Safety regulation and the risk of workplace accidents in Quebec.

• Author: Lanoie, Paul

1. Introduction

   This paper examines the effectiveness of policies adopted by Quebec's occupational safety and health (OSH) authority, the Commission de la Sante et Securite du Travail (CSST), in reducing the incidence of workplace accidents(1) after its creation in 1980. More specifically, data at the industry level (30 industries), and covering the period preceding the creation of the CSST (the "pre-CSST" period 1974-1980) and the period following its creation (the "post-CSST" period 1981-1987), will be used to ascertain, through dummy variable shift effects, whether or not there was a downward trend in accidents after the creation of the CSST in 1980. The analysis follows the methodology proposed be Curington [12] to examine the effect of OSHA (Occupational Safety and and health Administration) regulation on workplace safety in New York State.

   First, it is useful to describe the institutional context. Government intervention in occupational safety and health has gained more and more attention in North America during the last two decades. In the United States, safety regulation is under the responsibility of OSHA, created in 1970 to promote workplace safety by setting numerous new safety standards and implementing measures for the enforcement of standards (inspections of firms, fines ad prosecutions). Canadian provinces followed a similar strategy in the 1970s, while adopting additional safety-enhancing measures not present in the United States. These include the right to refuse hazardous tasks, the creation of joint worksite safety committees, the requirement of a prevention program and the right to protective reassignment. The right to refuse hazardous tasks means that a worker can refuse to execute a certain task if he or she believes it to be "abnormally" dangerous. The immediate supervisor is then asked to remedy the situation and has the onus of proving that safety has been established. Joint worksite safety committees assume the following responsibilities: obtaining and disseminating information on OSHA, identifying the sources of hazard and making recommendations on means of eliminating hazards to the employer. The size of the committees varies from province to province, but equal representation of management and workers is compulsory. A prevention program must meet the approval of the OSHA board and address the training and supervision of workers, inspections, accident investigations, personal protective equipment as well as the maintenance and disclosure of records. In Quebec, prevention programs (as well as the safety committees which implement the programs) are imposed on firms with more than 20 employees in only fifteen high risk industries. Protective reassignment gives a worker the right to be transferred to another job within the same firm if he or she can provide a medical certificate that attests the potential harm his or her job could cause. So far, this right can only be used by pregnant women. The last two measures (prevention programs and protective reassignments) have been adopted only in the province of Quebec where the OSH board has put particular emphasis on accident prevention during recent years. As an illustration, in 1989, the CSST [7] spent $7.88 (U.S.) per worker in prevention activities, while OSHA spent approximately $1.80 (U.S.) per worker in New York State.(2)

   It should also be noted that, in Canada, the government plays the role of an insurer through the presence of provincial public Workers' Compensation Boards (WCBs). In most provinces, including Quebec, workers' compensation and direct regulatory controls are under the responsibility of the same agency. Firms are considered liable for workplace accidents and pay insurance premia to the agency which, in turn, compensates accident victims. Via an experience-rating mechanism, these premia are partially adjusted to reflect the firm's own claim experience. In the United States, workers' compensation services are essentially of the same nature(3), but they are mainly provided by private insurance carriers subject to government regulation.

   So far, American econometric studies using aggregate data have found that OSHA regulation has had little or no impact on workplace safety [11;12;28;29]. No existing analysis, however, has considered the performance of any Canadian OSH board in improving workplace safety. Given that Canadian province have adopted safety-enhancing policies that differ from those of American states, it is of interest to determine whether or not the influence of these innovative policies on Canadian workplace safety has been more substantial than the apparently negligible effect OSHA regulation has had on American workplace safety. The exercise is particularly relevant in the province of Quebec where the CSST has adopted two policies unique in North America.

   The empirical approach suggested by Curington, and adopted here to scrutinize the effect of CSST safety policies, is useful since it allows one to identify the specific industries in which the regulation has had a discernible impact. This is an interesting exercise for policy targeting. Furthermore, it is plausible that there are "industry-specific" effects since the level of CSST enforcement varies from one industry to another (7).

   Apart from the data set, the present analysis differs from Curington's in three respects. First, the empirical work is based on a theoretical principal-agent framework in which the determination of the wage is considered and in which both firms and workers can influence the risk of a work-related accident. These important features are not considered by Curington whose model is based on the firm's side of the problem. The principal-agent framework is justified since it is plausible that the firm cannot observe the risk-related behavior of its workers. For instance, an employer cannot easily monitor whether a worker takes drugs or alcohol. It is also important, in a policy analysis, that both firms and workers be able to influence the risk of accident since their respective risk-related behavior could counterbalance each other (e.g.,workers becoming negligent when the firm increases its investment in safety) and thereby undermine any safety-enhancing policy. As a result, theoretical findings analogous to Curington's are obtained, but from a more general model. Second, in the empirical analysis, a more appropriate measure of workers'compensation benefits defined as the wage replacement ratio (in which the wage is determined endogeneously) is adopted, whereas Curington uses a simpler measure, not directly linked to his theoretical model, based on the maximum insurable income. Finally, this analysis examines the overall impact of CSST policies not only on the frequency of all accidents (the conventional measure of the incidence of workplace accidents), but also on the rate of accidents that have resulted in permanent disabilities. This is motivated by a potential problem of accident reporting. Indeed, as argued by other authors (25), it seems reasonable that the reporting of accidents increased over the period 1974-1987. For instance, since its creation, the CSST has opened eleven regional offices so that accident compensation can be handled locally. It is plausible that such a measure has facilitated the reporting of accidents (7). The fact that the relation between certain illnesses and certain types of jobs has become better known through time can also explain an increase in accident reporting (8). If this is the case, any ameliorating effect of the CSST on the incidence of accidents could be counterbalance be better reporting. However, it is arguable that accidents that generate a permanent disability (such as the loss of a limb) are more likely to have been reported in the same manner through time, attenuating any reporting bias. No researcher has previously examined the effect of safety-enforcing measures on a category of workplace accidents presumably non-biased with respect to accident reporting. Curington, for instance, has a different focus, concentrating on categories of accidents that have a better chance of being prevented through safety regulation (such as "struck by" or eye injuries).[4]

   The test of the paper is organized as follows: Section II presents the theoretical model underlying the empirical analysis. Section III discusses the estimation technique, the data and the specification of the equations to be estimated. Section IV...