Wherever you go, business lobby groups are trotting out cookie-cutter reports claiming businesses are folding, jobs are being lost, and the economy is being devastated.
And the cause? The burden of regulation, with health, safety and environmental rules always targeted as top irritants.
The perpetual belly-aching about workplace regulations is packaged the same both sides of the Atlantic, and contains the same claims about the dire impact of employment and safety regulations on business and the economy. It’s a clarion call that gets heard by frequently uncritical government agencies.
The SBA-commissioned report puts the annual cost of environmental regulations at $281 billion. In doing so, it adopts the upper limit of far-and-away the highest estimate in any research considered in the review, which is almost 20 per cent higher than the average figure and 60 per cent higher than the lowest estimate. Still, it’s now a big chunk in the headline figure cited in an oft-quoted government report, including a 27 September 2010 op-ed by the authors in the Wall Street Journal.
SBA puts the annual bill for occupational health and safety laws at $64.8 billion. The authors, Lafayette College economists Nicole V Crain and W Mark Crain, also say “it is noteworthy” their earlier (2005) study found occupational health and safety regulations “were by far the largest element within the workplace regulations category,” making up 53 per cent of the regulatory compliance costs in this category.
In the UK, the British Chambers of Commerce (BCC) produces its own same-problem-same-solutions annual ‘Business burdens’ report. The 2010 edition, published in May, puts the puts the total cumulative cost to business of regulations since 1998 at £88.34bn. Health and safety “burdens” identified in the 2010 report cover regulations providing workers with protection from hazards including explosives, chemicals, work at height, biocidal products, vibration and noise. BCC estimates these safety regulations lead to a combined recurring annual cost to business of £374 million. The cumulative cost since 1998 tots up to £2.963 billion.
There’s just a couple of flies in their deregulatory ointment. The arguments are bogus and the statistics behind them are rigged.
In the US, the SBA report contains this admission: “This research, while mindful of this fact, does not consider the benefits of federal regulations, but looks at the overall costs imposed by them.” And in the UK, BCC relegates to the technical notes an admission that the costs to business identified “are net of the benefits that accrue to business.”
Both sides of the Atlantic, the business lobby discounts entirely the cost paid by the victims of slack health and safety standards. And this human price out-strips the business cost several times over. Analyses from the US, the UK, Australia and elsewhere, cited in Hazards’ 2009 ‘Who pays?’ report, establish how only a small part of the cost is borne by business – the one party with something to gain from cost- and corner-cutting at the expense of safety.
A 2008 analysis by the UK Health and Safety Executive (HSE) concluded: “Although the costs of workplace injuries and work-related ill health are attributable to the activities of the business… the bulk of these costs fell ‘externally’ on individuals and society.”
Compared to the multi-billion annual cost of occupational injuries and diseases, many deadly, protective health and safety laws are really no burden at all. The Hazards report concludes: “Only a minute proportion of cases of occupational injury or disease result either in compensation for the victim or the prosecution of an employer. In cash terms, employers get off lightly. In human terms, employers just don’t suffer at all.”
And while the costs are inflated, the casualties figures are routinely depressed. A 2005 literature review, published in the Journal of Occupational and Environmental Medicine, found in the US both this human and cash cost “is significant but underestimated.” It concluded this was a consequence of the data on the incidence and cost of occupational illness and injury being marred by gaps and systematic methodological flaws in research on the burden of workplace harm. It is a criticism levelled at workplace morbidity and mortality figures in the UK (Hazards 92) and elsewhere.
‘Dangerous li(v)es’, a November 2010 campaign briefing from UK workers’ health and safety magazine Hazards, dismantles the business arguments for deregulation. It says the top bugbear of the UK business lobby is risk assessments, which it claims are petty bureaucracy and a burden. “But if you are too dumb to easily and quickly complete a risk assessment on your own business activities, you are too dumb to run that business,” it comments. It adds that the evidence, far from supporting the business-preferred approach of self-regulation, establishes “two methods are far-and-away the most effective in delivering safer, healthier workplaces – a credible inspection and enforcement regime and worker participation with active trade union involvement.”
The Hazards briefing adds that consigning health and safety enforcers to desk duty means dangerous rogue businesses will escape scrutiny and justice, “particularly those exposing their workers to slow-burn health risks like occupational cancer.”
It dismisses the case regularly trotted out by businesses and cost-conscious government agencies that running a safe, environmentally friendly business doesn’t require regulation and enforcement because “it is just a matter of common sense.” It concludes: “Boardrooms don’t care about demonstrating common sense, they care about demonstrating profitability.” While companies have absolute legal duties to protect the interests of shareholders, they only have heavily qualified duties to protect the health of their workforce and of the environment. “In this dangerously topsy-turvy system, it’s no wonder safety takes a backseat,” it concludes.
So, instead of common sense policing of the business world’s safety villains, the rigged and lop-sided business costings get repeated as fact and form a core part of the deregulatory arguments that shape governmental policy.
For example, the US Chamber of Commerce cites the SBA study as evidence in its ongoing campaign to have regulations, including safety and environment rules, eased and to block planned initiatives. The Chamber’s ‘This way to jobs’ public relations and lobbying push argues for fewer laws and more voluntary initiatives – in its words, ‘compliance assistance’ – on health and safety and the environment. The attack forms an explicit part of the business lobby group’s well-resourced anti-union, anti-regulation ‘Workforce Freedom Initiative’.
And both sides of the Atlantic the business lobby is complaining about a regulatory burden to business competitiveness that does not in fact exist. Out of all the OECD countries, the lowest levels of legal employment protection are found in the USA, Canada and Britain.
If the objective is to make work safer and reduce the related human and economic costs, then regulation and enforcement should be the preferred option.
Commenting on the US Chamber’s campaign, Tom O’Connor, executive director of the National Council for Occupational Safety and Health, a coalition of union backed and grassroots safety groups, said it was rehashing an approach that had failed the economy, the environment and workers’ safety for decades.
‘‘We’ve had a whole generation of deregulation, starting in the Reagan years, and what it brought us was complete financial disaster because of under-regulation of the financial industry, the worst environmental disaster in our history because of inadequate oversight and regulation, and a series of major workplace disasters this year,’’ O’Connor told the Bureau of National Affairs on 19 October 2010. ‘‘So I wouldn’t say that deregulation has done a lot of good for American consumers and American workers.’’
University of Maryland law professor Rena Steinzor believes enforcement is not just the more effective option, it is the more efficient option. Calling on the Obama administration to impart “a sense of urgency to regulatory agencies” protecting health, safety and the environment, she notes: “By far the most important initiative is to reinvigorate enforcement across the board, especially with respect to criminal violations. Enforcement – especially criminal enforcement – produces tremendous bang for limited bucks because it gives white collar executives ample incentive to prevent practices that, quite literally, kill people.”
She adds: “Taking cases of wrongdoing to court pulls the debate down from the ideological stratosphere of ‘big’ government arguments to the hands-on practicality of the ways that greedy executives injure actual men, women and children with impunity.”
Professor Phil James of Middlesex University Business School, in research for HSE published in 2005, concluded “existing evidence suggests that legal regulations and their enforcement constitute a key, and perhaps the most important, driver of director actions in respect of health and safety at work.”
It’s not just that the business argument concentrates solely on the costs rather than the benefits, both business and regulators are inclined to over-estimate the costs and the consequences.
In ‘The going out of business myth’, US group OMB Watch cites a succession of dire warnings about the cost implications of the introduction of workplace safety regulations covering asbestos, cotton dust, vinyl chloride and other highly hazardous substances.
It notes: “The public needs regulatory safeguards to protect our health, safety, environment, civil rights, and welfare. Corporate special interests, however, have an interest in avoiding spending a single dime to improve their destructive behaviour. Again and again, when new regulatory protections have been proposed, corporate lobbyists have argued that business would be bankrupted and forced to go out of business. Again and again, they have been proven wrong.”
Industry estimated the cost of rules requiring benzene emissions to be controlled would be hundreds of thousands of dollars per plant. The availability of safer substitutes meant the actual cost was zero. Asbestos, cotton dust and formaldehyde rules came in at less than half the predicted costs. Vinyl chloride rules cost a quarter the pre-regulation estimate.
‘Cry wolf – predicted costs by industry in the face of new regulations‘, an April 2004 report from the International Chemical Secretariat (ChemSec), found both industry, in resisting regulation, and regulators, through under-estimating the potential for beneficial innovation, over-estimated costs.
It noted: “Most of the statements about compliance costs and difficulties from industry organisations and lobbyists are general and vague. These statements range from claims that regulation will cause the downfall of whole industry sectors to the oft-repeated story of how regulation would drive one particular (usually imaginary) small or medium-sized enterprise out of business.”
David Michaels, author of the award-winning 2008 book ‘Doubt is their product: How industry’s assault on science threatens your health’ which dissected industry inflated cost and deflated risk estimates, and who is now the head of the US government’s Occupational Safety and Health Administration (OSHA), commented: “In field after field, year after year, conclusions that might support regulation are always disputed. Animal data are deemed not relevant, human data not representative, and exposure data not reliable. Whatever the story — workplace chemicals that cause cancer, diesel exhaust, global warming, sugar and obesity, secondhand smoke, plastics chemicals that may disrupt endocrine function — scientists in the ‘product defence industry’ will manufacture uncertainty about it” (Hazards 103).
It’s a toxic, but very deliberate, combination of bad science and bad sums. ChemSec’s ‘Cry Wolf’ report cites a leaked memo from the Washington DC-based crisis management and public relations consultancy firm Nichols-Dezenhall to the American Chemistry Council, regarding growing support in California for the use of the precautionary principle (PP) to control chemicals.
In a ‘Precautionary principle campaign proposal‘, the firm, now known as Dezenhall Resources, lays out a series of “tactics” to resist this preventive approach, including: “Conduct and publicize an economic-impact study to dramatize the potentially devastating impacts to industry and consumers should California broadly adapt PP-based legislation and regulation. The study could specify threats to both innovation and technology-development, as well as provide region-specific breakouts (eg. LA, San Francisco, Silicon Valley, Imperial Valley) so as to create multiple media-pitch opportunities and to generate support among target audiences.”
ChemSec found the industry’s smoke and mirrors “seem to exert an unduly large influence as they are frequently quoted by politicians and included in official background papers.” ChemSec concluded: “The cases studied show that cost estimates from specific interest groups within industry generally overestimates predicted compliance costs and underestimates innovation potential. The study of 25 environmental regulations confirms that regulators, too, tend to overestimate the costs to industry, although their overestimations are not as systematic or as large as those presented by industry.”
Research commissioned by US group Public Citizen and published in 2004 also observed a propensity for regulators to produce inflated estimates. It noted: “Studies, comparing cost projections during consideration of a regulation with actual post-regulatory compliance costs, show that regulators often overestimate costs.” It said when it came to environmental and occupational health and safety regulations, studies showed “most… turn out to be less costly than estimated beforehand.”
The Public Citizen paper concludes: “Regulatory agencies often overestimate the cost of regulatory compliance, sometimes substantially. There are dozens of examples of costs being inflated and the potential for innovation and productivity-enhancing activities ignored. If policy makers are to base decisions on quality work developed by their agencies, then regulatory cost studies need to have accurate information, realistic assumptions, and dynamic analysis.”
It’s not that governments don’t know regulation-lite approaches have deadly consequences. A lack of oversight by official agencies has been implicated in a sequence of occupational and environmental catastrophes, from the Gulf of Mexico to the cancerous clean rooms of microelectronics manufacturers. And studies by official agencies in both the US and the UK have shown businesses take dangerous liberties when left to their own devices, and are far more likely to do the responsible thing when facing a realistic prospect of inspection, enforcement and criminal penalties.
In between disasters, governments forget the evidence and gloss over the crimes and revert back to blind trust and business-friendly talk of health and safety deregulation. Only when the deaths come in a rush and industry’s safety and environmental peccadilloes are in the media spotlight, is common sense briefly restored and talk of responsible inspection and enforcement regimes preferred to blind trust. But responsible enforcement trumps blind trust all the time, not just when the media is showing an interest.
Business over-estimates costs and ignores benefits with a purpose. It doesn’t want regulations and it doesn’t want enforcement. In the deadly scheme of things, lying so they can leave their workforce in the firing line is the least of their money-motivated crimes. Somewhere down the line, people die when regulatory protection is removed. That’s the ultimate capital crime.