What's Deadlier, A Toxic Workplace Or Low Pay?

Lewis Carroll is alive and well and working at the Office of Management & Budget. At least that's the view of some economists, labor leaders, and lawmakers, who see shades of Alice in Wonderland in the OMB's new assault on regulation. The White House regulatory cops, seemingly turning logic on its head, are now saying that rules to cut toxic emissions in factories may increase worker deaths.

The OMB made its startling suggestion in a Mar. 10 letter that asked the Labor Dept. for additional analysis of new chemical-exposure limits proposed by the Occupational Safety & Health Administration. The OMB wants OSHA to use a novel twist on cost-benefit analysis called "risk-risk analysis." It assumes that higher incomes reduce mortality rates. And, since the money that companies spend to comply with rules comes out of workers' paychecks, rule makers should compare the risk of death from exposure to toxics with the risk of fatalities from reduced earnings. "We want to make sure we are helping more people than we are hurting," OMB regulatory chief James B. MacRae Jr. explained at a Mar. 19 congressional hearing.

Applying that philosophy broadly, as MacRae suggested the OMB might, could defang dozens of federal rules that impose costs on business. In the coming months, the OMB could move against any number of regulations from agencies ranging from the Environmental Protection Agency to the Food & Drug Administration (table).

The OMB's new course isn't a sure thing: Risk-risk analysis faces both legal and economic scrutiny. Some laws bar agencies from using any form of cost-benefit analysis. And experts say that while the concept may be sound, the data it's based on are dubious.

UNDER REVIEW. But even if risk-risk analysis flops, the OMB seems intent on doing its part to halt the government's regulatory juggernaut. As indicated in January, when the President slapped a 90-day moratorium on new rules and ordered a review that threatens existing ones, the Administration is looking to shore up business and conservative support this election year.

The current flap started in February, when the OMB reviewed a proposed OSHA rule limiting the exposure of some 6 million workers in the construction, maritime, and agriculture industries to lead, asphalt fumes, and hundreds of other toxic substances. The budget office vowed to hold up publication of the rule until OSHA considered the effect of the projected $163 million in compliance costs on workers' health. MacRae saw the rule as a chance to apply a theory mentioned in a 1991 decision by the U.S. Court of Appeals in Washington. It cited an article by Ralph L. Keeney, a University of Southern California systems management professor, that supposedly showed that each $7.5 million in regulatory costs may result in an additional death from lowered incomes.

But the OMB may be overreaching. The U.S. Supreme Court ruled in 1981 that federal law barred OSHA from applying cost-benefit analysis to health rules. MacRae, who declined comment, told Congress that risk-risk analysis is different and therefore permissible.

The OMB may be on firmer ground with other agencies, which are allowed to use cost-benefit analysis. But economists concede that calculating the direct costs to companies for compliance and direct benefits, including savings from fewer deaths and illnesses and increased productivity, is hardly an exact science. Toting up indirect costs would involve even more guesswork. The data would be "incredibly imprecise," warns John F. Cogan, a top OMB official in the ReaganAdministration.

Worse, although OMB officials say they have been studying the risk-risk issue for months, the $7.5 million figure MacRae cited is wrong. Keeney's figure was $7.25 million. And Duke University economist W. Kip Viscusi, another expert cited by the OMB, says that choosing a figure based on one study is "almost like picking a number out of the air."

Nor did MacRae know of a disclaimer Keeney placed in an earlier draft of his article in Risk Assessment that said: "Warning! Calculations that follow are for illustrative purposes only. Any attempt to use the results of these calculations to support or oppose a proposed regulation, program, or expenditure is absolutely inappropriate."

Keeney ended up using a shorter disclaimer but insists his number is a good one--better than those often used in calculating health hazards. The effect of income on mortality, he notes, "is not extrapolated from rats." If the effects aren't considered, he adds, "some of our regulations may take many lives in attempting to save a few."

OLD FIGURES. Many economists, including some cited by the OMB, have problems with his approach, however. Jack Hadley, co-director of Georgetown University's Center for Health Policy Studies, for example, is troubled that Keeney relied on 1960 data--a shortcoming Keeney acknowledges. That was before advances in medical technology and broader availability of medical insurance, which may have altered the income-mortality curve.

Indeed, while Hadley's own early studies suggested that higher incomes were linked to lower death rates, his later research showed the relationship "became more tenuous." He's not sure why. At best, argues economist Wayne Gray of Clark University, it can be hard to tell whether people are sick because they are poor or poor because they're sick. Hadley and others also note that the OMB failed to calculate the increased wealth for workers at companies that provide emission-control equipment. That could partly offset the costs for workers in the regulated industries.

The OMB and Labor, meantime, have reached a compromise: The OMB will process OSHA's proposal, and Labor will consider the questions the OMB wants answered. The OMB still has to grapple with politics, though, and both Democrats and Republicans are aghast at risk-risk analysis. As Senator James M. Jeffords (R-Vt.) said recently, the OMB should "pull it back and bury it somewhere." Yet even if the OMB retreats, its antiregulation war is bound to continue. Predicts Margaret Seminario, the AFL-CIO's health specialist: "They'll be back."

      OSHAProposed rule to set workplace exposure limits for hundreds of toxic 
      substances. Estimated cost: $163 million a year
      FDAFinal food labeling rules on the use of such terms as 'light' and 'low-fat' 
      and defining allowable health claims. Estimated cost: $1.5 billion
      ENERGYFeasibility study for construction of an underground storage facility to 
      contain spent nuclear fuel. Estimated cost: $8.7 billion
      EPAProposed rule to limit toxic emissions from chemical plants to levels 
      achieved by the top 12% plants. Estimated cost: $234 million a year
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