www.cos-mag.com
May 25, 2012

U.S. study finds financial benefit from safety inspections

By Linda Johnson
Random workplace inspections not only reduce injuries but also have no negative impact on a company’s performance and profits, a new study concludes.
The study, published in the journal Science, examined workplace safety inspections conducted between 1996 and 2006 by California’s Division of Occupational Safety and Health (Cal/OSHA) and was written by Harvard Business School professor Michael Toffel; David Levine, professor at the Haas School of Business at the University of California, Berkeley; and Boston University doctoral student Matthew Johnson.

The study found that, within high-hazard industries in California, inspected workplaces reduced their injury claims by 9.4 per cent and saved 26 per cent on workers’ compensation costs in the four years following the inspection, compared with a similar set of uninspected workplaces. On average, inspected firms saved an estimated US$355,000 in injury claims and compensation for paid lost work over that period. The study also showed random inspections had no discernible impact on companies’ profits.

“We spent several years collecting data, not just on injuries, which is very important, but also on other indicators to see whether inspections led to problems they are often accused of causing — like whether they increased costs and led to the elimination of jobs. We looked at company survival, employment, sales and total payroll to see if inspections were detrimental to the employers,” said Levine.

Looking at all those indicators, researchers saw no evidence that inspections cause harm, Toffel said.

“If OSHA inspections conducted in all 50 states are as valuable as the ones we studied, inspections improve safety worth roughly US$6 billion to employers and employees, ignoring pain and suffering. The overall message of our research is that these inspections worked pretty much the way one would hope. They improved safety, and they didn’t cost firms enough that we could detect it.”

Barrie Harrison, spokesperson for the Alberta Ministry of Labour, said the study’s results come as no surprise. The ministry conducts more than 10,000 random inspections annually and believes they produce positive results. Workplaces are safer in part because companies must always keep in mind that an OHS officer may show up at their door without warning.

“But it’s also part of a culture shift in our province — companies for the most part do not wait for that risk of us showing up before making their companies safer. And we’re seeing that,” he said.

In making inspection policy, he added, the ministry does not consider company profits. While it wants all businesses to succeed, the cost of OHS to employers plays no role in its inspection mechanism.

“If you cannot protect your workers to the standards we expect — and if that means you cannot keep your doors open for business — then so be it,” he said.

Though the ministry relies heavily on random inspection, it has found that providing some warning can also be very effective. During focused safety inspections, it announces in advance which industry it plans to target over the coming four to six weeks. Companies then know there’s a higher chance than usual that an OHS inspector will visit.

In addition to raising awareness of safety issues in the targeted industry and showing the ministry takes OHS seriously, Harrison said, focused inspections increase compliance.

“If we’re targeting residential construction, for example, it’s not feasible that we can visit every company. But, hopefully, just the fact there’s an increased chance of our showing up is enough for all companies to make sure they’re following the law,” he said.

“Most companies recognize that it’s in their best interest to follow the law rather than face the risk of us shutting them down because that in itself costs them money.”

The study looked at inspections done in accordance with a mandate issued by California in 1993 requiring Cal/OSHA to conduct some workplace inspections at random. Before then, most inspections were done following complaints or accidents, and it was thus difficult to determine whether the inspections helped increase safety.

“By studying the inspections Cal/OSHA conducted at workplaces selected at random, we were able to overcome this problem to learn the actual impact of inspections,” Toffel said.

Dr. Sheilah Hogg-Johnson, interim scientific director and senior scientist at Toronto-based Institute for Work and Health, described the study as quite thoughtful. She said random inspections produce more accurate results because companies cannot prepare in advance. “Inspectors would see the state of the workplace and how it works day to day, so they would be able to observe what actually happens.”

The Ontario Ministry of Labour is approaching inspections in several ways, Hogg-Johnson said. In 2004, they hired 200 inspectors, doubling their number, and increased the rate of inspections. Like Alberta, they often do publicized, targeted campaigns. They may, for example, announce a “blitz” on cranes and go out and inspect all cranes on construction sites.

“They also use field intelligence — the inspectors’ intelligence — and information they get about injury rates to make selections of where they inspect. Some of these are not announced a priori, and the inspectors will just show up and do their inspections,” she said.

Hogg-Johnson is currently working on a study on inspections that compares firms targeted for inspection, firms targeted by health and safety associations for consultation and ones not targeted at all. She expects to have results later this year.