savings worked out to be about 14 percent of the average annual payroll of these companies. What’s more, this added focus on safety did not lower company profits or workforce size. The findings were published online May 17 in Science.

Studying the economic impact of safety inspections on businesses can be tricky because most checks target companies that have had violations or complaints, thus skewing the sample. For this study, however, the researchers took advantage of a program started in the 1990s in California’s Division of Occupational Safety and Health Administration (Cal/OSHA), which conducts some of its inspections at random—not just at workplaces with recent complaints or accidents. “The randomized inspections provided a perfect natural experiment that uses the power of randomization just like a medical clinical trial,” Michael Toffel, Harvard Business School professor and co-author of the new paper, said in a prepared statement. This sample allowed them to assess the actual impact of inspections on operating costs, credit rating, job retention, company survival and sales, the researchers noted.

“Across the numerous outcomes we looked at, we never saw any evidence of inspections causing harms,” Toffel said. In the sample, they actually saw slight gains in firm survival, payroll, creditworthiness, sales and employment in the companies that had been inspected.

If these randomized inspections were rolled out to businesses across the country, the researchers estimate that they would save some $6 billion—not to mention the physical and psychological harms of workplace injury and death.

The takeaway message, Toffel said, is that the inspections succeeded in improving safety without appreciably increasing the cost of doing business. And that random, mandatory inspections are a worthwhile investment rather than voluntary compliance programs. Further research, they assert, should look more closely at what types and sizes of businesses benefited the most from random inspections so that OSHA can target its work most effectively. Until then, maybe those government inspectors shouldn’t be so much maligned.

Katherine Harmon Courage About the Author: Katherine Harmon Courage is a freelance writer and contributing editor for Scientific American. Her book Octopus! The Most Mysterious Creature In the Sea is out now from Penguin/Current. Follow on Twitter @KHCourage.

The views expressed are those of the author and are not necessarily those of Scientific American.





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  1. 1. profitsgood 4:38 pm 05/17/2012

    The presented savings must exclude all the EEOC and ADA law suits expenses. Agencies and lawyers can bring suit against any business no matter how big or how small without even having a complaint.

    ADA – any lawyer can bring a suit against the local city pool or a single YMCA pool or a motel hot tub – they are all required to have a automated lift to allow wheelchair bound citizens to have equal access in and out of the pools. Oh yes the lawyer gets paid by the government even if his efforts lose in court.

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  2. 2. quincykim 9:44 pm 05/17/2012

    profitsgood: This article is about OSHA and workplace safety for employees, not ADA or Equal Opportunity issues.

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  3. 3. drafter 11:23 am 05/18/2012

    I’m not denying the benifits of OSHA however the problem I see with studies like this is just because a safety inspection found an incorrect item does not mean that a tragedy would have always occurred and thus justify all of the cost to conform to OSHA, especially since OSHA also cover things like the, not always correct for everyone, ergonomics of everything from chairs and leaf rakes.

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  4. 4. denke42 3:21 pm 05/18/2012

    drafter: “Of 818 companies with more than 10 employees, the 409 that were randomly selected for inspections saved an average of $355,000 over five years in worker injury claims and compensation at each firm, compared with the other 409 similar companies that were not inspected…savings worked out to be about 14 percent of the average annual payroll of these companies. What’s more, this added focus on safety did not lower company profits or workforce size.”

    There is no speculation there about tragedies that might have occurred. It’s pretty simple: inspected companies saved money.

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  5. 5. jdelahunt 4:12 pm 05/18/2012

    > It’s pretty simple: inspected companies saved money.

    Actually, according to the study, none of the findings had statistical significance. Even the authors recognize this – “The estimates in table 2 imply that we can be 95% certain that the mean establishment either grows payroll or experiences a decline of less than $221,000 over the five years after the inspection,” and “these calculations imply that employees almost surely gain from Cal/OSHA inspections.” Note well: “imply,” “almost surely,” etc.

    The $6B number appears to exclude the cost to taxpayers of hiring the legions of inspectors (and their supervisors) required to implement the random inspection process. Nor does it include the costs to employers for operating safely, but not OSHA’s way. Hidden costs are still costs.

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  6. 6. Bob32 11:26 pm 05/18/2012

    It was personally gratifying since the beginning of OSHA to see accident rates and health hazards reduced. Inspections, often made by in house safety committees, resulted in savings both because of reduced accident and job related health issues. Insurance costs were also reduced. Often the negative rants re. increased costs are the result of management bias and ignorance finding it difficult to recognize the positive benefits of a system which has worked. Of course it takes effort, cooperation and good will of workers and management to make a safety program work and recognize its benefits.

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  7. 7. HubertB 10:45 am 05/19/2012

    In one food processing facility the Health Department inspector, agricultural department inspector, FDA inspector, and a whole bunch of other inspectors all required managerial time as each inspector toured the facility and did the individual inspection. Nothing is wrong with inspections. However, why can’t the government have one inspector capable of doing a thorough job instead of a whole lot of little nitpickers?

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  8. 8. jdelahunt 4:23 pm 05/19/2012

    Try training and retaining a thorough inspector, Hubert. Also, each of the agencies has their own enabling legislation and their own administrative feifdoms. Agency bureaucrats will be unwilling to relinquish their empires, even if the Congress sees its way clear to re-building the safety/health/quality/etc infrastructure.

    And getting Congress to rebuild the process requires doing actual science and getting past studies like these, which mislead people into thinking that regulation creates growth. Whether the companies in this study saw increased (or decreased, it turns out – the study shows that companies lost payroll post inspection) payrolls in the years post-inspection is not in question. Whether they saw those changes BECAUSE of safety inspections is not even close to clearly demonstrated here.

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  9. 9. kenapercu 5:20 pm 05/19/2012

    Hopefully, the message that safety is valuable is heard loud and clear. Back in the Day, yes, I remember it well. In April, 1994, Labor Secretary Robert Reich, flew to Oklahoma to personally levy a $7.5 million fine against Japaanese-owned Bridgestone/Firestone. Reich charged that “outrageous” and “offensive” safety violations led to the death of 53-year-old Robert Julian and left nearly 1,100 other workers in danger. In case you don’t remember, Julian was leaning over to adjust a tiremaking machine when it suddenly clicked on. Parts that normally squeeze the rubber like a giant nutcracker caught his head and crushed it. See, he was trying to clear the machine from a tire that was stuck on the assembly line, but there was no STOP switch–Bridgestone thought cost too much to stop the line, and that workers just might use the switch to take breaks from work.

    It took Mr. Julian a day or two to die. He wasn’t the first, nor was he the last to be crushed by the tiremaking machine. Other workers at the factory, which produced 35,000 tires a day in round-the-clock shifts, had ended up with mangled arms or lost fingers in the last several months before Mr. Julian’s death, according to Labor Department records.

    Reich’s blistering rhetoric surprised even labor leaders, who were disappointed that the Clinton administration hadn’t been any tougher on enforcing safety laws than the Bush administration.

    But while Reich’s sudden appearance at the gates of the tire plant was meant to signal the beginning of a crackdown, at a time when the cost of workplace accidents were rising, to a federal estimate of $115 billion a year in worker compensation payments, health insurance claims and lost productivity, the Clinton administration blinked first.

    END OF THE STORY: Bridgestone basically told the Clinton Administration to shove it. The plant was closed. The labor unions that decried the lack of enforcement changed their minds and begged D.C. to ignore the deaths and injuries and the fact that Bridgestone refused to install the less than $100 stop-switch. The message from the community was loud and clear, let those 1,100 dues-paying people go back to work. “It’s the economy stupid.” Oklahoma needed the jobs and was willing to ignore the danger.

    If the same circumstances happened today, what do you think would happen? Have our priorities really changed?

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  10. 10. Mikek 12:45 am 05/23/2012

    The one thing I like about the Chinese government is if they find that management is responsible for deaths of workers or consumers, management finds itself in prison or in front of a firing squad. None of this pay a fine and maybe we will fix it later crap.

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