How not to save lives

Dr Bryce Wilkinson
The National Business Review
20 October, 2017

In the DC comic story, a flying Superman spies Lois Lane tied across a railroad line. A fast-moving passenger train is but metres away. Superman swoops down. With a single out-stretched arm he stops the iron monster dead in its tracks. He has saved Lois. What else could matter?

Well, the comic book did not do a cost-benefit assessment. But the plausible tally is one life saved and hundreds killed or injured in the concertinaed train.

Enter WorkSafe NZ. Its vision is that “everyone who goes to work comes home healthy and safe.” Good for it but at what cost? In November 2011, it launched a safety campaign. It aimed to reduce workplace falls from heights of less than three metres. Single-storey dwellings are particularly affected.

It has pursued its campaign with a vigour that would be commendable were it spending its own money. But it is not. It's spending homeowners’ money.

The cost is big. A BRANZ study in 2014 put it at $1 billion over 25 years (discounted at 6% a year). In a July 2015 research note we cited the case the case of a Kapiti coast woman whose $4000 roofing job had become a $6000 job. The campaign caused the extra cost.

Such cost increases hit the least well-off owners hardest. Most dwellings in New Zealand are already ill-maintained, according to BRANZ surveys. In 2013, it put the shortfall at 38% of income for those with earning between $10,000 and $20,000. This group owned 81,000 homes, 5% of the national housing stock. BRANZ feared these dwellings were on a path to demolition.

Making roof repairs and repainting more expensive could worsen these statistics. More homes could deteriorate and become unhealthy.

Unacceptable costs

What about safety? Should cost be immaterial if lives are being saved? Not outside comic book fiction. Banning cars would slash the road toll. But the cost would be unacceptable. Our note calculated that spending billion dollars on road safety could provide three times the safety benefits from reduced fatalities and injuries.

Officials should assess value for money before launching a campaign. They did not do so. That is a prime concern. It meant ministers could not make a well-informed value-for-money decision. And how can officials inform them if they have not addressed the issue? It is as if they don’t care.

In The New Zealand Initiative’s view this is irresponsible. Governments should not spend citizens’ money, directly or by regulatory fiat, without a competent value-for-money justification.

In June this year, we obtained a copy of WorkSafe NZ’s briefing to its minister about our July 2015 research note. It shocked us. It did not even tell him a key concern was the absence of a proper evaluation before the campaign’s launch. Instead it disparaged our report, grossly misrepresenting along the way.

The briefing claimed our report said that: “Firms would have sufficient incentives to put in place safety systems in the absence of regulation." It did not. It actually offered two reasons why they might underspend on safety. It showed the campaign was not a likely remedy for either.

Homely example

To claim employers and employees will be better off if they do something does not justify forcing them to do it. A homely example might illustrate the point. Most of us wear warm clothing when out of doors on a wintry day. Someone might do a cost-benefit analysis to show why it is in our interests to do so. That calculation does not justify an enforcing regulation.

WorkSafe’s briefing asserted that people who lack full knowledge cannot make wise decisions. Also, there can be frictions between bosses and employees. Well, everyone lacks full knowledge, and frictions exist in most human interactions. Such points are irrelevant. The relevant question is whether the campaign makes imperfect outcomes better or worse.

On Wednesday, officials released a cost-benefit assessment by the NZIER. It found the new build single storey costs of the safety campaign exceeded the benefits. The benefit to cost ratio was 0.63 or 0.71.

This finding vindicates our concerns in 2015. Why the delay? The NZIER was contracted in June 2015 to provide its report by November 2015. That report was to encompass repairs and maintenance work. The 2017 report did not. Why not? Every homeowner would have been interested.

In June 2017, the Ministry of Business, Innovation and Employment declined to release the NZIER report or two earlier drafts. Its reason was that it was to be released “soon.” Perhaps it took the OIA request to finalise it?

Officials have failed the community. Sorry Superman, sorry WorkSafe. Good intentions are not good enough. Rigorous evaluations of value-for-money before launch should be mandatory. When spending money better elsewhere can save more lives, that is more important than saving face. Irresponsible campaigns should stop.

Stay in the loop: Subscribe to updates