Last week the government announced a comprehensive review of the country's Workplace Health and Safety regulation. There are good reasons for it to do so.  

The current legislation is overly prescriptive. Businesses and workers must comply with a plethora of procedures. The incentives to ensure that the benefits to those affected exceed the costs seem to be very weak. Expressed differently, well-being is not a focus. 

(A benefit is an increase in well-being, as perceived by the person affected. A cost is a negative benefit. So when perceived benefits exceed the costs, well-being is improved.  People who oppose cost-benefit analysis do not understand that they thereby oppose well-being assessments.) 

The focus on greater safety as a goal in its own right is of the same ilk. Safety contributes to well-being, but not in lock-step. People who drive cars put themselves at risk because what they are doing improves their well-being. As do those who play body-contact sports, ski, or work in risky occupations.  

There is substantial economic literature on how much more workers get paid for riskier work. It is significant. The trade-off is real. Greater safety is not the only goal. 

What this means is that businesses forced to make jobs safer will find themselves paying workers less. This is another trade-off. Businesses can compete for workers by offering a range of options as between wage rates and safety. Workers can choose according to their own risk-wage rate preferences. 

In contrast, the current system has a silo safety focus. It is not a well-being focus. For example, the Health and Safety at Work Act 2015) aspires that: 
 

“… workers and other persons should be given the highest level of protection against harm to their health, safety, and welfare from hazards and risks arising from work or from specified types of plant as is reasonably practicable”.  

Worker preferences are irrelevant, and determining what is “reasonably practicable” is a can of worms. 

So how did New Zealand get to this point?  In 1974, government replaced a well-behaved tort system for penalising negligence by a no-fault Accident Compensation scheme. That was bad for safety. So what has evolved to restore business liability is the current wasteful regulatory excess. That multitude of wasteful orange traffic cones is just the most visible aspect. 

That is why the Government’s announcement last week is so welcome.