OSHA regulations result in annual compliance costs of between $6.2 billion ... cost estimate of $35,000 per ¢rm (the full cost of compliance for small ¢rms.
Policy Sciences 31: 321^341, 1998. ß 1998 Kluwer Academic Publishers. Printed in the Netherlands.
Estimating OSHA compliance costs HARVEY S. JAMES JR. University of Hartford, Department of Economics, 200 Bloom¢eld Ave,West Hartford, CT 06117, U.S.A.
Introduction The Occupational Safety and Health Act of 1970 authorized the secretary of labor to establish the Occupational Safety and Health Administration (OSHA). OSHA's legal mandate requires that an employer `furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.' Accordingly, OSHA is authorized to set `mandatory occupational safety and health standards applicable to businesses a¡ecting interstate commerce' through public rule making.1 In particular, OSHA may regulate workplace practices and environments, inspect workplaces for hazards, issue citations, and require that noncompliant businesses pay penalties. In 1995, OSHA employed an estimated 2,323 employees and had an operating budget of approximately $315 million.2 This study estimates the economic costs of OSHA regulations on the U.S. economy and provides a basis for establishing a regulatory budget for the Occupational Safety and Health Administration using cost ¢gures provided by OSHA.3 The analysis is based on an examination of the regulatory impact analyses (RIAs) of new rules published by OSHA after 1980. The advantage of this study is that it examines the incremental cost of individual OSHA regulatory programs. The ¢ndings suggest that previous studies substantially underestimate the true economic burden of OSHA regulations. Speci¢cally, the total annual cost of compliance with OSHA's regulations in 1993 are estimated at approximately $33 billion. This cost estimate is approximately three times the highest ¢gure estimated in previous studies of OSHA. As a point of comparison, the estimated annual compliance costs of Environmental Protection Agency (EPA) regulations, including annual capital expenditures and operating expenses, totaled $109 billion in 1993.4 While environmental regulation continues to be one of the greatest sources of compliance expenditures for U.S. business establishments,5 the relative impact of OSHA's regulations is not insigni¢cant. The economic burden of OSHA on the U.S. economy is remarkable, since OSHA operates with a sta¡ that is one-eighth the size of the EPA's and has an operating budget that is 15 times smaller than that of the EPA.
322 Previous estimates of the compliance burden of OSHA regulations Only a handful of studies have attempted to estimate the total compliance costs of OSHA regulations on the U.S. economy.6 These studies, summarized in Table 1, provide a wide-range of cost estimates. In particular, they indicate that OSHA regulations result in annual compliance costs of between $6.2 billion and $13.5 billion (1993 dollars). Each study focuses on a di¡erent time period and utilizes a di¡erent approach in constructing compliance costs. Denison and Crandall examined capital expenditures required by health and safety regulations, McGraw-Hill surveyed ¢rms to estimate their investment expenditures for compliance with OSHA regulations, and Viscusi estimated the present value of ¢nal OSHA rules using cost estimates provided by the U.S. O¤ce of Management and Budget. Denison's study, for instance, calculates the capital costs (depreciation and net opportunity cost of invested capital) required for new safety features on automobiles and OSHA regulations promulgated prior to 1975. He arrived at his estimates by assuming that the ratio of capital expenditures for OSHA compliance to annual capital costs was the same as the ratio of air and water pollution abatement capital outlays to annual capital expenditures. Denison's report also included estimates of productivity changes due to mining safety in his cost estimates. An analysis of the projected costs of speci¢c regulations proposed by OSHA between 1975 and 1980 provides additional evidence of the regulatory burden of OSHA standards on the U.S. economy.7 As indicated in Table 2, proposed OSHA rules were projected by Litan and Nordhaus to result in additional compliance costs by a¡ected companies of between $27 billion and $73 billion. These cost projections are based on OSHA-commissioned cost studies. It should be noted that most of the expected compliance costs from rules promulgated during this period arise from only one major rule ^ OSHA's proposed ruling governing generic carcinogens.8 A study prepared by the National Association of Manufacturers (NAM) in 1974, summarized in Table 3, provides additional estimates of OSHA compliance costs.9 The study ¢nds that the cost of compliance for small manufacTable 1. Previous studies of total employee safety and health compliance costs (billions of dollars). Study name
Year studied
Cost (current dollars)
Cost (1993 dollars)
Denison McGraw-Hill survey Crandall Viscusi
1975 1976 1985 1989
4.1 3.2 8.5 12.7
8.4 6.2 9.8 13.5
Sources: Various studies.
323 Table 2. Estimated total cost of OSHA regulations proposed between 1975 and 1980 (billions of dollars). Proposed regulation
Cost (1977 dollars)
Cost (1993 dollars)
Generic carcinogens Benzene Cotton dust Noise Other
11^35 0.5 0.7 2.0 0.9^1.1
20.1^65.9 0.9 1.3 3.7 1.6^2.0
Total
15.2^40.3
27.8^73.8
Source: Adated from R. E. Litan and W. D. Nordhaus, Reforming Federal Regulation (New Haven, Conn.: Yale University Press, 1983), p. 26, Table 2.8.
Table 3. Estimated compliance cost per ¢rm of OSHA regulations in 1974. Company size (number of employees)
Cost (1974 dollars)
Cost (1993 dollars)
0^100 101^500 501^1,000 1,001^2,000 2,001^5,000 over 5,001
35,000 73,500 350,700 330,600 830,000 4,681,500
77,800 163,300 779,300 734,700 1,849,400 10,403,300
Source: Adapted from Occupational Safety and Health Management Research Survey, National Association of Manufacturers, 1974. Quoted in R. S. Smith, The Occupational Safety and Health Act (Washington, D.C.: American Enterprise Institute, 1976).
turers with fewer than 101 employees was on average $35,000 ($77,800 in 1993 dollars), while the compliance cost for manufacturers with over 5,000 employees was over $4.6 million ($10.4 million in 1993 dollars). The average cost per ¢rm was approximately $350,000 ($779,000 in 1993 dollars), which is supported by the fact that the ¢rst small-business loans issued during the 1970s for the purpose of OSHA compliance averaged $200,000 each.10 These ¢gures represent the estimated costs of complying with regulations issued and enforced by OSHA during the 1970s only. Thus, they do not re£ect rules issued by OSHA since that time. Nevertheless, if these cost estimates are only approximately accurate, they indicate that the estimates of the compliance costs of OSHA regulations reported in Table 1 signi¢cantly underestimate the full economic impact on the U.S. economy. For instance, using NAM's lowest cost estimate of $35,000 per ¢rm (the full cost of compliance for small ¢rms only) for all capital expenditures and control expenses resulting from OSHA regulations, the total cost of compliance for manufacturers alone in 1974 exceeds an estimated $10 billion ($23 billion in 1993 dollars.) If one includes
324 construction companies, the estimate of compliance costs of OSHA's regulations in 1974 exceeds $16.3 billion ($36 billion in 1993 dollars).11 Because the above studies examine the compliance burden of OSHA for di¡erent time periods, care must be taken in comparing the estimates, as regulations promulgated and enforced by OSHA will di¡er over time. Moreover, estimates of the compliance costs of OSHA do not take into account new rules, changes in existing regulations, and old rules no longer aggressively enforced by the agency. In addition, recent studies examining workplace accident rates and worker productivity suggest that many of the popularized bene¢ts of OSHA regulations may be overstated.12 Most studies ¢nd no signi¢cant impact of OSHA's regulations on fatality and injury rates in the workplace.13 Further research is needed to examine the economic costs of OSHA's regulations in light of the uncertain bene¢ts of governmental regulation on workplace environments.14 Data and methodology Data for this study come from regulatory impact analyses (RIAs) commissioned by OSHA prior to publication of agency proposed and ¢nal rules. OSHA is required to conduct RIAs for regulations as speci¢ed by Executive Order 12866 and the Regulatory Flexibility Act of 1980.15 Speci¢cally, OSHA must conduct an RIA for any rule having a `major economic consequence on the national economy.' The RIA must provide estimates of the expected total compliance costs to a¡ected businesses, although it is not required to publish cost-bene¢t tests.16 Generally, this involves regulations expected to result in compliance costs in excess of $100 million per year. By practice, OSHA usually contracts out to private consulting and research ¢rms the actual work for the RIA. These ¢rms then provide OSHA with the necessary reports and analyses. The RIA reports are published with the proposed and ¢nal rules in the Federal Register (FR). RIAs for 25 major ¢nal rules issued by OSHA after 1980 were examined, and cost estimates were calculated for all a¡ected businesses in the United States based on OSHA's studies. `A¡ected ¢rms' are expected to bear a cost as a result of the speci¢ed OSHA regulation. (Each of the 25 above-mentioned rules is currently enforced by OSHA inspectors.) Costs for all construction, manufacturing, and other establishments were calculated by averaging the total cost of regulations across all ¢rms within each respective category. For instance, if an OSHA regulation is expected to cost 100 construction ¢rms a total of $1,000, and there are 500 total construction ¢rms, then the average cost per construction ¢rm is $2 while the average cost per a¡ected ¢rm is $10. Because of limitations in the data available in the published RIAs, cost estimates were not calculated for ¢rms based on ¢rm size. Table 4 indicates the number of construction, manufacturing, and other establishments in the United States in 1993. These ¢gures were obtained from the 1993 County Business Patterns (CBP) report produced by the Bureau of the
325 Table 4. Total number of U.S. construction, manufacturing, and all other establishments, 1993. Catagory
Number
Construction Manufacturing All others
598,255 386,609 5,418,503
Total
6,403,367
Source: U.S. Bureau of the Census, County Business Patterns, 1993.
Census of the U.S. Department of Commerce.17 The CBP covers all U.S. business establishments, except most governments, railroads, and farms. Also excluded from the Census data are self-employed persons, persons working outside of the United States, and maritime employees. The scope of the CBP corresponds closely with OSHA's jurisdiction over business establishments. OSHA covers roughly 6.5 million employers, and nearly all employees, except miners, transportation workers, many public employees, and the self-employed.18 Appendix Table A1 presents the 25 major rules examined in this study along with each rule's primary Code of Federal Regulations (CFR) citation and date the ¢nal rule was published in the FR.19 A description of each of these major rules, along with an explanation of the methodology by which the compliance costs for construction, manufacturing, and all other ¢rms was estimated, is provided in the appendix. Current dollar amounts were adjusted for in£ation by using the year the RIA and the ¢nal rule were published in the FR as the base year. The Producer Price Index was used as the relevant price de£ator. The compliance costs of OSHA As shown in Table 5, the total annual compliance cost of 25 major rules currently enforced by OSHA exceeds $6 billion (1993 dollars). The rules currently imposing the greatest total costs on U.S. businesses are the hazardous communications, air contaminants, bloodborne pathogens, and process safety management regulations. The combined annual compliance costs of these four rules alone comprise over half of the total costs of all 25 OSHA regulations. Table 6 presents the average annual per-establishment compliance cost of the 25 OSHA regulations for construction, manufacturing, and other sectors. In the construction sector, the most costly regulations are those governing asbestos, excavations, and lead exposure. Compliance costs of these rules range from $541 for the excavation standard to $670 for the lead regulation. However, an examination of the expected compliance costs for construction ¢rms actually a¡ected by OSHA's rulings indicates that the hazardous waste operations regulation is the most costly. For each a¡ected business, the annual cost of compliance for this rule alone exceeds $700,000 (Table 7).
326 Table 5. Estimated total compliance costs of 25 major OSHA regulations ¢nalized after 1980 (millions of dollars). Standard name Air contaminants Asbestos Benzene Bloodborne pathogens Cadmium Control of hazardous energy (lockout/tagout) Cotton dust Electric power generation Electrical safety-related work Excavations Fall protection Fire protection Formaldehyde Grain handling Hazardous communication Hazardous waste operations and emergency response Lead in construction Logging Methylenedianiline (MDA) Noise Occupational exposure to lead Permit-required con¢ned spaces Personal protective equipment Process safety management Reporting of fatality/multiple hospitalizations Total
Cost (current dollars)
Cost (1993 dollars)
788.0 361.3 32.9 813.0 187.7 135.0 166.4 21.3 20.3 306.0 40.0 21.0 35.1 55.1 949.5 157.9 405.0 12.5 10.3 210.3 111.6 202.4 52.4 679.8 1.8
834.7 356.7 38.0 829.6 190.4 143.0 191.7 21.0 20.8 324.2 39.5 27.8 35.6 63.7 937.3 167.3 405.0 12.3 10.4 246.8 189.8 202.4 51.7 689.5 1.8
5,776.6
6,031.0
Sources: Various regulatory impact analyses published by OSHA in the Federal Register and author's calculations.
In the manufacturing sector, OSHA rules regarding air quality and process safety management are the most costly to the industry on average, with compliance costs of $1,337 and $1,874 a year respectively. For ¢rms directly a¡ected by these rules, compliance costs exceed $9,000 a year for the air contaminants rule and $36,000 for OSHA's process safety management regulation. However, the most costly rules for manufacturers a¡ected by OSHA rules are the lead and cotton dust standards. For a¡ected ¢rms, the expected cost of compliance with the lead standard, as reported by OSHA, is nearly $400,000 a year. For the revised cotton dust standard, OSHA estimates that a¡ected ¢rms may pay as much as $500,000 annually (Table 7). For all other businesses, the bloodborne pathogens standard and the hazardous communications rule are the most costly on average. Compliance costs for each of these rules average $153 annually per ¢rm. Since the bloodborne
327 Table 6. Estimated per-establishment compliance costs of 25 major OSHA regulations (construction, manufacturing, and all other sectors, 1993 dollars). Standard name Air contaminants Asbestos Benzene Bloodborne pathogens Cadmium Control of hazardous energy (lockout/tagout) Cotton dust Electric power generation Electric safety-related work Excavations Fall protection Fire protection Formaldehyde Grain handling Hazardous communication Hazardous waste operations and emergency response Lead in construction Logging Methylenedianiline (MDA) Noise Occupational exposure to lead Permit-required con¢ned spaces Personal protective equipment Process safety management Reporting of fatality/multiple hospitalizations Total
Construction
Manufacturing
All others
^ 572 ^ ^ 18 ^ ^ ^ ^ 542 66 ^ ^ ^ 141
1,874
20 3 ^ 153 6 9 ^ 4 3 ^ ^ ^ 1 12 147
61 670 ^ 1 ^ ^ ^ ^ ^
18
*
91 5 ^ 26 638 491 223 87 1,337 1
2,071
6,305
435
*
98 ^ 381 248 496 ^ 5 ^ ^ 72 84 ^ 146
*
2 ^ ^ ^ 21 3 32 *
* Indicates less than one dollar. Individual estimates may not sum to total due to rounding. Sources: Various regulatory impact analyses published by OSHA in the Federal Register and author's calculations.
pathogens standard a¡ects less than 10 percent of these businesses (see the Appendix), the annual cost of compliance for ¢rms a¡ected by this rule is nearly $2,000. However, the most costly ruling for a¡ected establishments is the process safety management rule, with annual compliance costs in excess in $27,000 for each establishment (Table 7). Because RIAs are reported for only 25 of all regulations OSHA enforces a¡ecting workplace safety and health, the full cost of compliance with OSHA standards is likely to exceed $6 billion a year. Indeed, a number of rules promulgated and enforced by OSHA are not included in this study but are believed to impose substantial costs on U.S. businesses. Some of the more costly standards not examined here include sca¡olding, abrasive machinery, abrasive wheels and tools, respiratory protection, ventilation, £ammable and
328 Table 7. Estimated compliance costs of 25 major OSHA regulations (for a¡ected establishments in construction, manufacturing, and all other sectors, 1993 dollars). Standard name Air contaminants Asbestos Benzene Bloodborne pathogens Cadmium Control of hazardous energy (lockout/tagout) Cotton dust Electric power generation Electrical safety-related work Excavations Fall protection Fire protection Formaldehyde Grain handling Hazardous communication Hazardous waste operatins and emergency response Lead in construction Logging Methylenedianiline (MDA Noise Occupational exposure to lead Permit-required con¢ned spaces Personal protective equipment Process safety management Reporting of fatality/multiple hospitalizations
Construction
Manufacturing
All others
^ 690 ^ ^ 1,150 ^ ^ ^ ^ 1,000 66 ^ ^ ^ 140
9,055 560 7,605 ^ 18,140 280 520,000 ^ 5 ^ ^ 80 670 ^ 145
2,140 45 ^ 1,660 5,910 35 ^ 1,775 5 ^ ^ ^ 50 4,065 147
726,185 2,795 ^ 3,460 ^ ^ ^ ^ ^ 7
1,595 19,230 ^ 50,710 700 379,590 995 200 36,860 7
2,280 580 1,035 ^ ^ ^ 765 10 27,660 7
Sources: Various regulatory impact analyses published by OSHA in the Federal Register and author's calculations.
combustible liquids, illumination, gases, ladders, stairways, ¢xed industrial stairs, head protection, hand protection, eye and face protection, sanitation, underground construction, ¢rst aid and life saving equipment, power-operated hand tools, slings, cranes and derricks, oxygen, hydrogen, ethylene oxide, ground-fault protection, and electrical systems design. Consequently, it is necessary to extrapolate from the available details estimates of the full cost of compliance with OSHA's regulations. The following cost calculations are estimates only ^ based on the total and per-¢rm cost of the 25 ¢nal OSHA rules described in Table 5 and Table 6 ^ and not measures of actual expenditures. It should be recognized that no single method of estimation will adequately re£ect the true economic costs of OSHA rulings; hence, several di¡erent approaches are examined.
329 The 1974 NAM study as benchmark The 1974 study of manufacturers described above provides a convenient benchmark for calculating the total annual cost of compliance with federal occupational health and safety standards. As indicated in Table 3, businesses were expected to pay an additional $35,000 to $4.7 million annually, depending on the size of the ¢rm, as a result of the regulations promulgated by OSHA during the 1970s. According to OSHA's 25 published RIAs listed above, manufacturers in 1993 could expect to pay an additional $6,305 each year on average per ¢rm for the 25 regulations promulgated since 1980 (Table 6). The 1974 estimate of per-¢rm compliance cost for manufacturers is approximately 5.55 times that of the per-¢rm cost for manufacturers in 1993. Assuming that the compliance burden of OSHA regulations in 1993 is at least as great as the compliance burden of OSHA regulations on business establishments in 1974 (and that the 1974 estimate is reasonably accurate), then the total compliance costs of all of OSHA's regulations enforced in 1993 is projected to be at least 5.55 times the total for the 25 major OSHA rules examined in this study. Accordingly, the estimated compliance cost of OSHA's regulations is estimated to be $33.5 billion in 1993.20 Is this a reasonable estimate of the compliance costs of OSHA today? While some of OSHA's regulations enforced after 1980 are revisions of earlier rules, the majority are new rules not existing in 1974. Moreover, many of the rules OSHA enforced in 1974 are either no longer being currently enforced or have been superseded by newer regulations. Therefore, assuming that the annual economic burden of OSHA's regulations on ¢rms today is at least as great as the economic burden of OSHA's regulations on businesses during the 1970s, then $33.5 billion is a reasonable cost estimate. Furthermore, this ¢gure is based on the lowest per-¢rm cost estimate of OSHA's regulations promulgated prior to 1974, and it is unadjusted for in£ation. In reality, the average annual cost of compliance for ¢rms in 1974 would have been greater than $35,000. If the in£ation-adjusted 1974 estimate of $77,800 per (small) ¢rm is used as the relevant benchmark, for instance, then the ratio of the 1974 per-¢rm cost to 1993 per-¢rm cost is 12.34. Accordingly, the estimated total annual compliance cost for OSHA regulations in 1993 is $74.4 billion. Consequently, $33.5 billion represents a lower bound estimate of the economic burden of OSHA's regulations today. Frequently cited OSHA standards as benchmark An examination of the OSHA standards that were most often cited by OSHA inspectors during the 1990s provides additional support for the reasonableness of this cost estimate of OSHA's regulations. OSHA collects data on the number of citations, the number of inspections, and the total penalties assessed on businesses for violation of OSHA regulations.21 Between October 1994 and
330 September 1995, OSHA inspectors made a total of 116,985 citations for 403 speci¢c regulatory standards that were violated by U.S. business establishments, and assessed over $93.7 million in penalties. The standards that were most often cited during this period were the hazardous communication, control of hazardous energy, and sca¡olding standards.22 Studies show that an increase in the likelihood of an OSHA inspection and citation by OSHA inspectors for rule violations increases the probability that ¢rms will comply with OSHA regulations.23 Furthermore, ¢rms lose value when OSHA announces citations for workplace health and safety violations.24 The negative impact to ¢rms as a result of a citation by OSHA inspectors, in addition to the expected monetary penalty that may be assessed on ¢rms for violations of OSHA's standards, impose costs on ¢rms as a result of noncompliance. Therefore, one may assume that many ¢rms that fail to comply with OSHA's standards do so because the expected cost of compliance exceeds the expected cost of noncompliance (loss of ¢rm value and monetary penalty).25 The reasonableness of this assumption is supported by the fact that, averaged across all business establishments in the United States, the average annual OSHA penalty paid per ¢rm is only $14.64, while the average annual cost per ¢rm for OSHA compliance is $5,234.38.26 Of course, not all rule violations are caught by OSHA inspectors, nor are they always intentional, since many ¢rms may not know that they are in violation of OSHA rules.27 Nevertheless, an examination of citation records will provide a rough measure of those OSHA regulations that are most burdensome to U.S. business establishments. Of the 403 speci¢c standards cited by OSHA inspectors between October 1994 and September 1995, the 25 rules examined in this study comprise roughly 13 percent of the total.28 Therefore, assuming that these rules are a reasonable sample of all 403 standards cited by OSHA's inspectors, the full cost of OSHA's regulations are 7.75 times the total for the 25 rules examined above, or $46.7 billion annually (Table 8).29 Since many of the citations issued by OSHA's inspectors are for one standard only, a more sensible estimate of the compliance cost of OSHA comes from an examination of those rules that received 10 or more citations. The justi¢cation is that rules with standards that were the basis of at least 10 citations by OSHA inspectors are expected to be relatively more burdensome than standards cited only one or two times. Of the 231 speci¢c standards that received at least 10 citations during the October 1994 to September 1995 period, the 25 OSHA regulations discussed above represent approximately one-¢fth of the total. Thus, assuming that the standards resulting from the 25 OSHA rules are representative of all standards cited by OSHA inspectors, the full annual compliance cost of OSHA regulations is estimated to be $32.4 billion. A similar estimation based on standards cited at least 100 times suggests that total compliance costs are $23.1 billion annually.
331 Table 8. Number of standards cited by OSHA inspectors, October 1994^September 1995, and the estimated annual compliance cost.
Number of standards cited for all rules Number of standards cited for the 25 OSHA rules Ratio of all standards cited to the 25 OSHA rules Estimated total costs (billions of 1993 dollars)
100+ citations
10^99 citations
1^9 citations
113
231
404
28
43
52
4.04
5.37
7.75
23.10
32.40
46.70
OSHA citation reports were examined to determine the number of times an OSHA standard was cited. For instance, a total of 113 OSHA standards were cited at least 100 times, while 403 standards were cited at least once. Of the 25 OSHA rules examined in this study, 28 standards derived from those rules were cited at least 100 times, while 52 standards were cited at least once. (Many OSHA rules, such as the hazardous communication regulation, consist of multiple standards; thus one rule may have more than one standard). The ratio of all standards with at least 100 citations to standards embodied by the 25 rules presented above is 4.04 (113/28 is 4.04). That is, there are 4.04 times as many standards cited by OSHA inspectors that have at least 100 citations than those represented by the 25 rules. Thus, total compliance cost is estimated to be 4.04 times the $6.031 billion calculated from the 25 OSHA rules described in this study, or $23.1 billion. Sources: OSHA, `Frequently Cited OSHA Standards,' and author's calculations.
Summary The full cost of compliance with OSHA's regulations in 1993 is estimated to be between $23.1 billion and $46.7 billion annually, with a reasonable estimate near $33 billion per year. These cost estimates are substantially greater than those produced in earlier studies, in part because they are based on an examination of the incremental costs resulting from speci¢c OSHA rules. Moreover, these estimates may underestimate the actual cost of compliance, because they are based on OSHA-published reports. In accordance with federal mandates to produce RIAs for its major rules, OSHA has an incentive to underestimate the full compliance cot of its proposed regulations in order to ensure that the proposed rules are ¢nalized. For example, OSHA's study of the economic impact of the proposed (but not passed) Comprehensive Occupational Safety and Health Reform Act (COSHRA) indicated that the total compliance cost to the economy would be $10.7 billion annually, while one private study suggested that annual costs would exceed $62 billion.30
332 Estimating the actual compliance costs of OSHA The cost estimates in this report, as well as in previous studies, are based on estimated rather than actual expenditures. The reason is that there is no reliable estimate of actual compliance expenditures for OSHA regulations like the Pollution Abatement and Control Expenditures (PACE) reports produced annually by the Bureau of the Census for the Environmental Protection Agency. Thus, an important advance in our understanding of the full economic impact of OSHA regulations ^ and the foundation for a regulatory budget of OSHA regulations ^ will come only after a reliable survey of compliance expenditures is established. The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor currently surveys approximately 280,000 ¢rms annually to calculate job injury and illness rates for various industries in the United States. By law, all employers selected for the survey are required to participate. (OSHA requires that all employers with at least 11 employees are to keep records of occupational injuries and illnesses. Those employers with 10 or fewer employees are not required to keep such records, unless they are selected by the BLS to participate in the annual survey.) 31 The purpose of the survey is to monitor OSHA's progress in reducing occupational safety and health hazards, as well as to evaluate existing standards and to schedule inspections by OSHA inspectors. The annual BLS survey could be expanded to assess the compliance expenditures by U.S. ¢rms a¡ected by OSHA regulations, although compulsory requirements might require new legislation. Questions should be broad enough so that all ¢rms surveyed would be able to answer them, but speci¢c enough to generate reasonable estimates of compliance expenditures for individual OSHA standards. The PACE survey currently conducted by the Bureau of the Census to assess compliance expenditures for EPA regulations may be used as a model for the expanded survey by the BLS of OSHA compliance expenditures. The advantage of using the PACE survey as a model for estimating the compliance costs of occupational health and safety regulations is that many ¢rms are already familiar with the format and cost estimates for pollution control. Also, OSHA compliance will be comparable, since the survey instruments will be estimated using similar techniques. In addition, the fact that a similar survey instrument is used to estimate pollution control expenditures and compliance expenses for OSHA regulations will make the implementation and operation of a regulatory budget more feasible.32 Conclusion The purpose of this study is to estimate the compliance costs of OSHA regulations in order to generate a regulatory budget for OSHA. The study ¢nds that the total annual cost of compliance is at least $33 billion, although actual
333 compliance expenditures are expected to be much higher. This cost estimate is substantially higher than previous studies have reported, in part because this study examined the annual incremental cost of individual OSHA regulations rather than total projected capital expenditures as earlier studies have done. The advantage of this measure over previous cost estimates is that it can be easily adjusted to re£ect new regulations proposed and ¢nalized by OSHA regulators. How great of a burden is $33 billion on the U.S. economy? By comparison, Environmental Protection Agency regulations result in compliance expenditures in excess of $109 billion annually, so OSHA's regulations are approximately one-third as burdensome as those produced by the EPA. However, the amount of money spent by Americans annually on weight-control e¡orts is only $33 billion.33 Thus, while $33 billion is higher than previous estimates, it does not appear to be unrealistically excessive. Of course, this cost ¢gure is an estimate only. More accurate estimates will only be available when surveys of actual compliance expenditures are conducted. Accordingly, the need for a regular survey of compliance costs resulting from OSHA rules is paramount. The methodology suggested by the study ^ that an analysis of speci¢c OSHA rules be used as the basis for estimating OSHA's total compliance burden on the U.S. economy ^ provides a useful starting point for upgrading the survey of occupational illnesses and injuries currently conducted by the Bureau of Labor Statistics. The $33 billion estimate provides a reasonable basis for establishing a regulatory budget for federally-mandated occupational health and safety regulations. Such a budget will provide OSHA with su¤cient £exibility in implementing its regulatory agenda, since the cost estimate is higher than previous estimates and is generated using OSHA-commissioned studies. And, if an assessment of the expenditures on compliance with OSHA regulations is incorporated into the annual BLS survey of occupational injury and illness rates, then a feasible foundation will be established for the implementation and operation of a federal regulatory budget for the Occupational Safety and Health Administration. Appendix This appendix presents the methodology by which the cost of each of the 25 major rules was determined, along with a brief description of the rule and the percent of ¢rms a¡ected by the rule. The Federal Register (FR) citation for the RIA provided by OSHA is also given. See Table A1. Air contaminants This OSHA rule amends earlier regulations by providing new permissible exposure limit (PEL) standards for about 212 substances currently regulated by OSHA, as well as new PEL standards for an additional 164 substances not currently regulated by OSHA. OSHA (54 FR 2332) estimates that the total annual compliance costs to business establishments a¡ected by this revised rule will be nearly $788 million. This rule a¡ects 19 percent of manufacturers and 7 percent of all other establishments in the United States.
334 Asbestos The new asbestos standard amends OSHA's older standard issued in 1986 for general industry and construction. The revised asbestos standard primarily a¡ects the brake and clutch repair industry. Custodial workers are also exposed to asbestos, and so they are a¡ected by this new standard as well. According to the RIA published in the FR in 1994 when the ¢nal rule was published (54 FR 40964), the annual costs of compliance in general industry is $14.8 million; in construction the annual compliance cost is $346.5 million. The construction compliance cost excludes EPA-related training costs of approximately $130 million. Thus, the combined compliance cost is $361.3 million. Approximately 83 percent of construction ¢rms, less than 1 percent of manufacturing ¢rms, and 6 percent of all other ¢rms are estimated to be a¡ected by this standard. Benzene This rule amends existing standards regulating the amount of benzene in the air from 10 parts per million (ppm) to between 1 ppm and 5 ppm. The RIA published by OSHA (52 FR 34460) indicates that less than 1 percent of manufacturers will be a¡ected by this rule. The total annualized cost to a¡ected ¢rms is estimated at $24.1 million, with an additional $8.8 million estimated nonengineering costs (medical surveillance, training, etc.). Therefore, the total annual compliance cost is estimated at $32.9 million. Table A1. Major ¢nal OSHA rules with regulatory impacts analyses published after 1980. Standard name
Primary CFR citations
FR publication date of ¢nal rule
Air contaminants Asbestos Benzene Bloodborne pathogens Cadmium Control of hazardous energy (lockout/tagout) Cotton dust Electric power generation Electrical safety related work Excavations Fall protection File protection Formaldehyde Grain handling Hazardous communication Hazardous waste operations and emergency response Lead in construction Logging Methylenedianiline Noise Occupational exposure to lead Permit-required con¢ned spaces Personal protective equipment Process safety management Reporting of fatality/multiple hospitalizations
1910.1000 1910.1001, 1926.0058 1910.1028 1910.1030 1910.1027, 1926.0063 1910.0147 1910.1043 1910.0269, 1910.0137 1910.0331 1026.0650 1926.0500 1910.0155 1910.1048 1910.0272 1910.1200
Jan. 19, 1989 Aug. 10, 1994 Sep. 11, 1987 Dec. 6, 1991 Sep. 14, 1992 Sep. 1, 1989 Dec. 13, 1985 Jan. 31, 1994 Aug. 6, 1990 Oct. 31, 1989 Aug. 9, 1994 Sep. 12, 1980 May 27, 1992 Dec. 31, 1987 Feb. 9, 1994
1910.0120 1926.0062 1910.0266 1910.1050, 1926.0060 1910.0095 1910.1025 1910.0146 1910.0132 1910.0119 1904.0008
Mar. 6, 1989 May 4, 1993 Oct. 12, 1994 Aug. 10, 1992 Mar. 8, 1983 Nov. 14, 1978 Jan. 14, 1993 Apr. 6, 1994 Feb. 24, 1992 Apr. 1, 1994
CFR refers to Current Federal Regulations and FR is the Federal Register.
335 Bloodborne pathogens The bloodborne pathogens standard is designed to protect workers, primarily those in the health professions, from exposure to Hepatitis B, Human Immunode¢ciency Virus, and other bloodborne pathogens. The rule requires employers to provide their employees with the protective equipment, instructions, and other means necessary to limit occupational exposure to blood. The rule a¡ects over 9 percent of all other establishments. According to OSHA (56 FR 64004), the additional compliance costs for a¡ected employers for this rule are calculated to total $813 million per year. Cadmium The new cadmium rule a¡ects all industries that produce and use cadmium, such as manufacturers of batteries. The rule sets guidelines for the use and control of cadmium so as to minimize its exposure to employees. According to OSHA (57 FR 42389), the total annual cost to construction, manufacturing, and all other establishments exceeds $187 million. An estimated 2 percent of all construction and manufacturing establishments, but less than 1 percent of all other businesses, are a¡ected by this rule. Control of hazardous energy (lockout/tagout) This standard covers manufacturing and maintenance machinery in which an unexpected start-up or release of stored energy could cause harm to employees. The rule requires employers to install safety equipment to prevent such accidents. RIA estimates (54 FR 36644) suggest that the total compliance cost to businesses will be $135 million, with ¢rst year costs exceeding $214 million. An estimated 88 percent of manufacturing facilities and 26 percent of all other establishments are a¡ected by this rule. Cotton dust In 1978, OSHA promulgated its cotton dust standard, which was revised in 1985. The new rules requires a¡ected ¢rms to reduce the amount of cotton ¢bers and dust released into the air. OSHA estimated (50 FR 51129) that the new standard will require a¡ected textile establishments to expend an additional $150 million for capital equipment and control expenses each year. The cost to a¡ected nontextile businesses, such as waste recyclers and garnetting ¢rms, is projected to be between $14.2 million and $18.6 million, or an average of $16.4 million per year. Therefore, the total incremental annual cost of the revised cotton dust standard is $166.4 million. The rule is expected to a¡ect less than 1 percent of all manufacturers. Electric Power Generation The Electric Power Generation standard a¡ects work practices used during the operation and maintenance of electric power generation, transmission, and distribution facilities. According to OSHA's RIA (59 FR 4320), the incremental annual compliance cost of this standard is projected to be $21.7 million, although the ¢rst year's costs are expected to exceed $40 million. Less than 1 percent of all other establishments are expected to be a¡ected by this standard. Electrical safety-related work This rule is designed to require a¡ected ¢rms to minimize the hazards of electrical shock for work performed on or near energized equipment. OSHA (55 FR 1984) estimates that 4.6 million manufacturers and all other establishments will be a¡ected by this rule. Annual compliance expenditures are projected to be $20.3 million, although ¢rst-year capital requirements are estimated at $74.6 million.
336 Excavations This OSHA rule a¡ects construction ¢rms that perform excavation work, as well as some utilities. The ruling provides speci¢c standards that employers are to meet in order to ensure that workers are protected from cave-ins and other excavation accidents. The RIA commissioned by OSHA and published with the ¢nal rule (54 FR 45894) indicates that the total annual cost to a¡ected construction ¢rms as a result of this regulation is $306 million. This rule primarily a¡ects approximately one-half of all construction establishments in the United States. Fall protection This rule covers all construction establishments, and requires employers to provide increased fall protection for their employees, especially for those working on roofs. OSHA (59 FR 40672) estimates that the total annual cost to the construction industry will be $40 million. Fire protection The ¢re protection rule requires most manufacturing establishments to minimize worker exposure to hazards involving ¢re and to provide workers with ¢re protection equipment. According to the published RIA (45 FR 60656), OSHA estimates that the total annual incremental cost of compliance will be $21 million. Formaldehyde OSHA estimates that workers in 112,066 businesses are exposed to formaldehyde at levels between 0.75 and 1.0 ppm. The majority of these workers are in the apparel, furniture, and funeral industries. This standard states that exposure levels can not exceed 0.75 ppm. OSHA estimates (57 FR 22290) that the annual costs to a¡ected establishments of complying with the new standard will total $35.1 million. Over 12 percent of manufacturing establishments, and one percent of all other establishments, are a¡ected by this rule. Grain handling This regulation a¡ects all businesses that process grains. According to OSHA's published RIA (52 FR 49592), the incremental annual costs to grain mills required to comply with this regulation range from $41.4 million to $68.8 million. The average of this range $55.1 million, is the ¢gure used as the total annual cost of compliance. This ruling a¡ects less than 1 percent of all other establishments. Hazardous communication The hazardous communication standard is designed to ensure that all employers properly inform and train their employees regarding any hazardous substances they may work with. The standard originally applied to manufacturing establishments only, but was later expanded to include all businesses. OSHA estimates that the new standard (59 FR 6126) will result in ¢rst-year compliance costs exceeding $1.264 billion. After 20 years, compliance costs are expected to decline to $214.5 million. The ¢rst-year estimate is given for 1988, the year the hazardous communication standard was initially established. Prorating the expected declining costs throughout the 20-year period results in compliance costs in 1994 of $949.5 million ($1.264 billion ^ (6 ¾ $2.5), where $52.5 million is the prorated cost per year throughout the 20-year period beginning in 1988). All construction, manufacturing, and all other ¢rms bear costs of hazardous communication compliance. Hazardous waste operations and emergency response This rule a¡ects hazardous waste sites and businesses that clean up, manage, store or dispose of hazardous wastes. The rule requires the a¡ected employers to comply with a number of stated waste operations standards. According to OSHA's RIA (54 FR 9311), the annual
337 compliance cost to a¡ected establishments will exceed $157 million. The rule a¡ects approximately 6 percent of manufacturers, and less than 1 percent of construction and all other establishments. Lead in construction This rule provides PEL standards for construction operations that involve lead or leadcontaining materials. OSHA (58 FR 26590) estimates that the total annual recurring compliance costs of this rule range from $365 million to $445 million, or an average of $405 million. OSHA also reports that during the ¢rst year of implementation, an additional $150 million to $183 million will be spent by ¢rms training and setting up monitoring and other equipment to comply with the new PEL standards. Approximately 25 percent of construction and 37 percent of manufacturing establishments are a¡ected by this rule. Logging The stated purpose of this rule is to revise existing standards a¡ecting the pulpwood and logging industries. Speci¢cally, this rule requires employers to protect workers against injury caused by the accidental falling, rolling, or sliding of trees and logs, and to provide training and safety equipment for workers using chain saws and other cutting devices. The RIA published along with the ¢nal rule (59 FR 51672) estimates that the total annual compliance cost of this revised standard will be $12.5 million. This rule a¡ects less than 1 percent of all other establishments. Methylenedianiline This rule sets new standards for occupational exposure to methylenedianiline. While less than 1 percent of construction and manufacturing establishments are expected to be a¡ected by this rule, OSHA estimates (57 FR 35630) that total annual compliance costs will be $10.3 million. Noise The 1983 occupational noise standard requires manufacturers to reduce noise levels of their facilities. OSHA estimates (48 FR 9738) that a¡ected manufacturers will spend an additional $210.3 million annually for compliance. Occupational exposure to lead Originally promulgated in 1978, this rule establishes standards for manufacturing establishments that use lead-containing materials. After a series of court cases forced postponement of the enforcement of the rule, OSHA was allowed to begin enforcing the ¢nal rule in 1989. Therefore, this rule is included in this study, even though it was initially promulgated in 1978. According to published RIAs (43 FR 52952 and 54 FR 29142), this rule is expected to result in annual compliance costs of approximately $111 million, a¡ecting less than 1 percent of all manufacturing establishments. Permit-required con¢ned spaces The rule is designed to protect workers from the hazards expected when they work in closed or con¢ned work-spaces, such as the repair of machinery requiring workers to `enter' the machine. The RIA published along with the ¢nal rule (58 FR 4462) indicates that the total annual compliance cost of this rule will be $202.4 million. This rule is expected to a¡ect nearly 22 percent of all manufacturing establishments and 3 percent of all other facilities. Personal protective equipment This rule revises the original personal protective rule promulgated by OSHA in 1971 and covers manufacturing and all other establishments. The new rule provides nationwide stand-
338 ards for personal protective equipment for a¡ected ¢rms (approximately 44 percent of manufacturing and 35 percent of all other establishments are a¡ected by this revised rule). According to OSHA estimates published along with the ¢nal rule (59 FR 16334), the annual compliance costs of a¡ected manufacturing establishments will be $34.2 million, and the annual compliance costs of all other establishments will be $18.2 million. Process safety management This rule establishes guidelines for management controls over the storage, handling, and processing of highly hazardous materials. The RIA provided by OSHA (57 FR 6356) indicates that during the ¢rst ¢ve years of the implementation of this rule, compliance costs are expected to be $888.7 million. During the second ¢ve years of compliance, costs are calculated to be $405.8. The decline in costs is attributed to `the completion of process hazard analyses for existing operations,' according to the report.34 The $679.8 million estimate reported in this study is the average of the two cost ¢gures for the 10-year period following the implementation of the ¢nal rule. Approximately 5 percent of manufacturing establishments and less than 1 percent of all other establishments are expected to be a¡ected by this rule. Over 75 percent of the total cost of compliance was allocated to manufacturing businesses. Reporting of fatality/multiple hospitalizations All construction, manufacturing, and all other businesses are required by this OSHA regulation to report within eight hours any accident that is fatal to one or more employees or that results in the hospitalization of three or more workers. According to the RIA published with the ¢nal rule (59 FR 15594), this rule is not expected to have a `signi¢cant regulatory action' on the U.S. economy. The RIA states that the added annual paperwork burden on a¡ected businesses will be approximately $1,500. This number comes from an estimated 200 additional reports requiring 15 minutes each, at $30 per hour (the cost of a professional to complete the report). Using this information, the total annual compliance cost is estimated to be $1.8 million. This number comes from assuming that of the total injuries occurring in construction, manufacturing, and all other establishments, 25 percent are `multiple' and thus require reports submitted to OSHA. Since one report is required when three or more workers are injured or a worker is fatally injured, the total number of reports that will be ¢led is estimated to be 242,432. Since the reports, according to OSHA's RIA, take 15 minutes to complete (at $30 per hour), the total cost to the economy is $1.8 million.
Notes 1. `Occupational Safety and Health Act of 1970,' Public Law 91^596, December 29, 1970. The 1970 act also created the Occupational Safety and Health Review Commission to oversee public hearings regarding OSHA regulations, the National Institute of Occupational Safety and Health (NIOSH) to conduct research on workplace safety issues and to provide training for workplaces a¡ected by OSHA rules, and the National Commission on State Workmen's Compensation Laws to oversee state-level workers' compensation programs. The OSH Act of 1970 was amended by Public Law 101^552, November 5, 1990. Quotations are from the 1990 OSH Act, sections 5 and 2, respectively. 2. Warren, M and B. Jones (July 1995). `Reinventing the regulatory system: no downsizing in administration plan,' Occasional Paper 155 (St. Louis: Center for the Study of American Business, Washington University). 3. For other studies of regulatory budgeting, see S. Hughes, `Regulatory Budgeting,' Working Paper 160 (St. Louis: Center for the Study of American Business, Washington University, June 1996); H. S. James, Jr., `Implementing a regulatory budget: Estimating the mandated private expenditures of the Clean Air Act and Safe Drinking Water Act amendments,' Policy Sciences, (this issue).
339 4. Rutledge, G. L. and C. R. Vogan (May 1995). `Pollution abatement and control expenditures, 1993,' Survey of Current Business pp. 36^45. 5. See T. D. Hopkins (November 1995). `Pro¢les of regulatory costs,' Report to the U.S. Small Business Administration. 6. Denison, E. (1979). Accounting for Slower Economic Growth: The United States in the 1970s. Washington, D.C.: The Brookings Institution; Fourth Annual McGraw-Hill Survey ^ Investment in Employee Safety and Health, cited in Tim Engel, OSHA: An Overview, American Conservative Union Issues Analysis Series, June 1977; R. Grandall (1988). `What ever happened to deregulation?' in D. Boaz ed. Assessing the Reagan Years. Washington, D.C.: The Cato Institute, p. 271; W. K. Viscusi (1992). `The mis-speci¢ed agenda: the 1980s reforms of health, safety, and environmental protection,' Fatal Tradeo¡s: Public and Private Responsibilities for Risk. New York: Oxford University Press. 7. Adapted from R. E. Litan and W. D. Nordhaus (1983). Reforming Federal Regulation. New Haven, Conn.: Yale University Press, p. 26, table 2.8. 8. OSHA's carcinogen policy, proposed in 1978 but not passed, was unlike any other OSHA regulation in its intended scope, cost, and complexity. 9. Adapted from Occupational Safety and Health Management Research Survey, National Association of Manufacturers, 1974, quoted in R. S. Smith (1976). The Occupational Safety and Health Act. Washington, D.C.: American Enterprise Institute. 10. Ibid. 11. This assumes that the per-¢rm cost of compliance for construction ¢rms is one-third the per¢rm cost of compliance for manufacturers, and that there are 300,000 manufacturing and 500,000 construction establishments in 1974. 12. See, for instance, W. B. Gray (1987). `The cost of regulation: OSHA, EPA and the productivity slowdown,' American Economic Review 77 (5), pp. 998^1006; J. C. Robinson (1995). `The impact of environmental and occupational health regulation on productivity growth in U.S. manufacturing,' Yale Journal on Regulation 12 (2), pp. 387^434; T. J. Kniesner and J. D. Leeth (1995). `Abolishing OSHA,' Regulation (4), pp. 46^56. 13. Kniesner, T. J. and J. D. Leeth (1996). `Reply to Fred Siskind,' Regulation (1), pp. 12^14. 14. One scholar notes that the `safety incentives created by the market and by social insurance' may provide `greater' improvements in occupational illness and injury rates than OSHA regulations (Viscusi, Fatal Tradeo¡s, p. 11). 15. In 1993, President Bill Clinton issued Executive Order No. 12866, which repealed and replaced the RIA requirements mandated by Executive Order No. 12291 with somewhat similar provisions. 16. Federal agencies are exempted from showing that their regulations pass a `cost-bene¢t test' if the test violates their legislative mandates, which exempts nearly all of OSHA's rulings (Viscusi, Fatal Tradeo¡s, p. 256). 17. The County Business Patterns report is available on the World Wide Web at http://www.census.gov/ftp/pub/econ/www/mu0800.html. 18. See the mission statement of the Occupational Safety and Health Administration on the World Wide Web at http://www.census.gov/oshinfo/mission.html. 19. OSHA standards for general industry are published in two volumes ^ 29 CFR parts 1901.0001 to 1920.0441 and 29 CFR parts 1910.1000 to end. Standards for construction are published in one volume ^ 29 CFR part 1926. 20. $35,000 divided by $6,305 is 5.55, and 5.55 times $6.031 billion is $33.5 billion. There may be some distortion due to the fact that the 1974 NAM study reports `per-¢rm' cost data, while the cost information reported in Table 6 is `per-establishment.' Ordinarily, this would indicate that the $33.5 billion cost estimate is overstated due to the fact that the benchmark chosen overstates the `per-establishment' cost. (The per-¢rm cost is expected to exceed the per-establishment cost, since one ¢rm may operate several establishments.) The 1974 NAM per-¢rm cost benchmark used to generate the 1993 per-establishment cost estimate is for businesses with less than 100 employees. This can easily be interpreted to mean establishments with fewer than 100 employed workers. Nevertheless, the $35,000 cost per-establishment benchmark seems small
340
21.
22.
23.
24.
25. 26.
27.
28.
29.
30.
31. 32.
33.
and thus likel underestimates the actual annual cost of OSHA regulations for each business establishment. Occupational Safety and Health Administration, U.S. Department of Labor, `Frequently Cited OSHA Standards,' on the World Wide Web at http://www.osha.gov/oshstats/std1.html. OSHA reports citation information for ¢rms according to SIC code and ¢rm size. The hazardous communication standard 1910.1200 was cited 10.504 times, while standard 1926.0059 was cited an additional 3,521 times. The control of hazardous energy standard 1910.0147 was cited 4,858 times, and the sca¡olding standard 1926.0451 was cited 4,254 times during this time period. Gray, W. B. and C. A. Jones (1991). `Are OSHA health inspections e¡ective? A longitudinal study in the manufacturing sector,' Review of Economics and Statistics 73 (3), pp. 504^508; Gray, W. B. and C. A. Jones (1991). `Longitudinal patterns of compliance with occupational safety and health administration health and safety regulations in the manufacturing sector,' Journal of Human Resources 26 (4), pp. 623^653. Fry, C. L. and I. Lee (1989). `OSHA sanctions and the value of the ¢rm,' Financial Review 24 (4), pp. 599^610. See also W. N. Davidson, III, D. Worrell and L.T.W. Cheng (1994). `The e¡ectiveness of OSHA penalties: a stock-market-based test,' Industrial Relations 33 (3), pp. 283^296. Viscusi, Fatal Tradeo¡s, p. 11. Total penalties assessed by OSHA inspectors on business establishments between October 1994 and September 1995 were $93.7 million, and there were approximately 6.4 million business establishments in the United States. Similarly, the total cost of OSHA regulations is estimated at $33.5 billion. Thus, $93.7/6.4 is $14.64 and $33,500/6.4 is $5,234.38. OSHA has three levels of citations: (1) serious ^ a workplace hazard is found to exist, (2) willful ^ an employer knew of the existence of hazardous conditions and made no reasonable attempt to eliminate them, and (3) repeated ^ a violation of a previously cited (within three years) rule is determined. Penalties range from $7,000 for serious violations, to as much as $70,000 for willful and repeated citations. OSHA reports citations for each speci¢c standard that was violated, rather than regulation that the standard is based on. For instance, the regulation on electrical safety work consists of ¢ve standards ^ 1910,331, 1910.332, 1910.333, 1910.334, and 1910.335. OSHA reports citations for each standard number, even though the standards are designated by the same name. Therefore, the 25 regulations examined in this study represent more than 25 standards as reported in OSHA citation tables The 25 regulations examined in this study do appear to be a reasonable sample of the standards reported in OSHA's citation tables. For instance, of the top ten standards cited by OSHA's inspectors between October 1994 and September 1995, the 25 regulation account for four of them. Of the top 100 standards cited, the 25 regulations account for 27 of the total. Thus, the 25 regulations do not appear to overrepresent the total number of standards cited. See Occupational Safety and Health Administration, U.S. Department of Labor, Study of the E¡ects of the Comprehensive Occupational Safety and Health Reform Act (H.R. 1280), April 1994, and Employment Policy Foundation, `Employment Policy Foundation Statement Regarding DOL's Estimate of the Cost of COSHRA.' Firms in the ¢nance, insurance, and real estate industries are also exempt from the recordkeeping requirements. If the PACE model is adopted by BLS researchers as a basis for estimating the business expenditures on federally mandated occupational health and safety standards, the survey will need to account for both regulatory requirements as well as regulatory prohibitions resulting from OSHA rulings. The reason is that both regulatory requirements and regulatory prohibitions result in compliance expenditures that should be estimated using a similar methodology. For a more detailed discussion, see James, `Implementing a regulatory budget.' American Business Information, Inc., as reported in U.S. News & World Report, May 13, 1996, p. 20.
341 34. Occupational Safety and Health Administration, U.S. Department of Labor, `Summary of regulatory impact and regulatory £exibility analysis, international trade impact analysis, and environmental impact assessment,' section V of the Final Rule, published in the Federal Register 57 FR 6356, on February 24, 1992.
