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 oflabor to establish the Occupational Safety and Health Administration (OSHA).OSHA's legal mandate requires that an employer `furnish to each of his em-ployees employment and a place of employment which are free from recognizedhazards that are causing or are likely to cause death or serious physical harm tohis employees.' Accordingly, OSHA is authorized to set `mandatory occupa-tional safety and health standards applicable to businesses a¡ecting interstatecommerce' through public rule making.1 In particular, OSHA may regulateworkplace practices and environments, inspect workplaces for hazards, issuecitations, and require that noncompliant businesses pay penalties. In 1995,OSHA employed an estimated 2,323 employees and had an operating budgetof 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 theOccupational Safety and Health Administration using cost ¢gures provided byOSHA.3 The analysis is based on an examination of the regulatory impactanalyses (RIAs) of new rules published by OSHA after 1980. The advantage ofthis study is that it examines the incremental cost of individual OSHA regula-tory programs.

The ¢ndings suggest that previous studies substantially underestimate thetrue economic burden of OSHA regulations. Speci¢cally, the total annual costof compliance with OSHA's regulations in 1993 are estimated at approximately$33 billion. This cost estimate is approximately three times the highest ¢gureestimated in previous studies of OSHA.

As a point of comparison, the estimated annual compliance costs of Environ-mental Protection Agency (EPA) regulations, including annual capital expendi-tures and operating expenses, totaled $109 billion in 1993.4 While environmentalregulation continues to be one of the greatest sources of compliance expendituresfor U.S. business establishments,5 the relative impact of OSHA's regulations isnot insigni¢cant. The economic burden of OSHA on the U.S. economy is remark-able, since OSHA operates with a sta¡ that is one-eighth the size of the EPA'sand has an operating budget that is 15 times smaller than that of the EPA.

Policy Sciences 31: 321^341, 1998.ß 1998Kluwer Academic Publishers. Printed in the Netherlands.

Previous estimates of the compliance burden of OSHA regulations

Only a handful of studies have attempted to estimate the total compliance costsof OSHA regulations on the U.S. economy.6 These studies, summarized inTable 1, provide a wide-range of cost estimates. In particular, they indicate thatOSHA regulations result in annual compliance costs of between $6.2 billionand $13.5 billion (1993 dollars).

Each study focuses on a di¡erent time period and utilizes a di¡erent ap-proach in constructing compliance costs. Denison and Crandall examinedcapital expenditures required by health and safety regulations, McGraw-Hillsurveyed ¢rms to estimate their investment expenditures for compliance withOSHA regulations, and Viscusi estimated the present value of ¢nal OSHArules using cost estimates provided by the U.S. O¤ce of Management andBudget.

Denison's study, for instance, calculates the capital costs (depreciation andnet opportunity cost of invested capital) required for new safety features onautomobiles and OSHA regulations promulgated prior to 1975. He arrived athis estimates by assuming that the ratio of capital expenditures for OSHAcompliance to annual capital costs was the same as the ratio of air and waterpollution abatement capital outlays to annual capital expenditures. Denison'sreport also included estimates of productivity changes due to mining safety inhis cost estimates.

An analysis of the projected costs of speci¢c regulations proposed by OSHAbetween 1975 and 1980 provides additional evidence of the regulatory burdenof OSHA standards on the U.S. economy.7 As indicated in Table 2, proposedOSHA rules were projected by Litan and Nordhaus to result in additionalcompliance costs by a¡ected companies of between $27 billion and $73 billion.These cost projections are based on OSHA-commissioned cost studies. It shouldbe noted that most of the expected compliance costs from rules promulgatedduring this period arise from only one major rule ^ OSHA's proposed rulinggoverning generic carcinogens.8

A study prepared by the National Association of Manufacturers (NAM)in 1974, summarized in Table 3, provides additional estimates of OSHA com-pliance costs.9 The study ¢nds that the cost of compliance for small manufac-

Table 1. Previous studies of total employee safety and health compliance costs (billions of dollars).

Study name Yearstudied

Cost(current dollars)

Cost(1993 dollars)

Denison 1975 4.1 8.4McGraw-Hill survey 1976 3.2 6.2Crandall 1985 8.5 9.8Viscusi 1989 12.7 13.5

Sources: Various studies.

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turers with fewer than 101 employees was on average $35,000 ($77,800 in 1993dollars), while the compliance cost for manufacturers with over 5,000 employeeswas over $4.6 million ($10.4 million in 1993 dollars). The average cost per ¢rmwas approximately $350,000 ($779,000 in 1993 dollars), which is supported bythe fact that the ¢rst small-business loans issued during the 1970s for thepurpose of OSHA compliance averaged $200,000 each.10

These ¢gures represent the estimated costs of complying with regulationsissued and enforced by OSHA during the 1970s only. Thus, they do not re£ectrules issued by OSHA since that time. Nevertheless, if these cost estimates areonly approximately accurate, they indicate that the estimates of the compliancecosts of OSHA regulations reported in Table 1 signi¢cantly underestimate thefull economic impact on the U.S. economy. For instance, using NAM's lowestcost estimate of $35,000 per ¢rm (the full cost of compliance for small ¢rmsonly) for all capital expenditures and control expenses resulting from OSHAregulations, the total cost of compliance for manufacturers alone in 1974exceeds an estimated $10 billion ($23 billion in 1993 dollars.) If one includes

Table 2. Estimated total cost of OSHA regulations proposed between 1975 and 1980 (billions ofdollars).

Proposed regulation Cost (1977 dollars) Cost (1993 dollars)

Generic carcinogens 11^35 20.1^65.9Benzene 0.5 0.9Cotton dust 0.7 1.3Noise 2.0 3.7Other 0.9^1.1 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 35,000 77,800101^500 73,500 163,300501^1,000 350,700 779,300

1,001^2,000 330,600 734,7002,001^5,000 830,000 1,849,400over 5,001 4,681,500 10,403,300

Source: Adapted from Occupational Safety and Health Management Research Survey, NationalAssociation of Manufacturers, 1974. Quoted in R. S. Smith, The Occupational Safety and HealthAct (Washington, D.C.: American Enterprise Institute, 1976).

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construction companies, the estimate of compliance costs of OSHA's regula-tions in 1974 exceeds $16.3 billion ($36 billion in 1993 dollars).11

Because the above studies examine the compliance burden of OSHA fordi¡erent time periods, care must be taken in comparing the estimates, as regu-lations 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 enforcedby the agency.

In addition, recent studies examining workplace accident rates and workerproductivity suggest that many of the popularized bene¢ts of OSHA regula-tions may be overstated.12 Most studies ¢nd no signi¢cant impact of OSHA'sregulations on fatality and injury rates in the workplace.13 Further research isneeded to examine the economic costs of OSHA's regulations in light of theuncertain bene¢ts of governmental regulation on workplace environments.14

Data and methodology

Data for this study come from regulatory impact analyses (RIAs) commissionedby OSHA prior to publication of agency proposed and ¢nal rules. OSHA isrequired to conduct RIAs for regulations as speci¢ed by Executive Order 12866and the Regulatory Flexibility Act of 1980.15 Speci¢cally, OSHA must conductan RIA for any rule having a `major economic consequence on the nationaleconomy.' The RIA must provide estimates of the expected total compliancecosts to a¡ected businesses, although it is not required to publish cost-bene¢ttests.16 Generally, this involves regulations expected to result in compliance costsin excess of $100 million per year. By practice, OSHA usually contracts out toprivate consulting and research ¢rms the actual work for the RIA. These ¢rmsthen provide OSHA with the necessary reports and analyses. The RIA reportsare 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 UnitedStates based on OSHA's studies. A¡ected ¢rms' are expected to bear a cost asa result of the speci¢ed OSHA regulation. (Each of the 25 above-mentionedrules is currently enforced by OSHA inspectors.) Costs for all construction,manufacturing, and other establishments were calculated by averaging the totalcost of regulations across all ¢rms within each respective category. For in-stance, if an OSHA regulation is expected to cost 100 construction ¢rms a totalof $1,000, and there are 500 total construction ¢rms, then the average cost perconstruction ¢rm is $2 while the average cost per a¡ected ¢rm is $10. Becauseof limitations in the data available in the published RIAs, cost estimates werenot calculated for ¢rms based on ¢rm size.

Table 4 indicates the number of construction, manufacturing, and otherestablishments in the United States in 1993. These ¢gures were obtained fromthe 1993County Business Patterns (CBP) report produced by the Bureau of the

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Census of the U.S. Department of Commerce.17 The CBP covers all U.S. businessestablishments, except most governments, railroads, and farms. Also excludedfrom the Census data are self-employed persons, persons working outside ofthe United States, and maritime employees. The scope of the CBP correspondsclosely with OSHA's jurisdiction over business establishments. OSHA coversroughly 6.5 million employers, and nearly all employees, except miners, trans-portation workers, many public employees, and the self-employed.18

Appendix Table A1 presents the 25 major rules examined in this study alongwith each rule's primary Code of Federal Regulations (CFR) citation and datethe ¢nal rule was published in the FR.19 A description of each of these majorrules, along with an explanation of the methodology by which the compliancecosts for construction, manufacturing, and all other ¢rms was estimated, isprovided in the appendix. Current dollar amounts were adjusted for in£ationby using the year the RIA and the ¢nal rule were published in the FR as thebase 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 rulescurrently enforced by OSHA exceeds $6 billion (1993 dollars). The rules cur-rently imposing the greatest total costs on U.S. businesses are the hazardouscommunications, air contaminants, bloodborne pathogens, and process safetymanagement regulations. The combined annual compliance costs of these fourrules alone comprise over half of the total costs of all 25 OSHA regulations.

Table 6 presents the average annual per-establishment compliance cost ofthe 25 OSHA regulations for construction, manufacturing, and other sectors.In the construction sector, the most costly regulations are those governingasbestos, excavations, and lead exposure. Compliance costs of these rules rangefrom $541 for the excavation standard to $670 for the lead regulation. However,an examination of the expected compliance costs for construction ¢rms ac-tually a¡ected by OSHA's rulings indicates that the hazardous waste operationsregulation is the most costly. For each a¡ected business, the annual cost ofcompliance for this rule alone exceeds $700,000 (Table 7).

Table 4. Total number of U.S. construction, manufacturing, and all other establishments, 1993.

Catagory Number

Construction 598,255Manufacturing 386,609All others 5,418,503

Total 6,403,367

Source: U.S. Bureau of the Census,County Business Patterns, 1993.

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In the manufacturing sector, OSHA rules regarding air quality and processsafety management are the most costly to the industry on average, with com-pliance costs of $1,337 and $1,874 a year respectively. For ¢rms directly a¡ectedby these rules, compliance costs exceed $9,000 a year for the air contaminantsrule and $36,000 for OSHA's process safety management regulation. However,the most costly rules for manufacturers a¡ected by OSHA rules are the leadand cotton dust standards. For a¡ected ¢rms, the expected cost of compliancewith the lead standard, as reported by OSHA, is nearly $400,000 a year. Forthe revised cotton dust standard, OSHA estimates that a¡ected ¢rms may payas much as $500,000 annually (Table 7).

For all other businesses, the bloodborne pathogens standard and the hazard-ous communications rule are the most costly on average. Compliance costs foreach of these rules average $153 annually per ¢rm. Since the bloodborne

Table 5. Estimated total compliance costs of 25 major OSHA regulations ¢nalized after 1980(millions of dollars).

Standard name Cost(current dollars)

Cost(1993 dollars)

Air contaminants 788.0 834.7Asbestos 361.3 356.7Benzene 32.9 38.0Bloodborne pathogens 813.0 829.6Cadmium 187.7 190.4Control of hazardous energy (lockout/tagout) 135.0 143.0Cotton dust 166.4 191.7Electric power generation 21.3 21.0Electrical safety-related work 20.3 20.8Excavations 306.0 324.2Fall protection 40.0 39.5Fire protection 21.0 27.8Formaldehyde 35.1 35.6Grain handling 55.1 63.7Hazardous communication 949.5 937.3Hazardous waste operations and emergency response 157.9 167.3Lead in construction 405.0 405.0Logging 12.5 12.3Methylenedianiline (MDA) 10.3 10.4Noise 210.3 246.8Occupational exposure to lead 111.6 189.8Permit-required con¢ned spaces 202.4 202.4Personal protective equipment 52.4 51.7Process safety management 679.8 689.5Reporting of fatality/multiple hospitalizations 1.8 1.8

Total 5,776.6 6,031.0

Sources: Various regulatory impact analyses published by OSHA in the Federal Register andauthor's calculations.

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pathogens standard a¡ects less than 10 percent of these businesses (see theAppendix), the annual cost of compliance for ¢rms a¡ected by this rule isnearly $2,000. However, the most costly ruling for a¡ected establishments isthe 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 enforcesa¡ecting workplace safety and health, the full cost of compliance with OSHAstandards is likely to exceed $6 billion a year. Indeed, a number of rulespromulgated and enforced by OSHA are not included in this study but arebelieved to impose substantial costs on U.S. businesses. Some of the morecostly standards not examined here include sca¡olding, abrasive machinery,abrasive wheels and tools, respiratory protection, ventilation, £ammable and

Table 6. Estimated per-establishment compliance costs of 25 major OSHA regulations (construc-tion, manufacturing, and all other sectors, 1993 dollars).

Standard name Construction Manufacturing All others

Air contaminants ^ 1,874 20Asbestos 572 * 3Benzene ^ 98 ^Bloodborne pathogens ^ ^ 153Cadmium 18 381 6Control of hazardous energy (lockout/tagout) ^ 248 9Cotton dust ^ 496 ^Electric power generation ^ ^ 4Electric safety-related work ^ 5 3Excavations 542 ^ ^Fall protection 66 ^ ^Fire protection ^ 72 ^Formaldehyde ^ 84 1Grain handling ^ ^ 12Hazardous communication 141 146 147Hazardous waste operations and emergencyresponse 61 91 18

Lead in construction 670 5 *

Logging ^ ^ 2Methylenedianiline (MDA) 1 26 ^Noise ^ 638 ^Occupational exposure to lead ^ 491 ^Permit-required con¢ned spaces ^ 223 21Personal protective equipment ^ 87 3Process safety management ^ 1,337 32Reporting of fatality/multiple hospitalizations * 1 *

Total 2,071 6,305 435

* 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'scalculations.

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combustible liquids, illumination, gases, ladders, stairways, ¢xed industrialstairs, head protection, hand protection, eye and face protection, sanitation,underground construction, ¢rst aid and life saving equipment, power-operatedhand 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 esti-mates of the full cost of compliance with OSHA's regulations. The followingcost calculations are estimates only ^ based on the total and per-¢rm cost ofthe 25 ¢nal OSHA rules described inTable 5 and Table 6 ^ and not measures ofactual expenditures. It should be recognized that no single method of estima-tion will adequately re£ect the true economic costs of OSHA rulings; hence,several di¡erent approaches are examined.

Table 7. Estimated compliance costs of 25 major OSHA regulations (for a¡ected establishments inconstruction, manufacturing, and all other sectors, 1993 dollars).

Standard name Construction Manufacturing All others

Air contaminants ^ 9,055 2,140Asbestos 690 560 45Benzene ^ 7,605 ^Bloodborne pathogens ^ ^ 1,660Cadmium 1,150 18,140 5,910Control of hazardous energy (lockout/tagout) ^ 280 35Cotton dust ^ 520,000 ^Electric power generation ^ ^ 1,775Electrical safety-related work ^ 5 5Excavations 1,000 ^ ^Fall protection 66 ^ ^Fire protection ^ 80 ^Formaldehyde ^ 670 50Grain handling ^ ^ 4,065Hazardous communication 140 145 147Hazardous waste operatins and emergencyresponse 726,185 1,595 2,280

Lead in construction 2,795 19,230 580Logging ^ ^ 1,035Methylenedianiline (MDA 3,460 50,710 ^Noise ^ 700 ^Occupational exposure to lead ^ 379,590 ^Permit-required con¢ned spaces ^ 995 765Personal protective equipment ^ 200 10Process safety management ^ 36,860 27,660Reporting of fatality/multiple hospitalizations 7 7 7

Sources: Various regulatory impact analyses published by OSHA in the Federal Register andauthor's calculations.

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The 1974 NAMstudy as benchmark

The 1974 study of manufacturers described above provides a convenient bench-mark for calculating the total annual cost of compliance with federal occupa-tional health and safety standards. As indicated in Table 3, businesses wereexpected to pay an additional $35,000 to $4.7 million annually, depending onthe size of the ¢rm, as a result of the regulations promulgated by OSHA duringthe 1970s. According to OSHA's 25 published RIAs listed above, manufac-turers in 1993 could expect to pay an additional $6,305 each year on averageper ¢rm for the 25 regulations promulgated since 1980 (Table 6). The 1974estimate of per-¢rm compliance cost for manufacturers is approximately 5.55times that of the per-¢rm cost for manufacturers in 1993. Assuming that thecompliance burden of OSHA regulations in 1993 is at least as great as thecompliance burden of OSHA regulations on business establishments in 1974(and that the 1974 estimate is reasonably accurate), then the total compliancecosts of all of OSHA's regulations enforced in 1993 is projected to be at least5.55 times the total for the 25 major OSHA rules examined in this study.Accordingly, the estimated compliance cost of OSHA's regulations is estimatedto be $33.5 billion in 1993.20

Is this a reasonable estimate of the compliance costs of OSHA today? Whilesome 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 rulesOSHA enforced in 1974 are either no longer being currently enforced or havebeen superseded by newer regulations. Therefore, assuming that the annualeconomic burden of OSHA's regulations on ¢rms today is at least as great asthe 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 ofOSHA's regulations promulgated prior to 1974, and it is unadjusted for in£a-tion. In reality, the average annual cost of compliance for ¢rms in 1974 wouldhave 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, thenthe 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 ofthe 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 OSHAinspectors during the 1990s provides additional support for the reasonablenessof this cost estimate of OSHA's regulations. OSHA collects data on the numberof citations, the number of inspections, and the total penalties assessed onbusinesses for violation of OSHA regulations.21 Between October 1994 and

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September 1995, OSHA inspectors made a total of 116,985 citations for 403speci¢c regulatory standards that were violated by U.S. business establish-ments, and assessed over $93.7 million in penalties. The standards that weremost often cited during this period were the hazardous communication, controlof hazardous energy, and sca¡olding standards.22

Studies show that an increase in the likelihood of an OSHA inspection andcitation by OSHA inspectors for rule violations increases the probability that¢rms will comply with OSHA regulations.23 Furthermore, ¢rms lose valuewhen OSHA announces citations for workplace health and safety violations.24

The negative impact to ¢rms as a result of a citation by OSHA inspectors, inaddition to the expected monetary penalty that may be assessed on ¢rms forviolations of OSHA's standards, impose costs on ¢rms as a result of noncom-pliance. Therefore, one may assume that many ¢rms that fail to comply withOSHA's standards do so because the expected cost of compliance exceeds theexpected cost of noncompliance (loss of ¢rm value and monetary penalty).25

The reasonableness of this assumption is supported by the fact that, averagedacross all business establishments in the United States, the average annualOSHA 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 arecaught by OSHA inspectors, nor are they always intentional, since many ¢rmsmay not know that they are in violation of OSHA rules.27 Nevertheless, anexamination of citation records will provide a rough measure of those OSHAregulations that are most burdensome to U.S. business establishments.

Of the 403 speci¢c standards cited by OSHA inspectors between October1994 and September 1995, the 25 rules examined in this study comprise roughly13 percent of the total.28 Therefore, assuming that these rules are a reasonablesample of all 403 standards cited by OSHA's inspectors, the full cost of OSHA'sregulations are 7.75 times the total for the 25 rules examined above, or $46.7billion annually (Table 8).29

Since many of the citations issued by OSHA's inspectors are for one standardonly, a more sensible estimate of the compliance cost of OSHA comes from anexamination of those rules that received 10 or more citations. The justi¢cationis that rules with standards that were the basis of at least 10 citations by OSHAinspectors are expected to be relatively more burdensome than standards citedonly one or two times. Of the 231 speci¢c standards that received at least 10citations during the October 1994 to September 1995 period, the 25 OSHAregulations discussed above represent approximately one-¢fth of the total.Thus, assuming that the standards resulting from the 25 OSHA rules arerepresentative of all standards cited by OSHA inspectors, the full annual com-pliance cost of OSHA regulations is estimated to be $32.4 billion. A similarestimation based on standards cited at least 100 times suggests that totalcompliance costs are $23.1 billion annually.

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Summary

The full cost of compliance with OSHA's regulations in 1993 is estimated to bebetween $23.1 billion and $46.7 billion annually, with a reasonable estimatenear $33 billion per year. These cost estimates are substantially greater thanthose produced in earlier studies, in part because they are based on an exami-nation 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 federalmandates to produce RIAs for its major rules, OSHA has an incentive tounderestimate the full compliance cot of its proposed regulations in order toensure that the proposed rules are ¢nalized. For example, OSHA's study of theeconomic impact of the proposed (but not passed) Comprehensive Occupa-tional Safety and Health Reform Act (COSHRA) indicated that the totalcompliance cost to the economy would be $10.7 billion annually, while oneprivate study suggested that annual costs would exceed $62 billion.30

Table 8. Number of standards cited by OSHA inspectors, October 1994^September 1995, and theestimated annual compliance cost.

100+ citations 10^99 citations 1^9 citations

Number of standardscited for all rules 113 231 404

Number of standardscited for the 25 OSHA rules 28 43 52

Ratio of all standardscited to the 25 OSHA rules 4.04 5.37 7.75

Estimated total costs(billions of 1993 dollars) 23.10 32.40 46.70

OSHA citation reports were examined to determine the number of times an OSHA standard wascited. For instance, a total of 113 OSHA standards were cited at least 100 times, while 403 standardswere cited at least once. Of the 25 OSHA rules examined in this study, 28 standards derived fromthose rules were cited at least 100 times, while 52 standards were cited at least once. (Many OSHArules, such as the hazardous communication regulation, consist of multiple standards; thus one rulemay have more than one standard). The ratio of all standards with at least 100 citations to standardsembodied by the 25 rules presented above is 4.04 (113/28 is 4.04). That is, there are 4.04 times asmany standards cited by OSHA inspectors that have at least 100 citations than those represented bythe 25 rules. Thus, total compliance cost is estimated to be 4.04 times the $6.031 billion calculatedfrom the 25 OSHA rules described in this study, or $23.1 billion.Sources: OSHA, `Frequently Cited OSHA Standards,' and author's calculations.

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Estimating the actual compliance costs of OSHA

The cost estimates in this report, as well as in previous studies, are based onestimated rather than actual expenditures. The reason is that there is noreliable estimate of actual compliance expenditures for OSHA regulations likethe Pollution Abatement and Control Expenditures (PACE) reports producedannually by the Bureau of the Census for the Environmental ProtectionAgency. Thus, an important advance in our understanding of the full economicimpact of OSHA regulations ^ and the foundation for a regulatory budget ofOSHA regulations ^ will come only after a reliable survey of complianceexpenditures is established.

The Bureau of Labor Statistics (BLS) of the U.S. Department of Laborcurrently surveys approximately 280,000 ¢rms annually to calculate job injuryand illness rates for various industries in the United States. By law, all employersselected for the survey are required to participate. (OSHA requires that allemployers with at least 11 employees are to keep records of occupationalinjuries and illnesses. Those employers with 10 or fewer employees are notrequired to keep such records, unless they are selected by the BLS to participatein the annual survey.)31 The purpose of the survey is to monitor OSHA'sprogress in reducing occupational safety and health hazards, as well as toevaluate existing standards and to schedule inspections by OSHA inspectors.

The annual BLS survey could be expanded to assess the compliance expen-ditures by U.S. ¢rms a¡ected by OSHA regulations, although compulsoryrequirements might require new legislation. Questions should be broad enoughso that all ¢rms surveyed would be able to answer them, but speci¢c enoughto generate reasonable estimates of compliance expenditures for individualOSHA standards.

The PACE survey currently conducted by the Bureau of the Census to assesscompliance expenditures for EPA regulations may be used as a model for theexpanded survey by the BLS of OSHA compliance expenditures. The advantageof using the PACE survey as a model for estimating the compliance costs ofoccupational health and safety regulations is that many ¢rms are alreadyfamiliar with the format and cost estimates for pollution control. Also, OSHAcompliance will be comparable, since the survey instruments will be estimatedusing similar techniques. In addition, the fact that a similar survey instrumentis used to estimate pollution control expenditures and compliance expenses forOSHA regulations will make the implementation and operation of a regulatorybudget more feasible.32

Conclusion

The purpose of this study is to estimate the compliance costs of OSHA regu-lations in order to generate a regulatory budget for OSHA. The study ¢nds thatthe total annual cost of compliance is at least $33 billion, although actual

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compliance expenditures are expected to be much higher. This cost estimate issubstantially higher than previous studies have reported, in part because thisstudy examined the annual incremental cost of individual OSHA regulationsrather than total projected capital expenditures as earlier studies have done. Theadvantage of this measure over previous cost estimates is that it can be easilyadjusted 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 expendituresin excess of $109 billion annually, so OSHA's regulations are approximatelyone-third as burdensome as those produced by the EPA. However, the amountof money spent by Americans annually on weight-control e¡orts is only $33billion.33 Thus, while $33 billion is higher than previous estimates, it does notappear to be unrealistically excessive. Of course, this cost ¢gure is an estimateonly. More accurate estimates will only be available when surveys of actualcompliance expenditures are conducted. Accordingly, the need for a regularsurvey of compliance costs resulting from OSHA rules is paramount. Themethodology suggested by the study ^ that an analysis of speci¢c OSHA rulesbe used as the basis for estimating OSHA's total compliance burden on theU.S. economy ^ provides a useful starting point for upgrading the survey ofoccupational illnesses and injuries currently conducted by the Bureau of LaborStatistics.

The $33 billion estimate provides a reasonable basis for establishing a regu-latory budget for federally-mandated occupational health and safety regulations.Such a budget will provide OSHAwith su¤cient £exibility in implementing itsregulatory agenda, since the cost estimate is higher than previous estimates andis generated using OSHA-commissioned studies. And, if an assessment of theexpenditures on compliance with OSHA regulations is incorporated into theannual BLS survey of occupational injury and illness rates, then a feasiblefoundation will be established for the implementation and operation of a federalregulatory 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 wasdetermined, 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 contaminantsThis 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 PELstandards for an additional 164 substances not currently regulated by OSHA. OSHA (54 FR2332) estimates that the total annual compliance costs to business establishments a¡ected bythis revised rule will be nearly $788 million. This rule a¡ects 19 percent of manufacturers and7 percent of all other establishments in the United States.

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AsbestosThe new asbestos standard amends OSHA's older standard issued in 1986 for general industryand construction. The revised asbestos standard primarily a¡ects the brake and clutch repairindustry. Custodial workers are also exposed to asbestos, and so they are a¡ected by this newstandard as well. According to the RIA published in the FR in 1994 when the ¢nal rule waspublished (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 compliancecost excludes EPA-related training costs of approximately $130 million. Thus, the combinedcompliance cost is $361.3 million. Approximately 83 percent of construction ¢rms, less than 1percent of manufacturing ¢rms, and 6 percent of all other ¢rms are estimated to be a¡ectedby this standard.

BenzeneThis rule amends existing standards regulating the amount of benzene in the air from 10 partsper 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 totalannualized cost to a¡ected ¢rms is estimated at $24.1 million, with an additional $8.8 millionestimated nonengineering costs (medical surveillance, training, etc.). Therefore, the totalannual compliance cost is estimated at $32.9 million.

Table A1. Major ¢nal OSHA rules with regulatory impacts analyses published after 1980.

Standard name Primary CFRcitations

FR publicationdate of ¢nal rule

Air contaminants 1910.1000 Jan. 19, 1989Asbestos 1910.1001, 1926.0058 Aug. 10, 1994Benzene 1910.1028 Sep. 11, 1987Bloodborne pathogens 1910.1030 Dec. 6, 1991Cadmium 1910.1027, 1926.0063 Sep. 14, 1992Control of hazardous energy (lockout/tagout) 1910.0147 Sep. 1, 1989Cotton dust 1910.1043 Dec. 13, 1985Electric power generation 1910.0269, 1910.0137 Jan. 31, 1994Electrical safety related work 1910.0331 Aug. 6, 1990Excavations 1026.0650 Oct. 31, 1989Fall protection 1926.0500 Aug. 9, 1994File protection 1910.0155 Sep. 12, 1980Formaldehyde 1910.1048 May 27, 1992Grain handling 1910.0272 Dec. 31, 1987Hazardous communication 1910.1200 Feb. 9, 1994Hazardous waste operations and emergencyresponse 1910.0120 Mar. 6, 1989

Lead in construction 1926.0062 May 4, 1993Logging 1910.0266 Oct. 12, 1994Methylenedianiline 1910.1050, 1926.0060 Aug. 10, 1992Noise 1910.0095 Mar. 8, 1983Occupational exposure to lead 1910.1025 Nov. 14, 1978Permit-required con¢ned spaces 1910.0146 Jan. 14, 1993Personal protective equipment 1910.0132 Apr. 6, 1994Process safety management 1910.0119 Feb. 24, 1992Reporting of fatality/multiple hospitalizations 1904.0008 Apr. 1, 1994

CFR refers toCurrent Federal Regulations and FR is the Federal Register.

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Bloodborne pathogensThe bloodborne pathogens standard is designed to protect workers, primarily those in thehealth professions, from exposure to Hepatitis B, Human Immunode¢ciency Virus, and otherbloodborne pathogens. The rule requires employers to provide their employees with theprotective equipment, instructions, and other means necessary to limit occupational exposureto blood. The rule a¡ects over 9 percent of all other establishments. According to OSHA (56FR 64004), the additional compliance costs for a¡ected employers for this rule are calculatedto total $813 million per year.

CadmiumThe new cadmium rule a¡ects all industries that produce and use cadmium, such as manu-facturers of batteries. The rule sets guidelines for the use and control of cadmium so as tominimize its exposure to employees. According to OSHA (57 FR 42389), the total annual costto construction, manufacturing, and all other establishments exceeds $187 million. An esti-mated 2 percent of all construction and manufacturing establishments, but less than 1 percentof 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 unexpectedstart-up or release of stored energy could cause harm to employees. The rule requires employ-ers 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 costsexceeding $214 million. An estimated 88 percent of manufacturing facilities and 26 percent ofall other establishments are a¡ected by this rule.

Cotton dustIn 1978, OSHA promulgated its cotton dust standard, which was revised in 1985. The newrules requires a¡ected ¢rms to reduce the amount of cotton ¢bers and dust released into theair. OSHA estimated (50 FR 51129) that the new standard will require a¡ected textileestablishments to expend an additional $150 million for capital equipment and controlexpenses each year. The cost to a¡ected nontextile businesses, such as waste recyclers andgarnetting ¢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 duststandard is $166.4 million. The rule is expected to a¡ect less than 1 percent of all manufac-turers.

Electric Power GenerationThe Electric Power Generation standard a¡ects work practices used during the operation andmaintenance of electric power generation, transmission, and distribution facilities. Accordingto OSHA's RIA (59 FR 4320), the incremental annual compliance cost of this standard isprojected to be $21.7 million, although the ¢rst year's costs are expected to exceed $40million. Less than 1 percent of all other establishments are expected to be a¡ected by thisstandard.

Electrical safety-related workThis rule is designed to require a¡ected ¢rms to minimize the hazards of electrical shock forwork performed on or near energized equipment. OSHA (55 FR 1984) estimates that 4.6million manufacturers and all other establishments will be a¡ected by this rule. Annualcompliance expenditures are projected to be $20.3 million, although ¢rst-year capital require-ments are estimated at $74.6 million.

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ExcavationsThis OSHA rule a¡ects construction ¢rms that perform excavation work, as well as someutilities. The ruling provides speci¢c standards that employers are to meet in order to ensurethat workers are protected from cave-ins and other excavation accidents. The RIA commis-sioned by OSHA and published with the ¢nal rule (54 FR 45894) indicates that the totalannual cost to a¡ected construction ¢rms as a result of this regulation is $306 million. Thisrule primarily a¡ects approximately one-half of all construction establishments in the UnitedStates.

Fall protectionThis rule covers all construction establishments, and requires employers to provide increasedfall protection for their employees, especially for those working on roofs. OSHA (59 FR40672) estimates that the total annual cost to the construction industry will be $40 million.

Fire protectionThe ¢re protection rule requires most manufacturing establishments to minimize workerexposure 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 annualincremental cost of compliance will be $21million.

FormaldehydeOSHA estimates that workers in 112,066 businesses are exposed to formaldehyde at levelsbetween 0.75 and 1.0 ppm. The majority of these workers are in the apparel, furniture, andfuneral industries. This standard states that exposure levels can not exceed 0.75 ppm. OSHAestimates (57 FR 22290) that the annual costs to a¡ected establishments of complying withthe 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 handlingThis regulation a¡ects all businesses that process grains. According to OSHA's publishedRIA (52 FR 49592), the incremental annual costs to grain mills required to comply with thisregulation 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 percentof all other establishments.

Hazardous communicationThe hazardous communication standard is designed to ensure that all employers properlyinform and train their employees regarding any hazardous substances they may work with.The standard originally applied to manufacturing establishments only, but was later ex-panded to include all businesses. OSHA estimates that the new standard (59 FR 6126) willresult in ¢rst-year compliance costs exceeding $1.264 billion. After 20 years, compliance costsare expected to decline to $214.5 million. The ¢rst-year estimate is given for 1988, the year thehazardous communication standard was initially established. Prorating the expected declin-ing 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 the20-year period beginning in 1988). All construction, manufacturing, and all other ¢rms bearcosts of hazardous communication compliance.

Hazardous waste operations and emergency responseThis rule a¡ects hazardous waste sites and businesses that clean up, manage, store or disposeof hazardous wastes. The rule requires the a¡ected employers to comply with a number ofstated waste operations standards. According to OSHA's RIA (54 FR 9311), the annual

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compliance cost to a¡ected establishments will exceed $157 million. The rule a¡ects approx-imately 6 percent of manufacturers, and less than 1 percent of construction and all otherestablishments.

Lead in constructionThis rule provides PEL standards for construction operations that involve lead or lead-containing materials. OSHA (58 FR 26590) estimates that the total annual recurring com-pliance costs of this rule range from $365 million to $445 million, or an average of $405million. OSHA also reports that during the ¢rst year of implementation, an additional $150million to $183 million will be spent by ¢rms training and setting up monitoring and otherequipment to comply with the new PEL standards. Approximately 25 percent of constructionand 37 percent of manufacturing establishments are a¡ected by this rule.

LoggingThe stated purpose of this rule is to revise existing standards a¡ecting the pulpwood andlogging industries. Speci¢cally, this rule requires employers to protect workers against injurycaused by the accidental falling, rolling, or sliding of trees and logs, and to provide trainingand safety equipment for workers using chain saws and other cutting devices. The RIApublished along with the ¢nal rule (59 FR 51672) estimates that the total annual compliancecost of this revised standard will be $12.5 million. This rule a¡ects less than 1 percent of allother establishments.

MethylenedianilineThis rule sets new standards for occupational exposure to methylenedianiline.While less than1 percent of construction and manufacturing establishments are expected to be a¡ected bythis rule, OSHA estimates (57 FR 35630) that total annual compliance costs will be $10.3million.

NoiseThe 1983 occupational noise standard requires manufacturers to reduce noise levels of theirfacilities. OSHA estimates (48 FR 9738) that a¡ected manufacturers will spend an additional$210.3 million annually for compliance.

Occupational exposure to leadOriginally promulgated in 1978, this rule establishes standards for manufacturing establish-ments that use lead-containing materials. After a series of court cases forced postponement ofthe 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 resultin annual compliance costs of approximately $111 million, a¡ecting less than 1 percent of allmanufacturing establishments.

Permit-required con¢ned spacesThe rule is designed to protect workers from the hazards expected when they work in closedor con¢ned work-spaces, such as the repair of machinery requiring workers to `enter' themachine. The RIA published along with the ¢nal rule (58 FR 4462) indicates that the totalannual compliance cost of this rule will be $202.4 million. This rule is expected to a¡ectnearly 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 andcovers manufacturing and all other establishments. The new rule provides nationwide stand-

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ards for personal protective equipment for a¡ected ¢rms (approximately 44 percent of man-ufacturing 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 annualcompliance costs of a¡ected manufacturing establishments will be $34.2 million, and theannual compliance costs of all other establishments will be $18.2 million.

Process safety managementThis rule establishes guidelines for management controls over the storage, handling, andprocessing of highly hazardous materials. The RIA provided by OSHA (57 FR 6356) indicatesthat during the ¢rst ¢ve years of the implementation of this rule, compliance costs areexpected to be $888.7 million. During the second ¢ve years of compliance, costs are calcu-lated to be $405.8. The decline in costs is attributed to `the completion of process hazardanalyses for existing operations,' according to the report.34 The $679.8 million estimatereported in this study is the average of the two cost ¢gures for the 10-year period followingthe implementation of the ¢nal rule. Approximately 5 percent of manufacturing establishmentsand less than 1 percent of all other establishments are expected to be a¡ected by this rule. Over75 percent of the total cost of compliance was allocated to manufacturing businesses.

Reporting of fatality/multiple hospitalizationsAll construction, manufacturing, and all other businesses are required by this OSHA regu-lation to report within eight hours any accident that is fatal to one or more employees or thatresults in the hospitalization of three or more workers. According to the RIA published withthe ¢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¡ectedbusinesses will be approximately $1,500. This number comes from an estimated 200 addi-tional reports requiring 15 minutes each, at $30 per hour (the cost of a professional tocomplete the report). Using this information, the total annual compliance cost is estimatedto be $1.8 million. This number comes from assuming that of the total injuries occurring inconstruction, manufacturing, and all other establishments, 25 percent are `multiple' and thusrequire reports submitted to OSHA. Since one report is required when three or more workersare injured or a worker is fatally injured, the total number of reports that will be ¢led isestimated to be 242,432. Since the reports, according to OSHA's RIA, take 15 minutes tocomplete (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. The1970 act also created the Occupational Safety and Health Review Commission to overseepublic hearings regarding OSHA regulations, the National Institute of Occupational Safetyand Health (NIOSH) to conduct research on workplace safety issues and to provide trainingfor workplaces a¡ected by OSHA rules, and the National Commission on State Workmen'sCompensation Laws to oversee state-level workers' compensation programs. The OSH Act of1970 was amended by Public Law 101^552, November 5, 1990. Quotations are from the 1990OSH Act, sections 5 and 2, respectively.

2. Warren, M and B. Jones (July 1995). `Reinventing the regulatory system: no downsizing inadministration plan,' Occasional Paper 155 (St. Louis: Center for the Study of AmericanBusiness,Washington University).

3. For other studies of regulatory budgeting, see S. Hughes, `Regulatory Budgeting,' WorkingPaper 160 (St. Louis: Center for the Study of American Business,Washington University, June1996); H. S. James, Jr., `Implementing a regulatory budget: Estimating the mandated privateexpenditures of the Clean Air Act and Safe DrinkingWater Act amendments,'Policy Sciences,(this issue).

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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. SmallBusiness 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 ^ Invest-ment in Employee Safety and Health, cited in Tim Engel, OSHA: An Overview, AmericanConservative Union Issues Analysis Series, June 1977; R. Grandall (1988). `What ever hap-pened to deregulation?' in D. Boaz ed. Assessing the Reagan Years. Washington, D.C.: TheCato Institute, p. 271; W.K. Viscusi (1992). `The mis-speci¢ed agenda: the 1980s reforms ofhealth, safety, and environmental protection,' Fatal Tradeo¡s: Public and Private Responsibil-ities for Risk. NewYork: Oxford University Press.

7. Adapted from R. E. Litan and W.D. Nordhaus (1983). Reforming Federal Regulation. NewHaven, Conn.: Yale University Press, p. 26, table 2.8.

8. OSHA's carcinogen policy, proposed in 1978 but not passed, was unlike any other OSHAregulation in its intended scope, cost, and complexity.

9. Adapted from Occupational Safety and Health Management Research Survey, National Asso-ciation of Manufacturers, 1974, quoted in R. S. Smith (1976). The Occupational Safety andHealth 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 and500,000 construction establishments in 1974.

12. See, for instance,W. B. Gray (1987). `The cost of regulation: OSHA, EPA and the productivityslowdown,' American Economic Review 77 (5), pp. 998^1006; J. C. Robinson (1995). `Theimpact 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 OSHAregulations (Viscusi, Fatal Tradeo¡s, p. 11).

15. In 1993, President Bill Clinton issued Executive Order No. 12866, which repealed and replacedthe RIA requirements mandated by Executive Order No. 12291 with somewhat similar provi-sions.

16. Federal agencies are exempted from showing that their regulations pass a `cost-bene¢t test' ifthe test violates their legislative mandates, which exempts nearly all of OSHA's rulings (Viscu-si, Fatal Tradeo¡s, p. 256).

17. The County Business Patterns report is available on the World WideWeb at http://www.cen-sus.gov/ftp/pub/econ/www/mu0800.html.

18. See the mission statement of the Occupational Safety and Health Administration on theWorldWideWeb at http://www.census.gov/oshinfo/mission.html.

19. OSHA standards for general industry are published in two volumes ^ 29 CFR parts 1901.0001to 1920.0441 and 29 CFR parts 1910.1000 to end. Standards for construction are published inone 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 besome distortion due to the fact that the 1974 NAM study reports `per-¢rm' cost data, while thecost information reported in Table 6 is `per-establishment.' Ordinarily, this would indicate thatthe $33.5 billion cost estimate is overstated due to the fact that the benchmark chosen over-states the `per-establishment' cost. (The per-¢rm cost is expected to exceed the per-establish-ment cost, since one ¢rm may operate several establishments.) The 1974 NAM per-¢rm costbenchmark used to generate the 1993 per-establishment cost estimate is for businesses with lessthan 100 employees. This can easily be interpreted to mean establishments with fewer than 100employed workers. Nevertheless, the $35,000 cost per-establishment benchmark seems small

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and thus likel underestimates the actual annual cost of OSHA regulations for each businessestablishment.

21. Occupational Safety and Health Administration, U.S. Department of Labor, `Frequently CitedOSHA 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.

22. The hazardous communication standard 1910.1200 was cited 10.504 times, while standard1926.0059 was cited an additional 3,521 times. The control of hazardous energy standard1910.0147 was cited 4,858 times, and the sca¡olding standard 1926.0451 was cited 4,254 timesduring this time period.

23. Gray, W. B. and C.A. Jones (1991). Are OSHA health inspections e¡ective? A longitudinalstudy 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 occupationalsafety and health administration health and safety regulations in the manufacturing sector,'Journal of Human Resources 26 (4), pp. 623^653.

24. 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). `Thee¡ectiveness of OSHA penalties: a stock-market-based test,' Industrial Relations 33 (3), pp.283^296.

25. Viscusi, Fatal Tradeo¡s, p. 11.26. 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 busi-ness establishments in the United States. Similarly, the total cost of OSHA regulations isestimated at $33.5 billion. Thus, $93.7/6.4 is $14.64 and $33,500/6.4 is $5,234.38.

27. 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 reasonableattempt to eliminate them, and (3) repeated ^ a violation of a previously cited (within threeyears) rule is determined. Penalties range from $7,000 for serious violations, to as much as$70,000 for willful and repeated citations.

28. OSHA reports citations for each speci¢c standard that was violated, rather than regulationthat 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 citationsfor 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 asreported in OSHA citation tables

29. The 25 regulations examined in this study do appear to be a reasonable sample of the stand-ards reported in OSHA's citation tables. For instance, of the top ten standards cited byOSHA's inspectors between October 1994 and September 1995, the 25 regulation account forfour 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.

30. See Occupational Safety and Health Administration, U.S. Department of Labor, Study of theE¡ects of the Comprehensive Occupational Safety and Health Reform Act (H.R. 1280), April1994, and Employment Policy Foundation, `Employment Policy Foundation Statement Re-garding DOL's Estimate of the Cost of COSHRA.'

31. Firms in the ¢nance, insurance, and real estate industries are also exempt from the record-keeping requirements.

32. If the PACE model is adopted by BLS researchers as a basis for estimating the businessexpenditures on federally mandated occupational health and safety standards, the survey willneed to account for both regulatory requirements as well as regulatory prohibitions resultingfrom OSHA rulings. The reason is that both regulatory requirements and regulatory prohib-itions result in compliance expenditures that should be estimated using a similar methodology.For a more detailed discussion, see James, `Implementing a regulatory budget.'

33. American Business Information, Inc., as reported inU.S. News &World Report, May 13, 1996,p. 20.

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34. Occupational Safety and Health Administration, U.S. Department of Labor, `Summary ofregulatory impact and regulatory £exibility analysis, international trade impact analysis, andenvironmental impact assessment,' section V of the Final Rule, published in the FederalRegister 57 FR 6356, on February 24, 1992.

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