VSL and Labor Market Competition.

• Author: Kniesner, Thomas J.
• Position: SPECIAL SECTION - Value of a statistical life

The Biden administration has articulated several shifts in microeconomic policy emphasis. Among the most prominent concerns is the role of possible noncompetitive forces in labor markets, which have implications for equity and efficiency as well as for updating the regulatory review process to incorporate noncompetitive influences. The concerns are articulated in two presidential executive orders: EO 14036, intended to mitigate noncompetitive forces in product and labor markets, and EO 14094, intended to include recent research developments in the regulatory review process.

Our focus here is on whether the administration's view that there are noncompetitive labor market influences also leads to downward biases in the value of a statistical life (VSL) used to monetize mortality risks in regulatory impact analysis. The VSL suggested for use by the Office of Management and Budget in the latest proposed draft of Circular A-4 is in the $10 million to $12 million range and is to be adjusted regularly for inflation and real income growth. The new issue raised by concern with noncompetitive forces is whether there is a need for additional correction for possible employer monopsony power. Based on our examinations of the VSL in different labor market contexts, we do not find that there is any current rationale for increasing the VSL to account for possible noncompetitive forces.

VSL and labor market noncompetition / The U.S. Treasury has produced a lengthy report on estimates of the amount of labor market noncompetition in the United States. The report does not document any inequity and inefficiency consequences from this noncompetition, but instead jumps straight to policy recommendations that go so far as to have the Department of Justice pursue criminal cases against employers. Most recently the general counsel of the National Labor Relations Board issued a memo stating her opinion that noncompete provisions in employment contracts and severance agreements most typically violate the National Labor Relations Act. Our concern here follows a different thread of the labor market effects of noncompetition, which is whether it biases downward the estimates of the VSL, which in turn reduces the assessed benefits of risk regulations.

It is useful to review how labor markets work. Jobs have many different attributes, including the wage rate and the fatality rate. Workers considering jobs will face a variety of employment possibilities. The best wage...