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Don’t regulate health and safety

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Don’t regulate health and safety

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Academic studies show that OSHA has done little to improve the health and safety of America’s workers. For that reason alone it should probably be abolished. But even if it did improve the health and safety of America’s workers, it should still be abolished. That’s because there’s no market failure here large enough to justify costly and intrusive regulation.

Companies have an incentive to provide the optimal level of health and safety, because workers will demand higher wages where there are dangerous working conditions. If the safety situation can be improved at a cost lower than the extra wage bill, then firms will have an incentive to do so. If it cannot, then they should not do so.

Here’s Noah Smith:

Waiving legal liability would simply discourage companies in essential industries, such as grocery stores or delivery services, from providing their workers with adequate protection equipment. That in turn would raise the amount of compensation that workers demand in exchange for staying on the job, making it harder for essential businesses to stay open.

Actually, companies are more likely to remain open if they are able to voluntarily choose the most cost effective method of producing their goods and services.  Smith is right that companies would have to pay higher wages for unsafe working conditions, but that’s precisely why there is no market failure calling for regulation.

Some people might disagree with Smith’s claim that companies would have to pay higher wages.  One argument is that information is “asymmetric”.  Companies understand the risk while workers do not.  In that case, there may be an argument for legal liability.  But it seems very unlikely that companies know more about the risk of Covid-19 than do workers.  Nor is there any reason to assume that workers underestimate the risk, on average.  Firms should be allowed to have employees sign a contract promising not to sue if they contract Covid-19 (in which case it would be basically impossible to know where they caught the disease in any case.)

America has a lot of economic problems right now.  The last thing we need is our courts to be tied up with hundreds of thousands of lawsuits from workers who became sick with coronavirus from God knows where, bankrupting our small businesses that are already reeling from this economic crisis.  That would be crazy.

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