South-Western College Publishing - Economics  
The Economics of Ergonomics
Subject Public choice
Topic Market Failure, Regulation, and Public Choice
Key Words Rules, employers, hazards, pay and benefits, cost-effective, jobs, benefits, costs
News Story

The Clinton Administration is to propose new rules to protect workers from the effects of repetitive strain injuries caused by repetitive motion, climbing, crawling, bending and overexertion. Employers will have to have ergonomics programs: the health risks of various jobs will have to be analyzed; where there are hazards, the jobs will have to be redesigned, and employees will have to have treatment for work-related medical problems. Employers will also be required to provide full pay and benefits for six months to workers who are removed or reassigned due to their injuries.

The Occupational Health and Safety Administration believes that the rules will be cost-effective, reducing for example strains and sprains, lower back pain, carpal tunnel syndrome and hernias by 32,000 to 95,000 injuries each year. Employers would have to fix 4.5 million jobs in the first year and fewer thereafter. The total cost of the rules would be $3.5 billion in the first year.

Critics include business groups who say the rules are too expensive relative to the benefits. The Small Business Administration believes that the first-year cost will be more like $18 billion, partly due to the guarantee of full pay and benefits for injured workers. While the House delayed the rules pending further research, the Senate did not act, so the President is free to act.

(Updated January 1, 2000)

Questions
1. Employers argue that the cost of the rules will be high. Opportunity costs comprise direct and indirect costs.
  a) What kinds of direct costs will they incur?
  b) What kinds of indirect costs will they have to absorb?
2. Workers in jobs susceptible to repetitive strain injuries are likely to see benefits. What will they be?
3. Business groups successfully convinced the House to delay the introduction of the rules.
  a) Why might employers have exhibited a low demand for ergonomics rules?
  b) Why might have voters had a relatively high demand for such rules?
  c) Why might politicians have been willing to side with business groups? Refer to the distribution of the costs and benefits and the ability of different groups to mount opposition or show support.
4. In the long run, are the employers likely to see the benefits of the rules exceed the costs? Examine the case for and against.
Source Robert Pear, "After Long Delay, U.S. Plans to Issue Ergonomic Rules," The New York Times, November 22, 1999.

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