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CHAPTER V: COSTS OF COMPLIANCE

This chapter presents OSHA's estimates of the costs of compliance associated with the proposed ergonomics program rule. Costs were developed for four categories of costs:

(1) familiarization costs, i.e., those that would be incurred by all establishments in general industry, to determine whether they are covered by the proposed rule or whether or not their program can be grandfathered in; (2) the costs covered establishments would incur to implement the basic program; (3) the costs they would incur to implement the full program (excluding the costs of job control interventions and work restriction removal protection); and (4) the costs of job control interventions. This chapter also estimates the shift in costs from employees to employers that would occur when the work restriction protection (WRP) provisions of the proposed rule take effect.

The chapter presents these costs on a provision-by-provision basis and explains the assumptions underlying each cost estimate. The cost estimates in this chapter reflect a number of changes OSHA has made to the economic analysis in response both to suggestions from the Small Entity Representatives (SERs) who gave comments to the Federal Panel convened as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA) to review an early draft of this rule, and to the findings and recommendations made by the Federal Panel in its report to the Assistant Secretary.

The basic steps followed in developing the costs of compliance for this rule were:

  • Determine the applicability of the rule to various portions of general industry;

  • Determine the number of employees and/or establishments in each portion of the industry the rule would apply to;

  • Estimate the unit costs of each provision of the rule per affected establishment and/or employee; and

  • Multiply the estimated unit costs of each provision by the number of affected employees or establishments to which the provision applies.

In carrying out these steps, OSHA's analysis takes into account differences in the characteristics of more than 300 industries within general industry, of 3 size classes of establishments within these industries, and of 26 general industry occupational groups. The steps involved in determining the applicability of the rule and the number of employees and/or establishments affected by various portions of the rule are covered in detail in the Industrial Profile (Chapter II) and Benefits (Chapter IV) chapters of the analysis.

In carrying out these calculations, OSHA made certain simplifying assumptions to reduce the complexity of the rule. (The same assumptions were made, where applicable, in the Benefits chapter):

  • The phased-in implementation dates included in the standard were ignored. The analysis assumes that all establishments will implement full programs and control their problem jobs by the end of the first year. This simplification has the effect of overestimating both benefits and costs, although it overestimates benefits somewhat more than it overestimates costs(1) ;

  • The analysis assumes that employers will continue to implement full programs for two years (rather than the three years required by the proposed standard) before they are permitted to fall back to the basic program. This assumption was necessary because of the complexity of the probability calculations involved in determining how many establishments already had programs in place over a three year period. The result of this simplifying assumption is to slightly underestimate the costs of program evaluation and to overestimate the costs of establishing new programs.

  • Both the benefits and cost estimates assume that all covered establishments will fully comply with the standard but will not implement programs that go beyond the program required by the proposal. Use of this assumption is essential if OSHA is to demonstrate that the proposed standard is economically feasible; that is, OSHA could not appropriately analyze the feasibility of the standard if the Agency assumed that certain classes of establishments would not implement the standard. In actuality, many firms will not fully comply with the standard, which will lower both the benefits and costs actually realized by the standard. For example, a survey of 100 large firms in the Sacramento area found that only 65% of them had implemented the California ergonomics standard and that 15% did not even realize that there was a State ergonomics standard (Ex. 26-1597). Similarly, in order to determine the economic feasibility of the standard that OSHA has proposed, OSHA's analysis does not take into consideration the possibility that some firms may do more than is required by the standard.

  • OSHA estimates that 25% of all problem jobs covered by the standard can be controlled using the proposed "quick fix" option. This estimate was made by OSHA's Expert Ergonomics Panel, which estimated that 50% of all problem jobs could be controlled "quickly and easily." OSHA reduced this estimate by half to account for the fact that the proposed rule's quick fix option applies only in situations where the MSD hazard in the problem job can be eliminated completely. OSHA estimates that only about 25% of all problem jobs, or half of the problem jobs the Panel identified as quick and easy to fix, would be fixed by eliminating the MSD hazard, and that, in the other half of such jobs, MSD hazards would be materially reduced substantially but not eliminated. OSHA estimates that employers who are able to use the quick fix option (i.e., employers whose workplaces contain 25% of all problem jobs) will not incur costs for employee training or for program evaluation for those jobs fixed through the quick fix option.

In addition to these assumptions, which primarily affect this cost chapter, the results of the analysis are also affected by the assumptions outlined in Chapter IV (Benefits) concerning the number of MSDs and problems jobs fixed. Unless otherwise stated, the cost estimates provided in this cost chapter are estimates of annualized costs over the first ten years the standard would be in place. For both benefits and costs, OSHA estimated the present value of the control costs and the direct cost savings, beginning at the time the job fix was made. This present value is calculated over ten years, and if equipment must be purchased more than once over a ten year time span, this cost is included in the present value. In addition, for both the costs and benefits, OSHA assumes that a job fix would be in place for ten years. For both costs and benefits, OSHA used the OMB recommended discount rate of 7 percent for purposes of annualization (OMB, 1992). Both the costs and benefits are measured in real 1996 dollars. Both costs and benefits are measured assuming that the affected industries are as they are today. The analysis does not account for any changes in the economy over time, possible adjustments in the demand and supply of goods, changes in production methods, investment effects, or macroeconomic effects of the standard. The macroeconomic impacts of any rule whose costs are less than 0.05 percent of GNP are likely to be minimal. OSHA believes that its approach, i.e., of determining the benefits and costs for industry as it is today, is the least speculative and controversial way of presenting the benefits and costs of this proposed standard.

The remainder of this section is organized according to the applicability of the relevant portion of the proposed standard:

  • Costs to all general industry establishments;

  • Basic program costs;

  • Full program costs (excluding costs for job controls and work restriction protection);

  • Job control costs; and

  • Work restriction protection costs.

Table V-1 summarizes the basis for OSHA's unit cost estimates and presents the situations to which they apply, for all provisions of the proposed standard. The origins of the estimates in this table vary. The derivation of the average costs of job interventions and job controls are given in detail in the appropriate sections of this chapter. The costs associated with other elements of the program are based on OSHA's experience and judgment, and were revised in some cases as a result of comments made by the SBREFA Panel and the Small Entity Representatives (SERs). Where the table presents costs in terms of hours, the unit costs of the activity were determined on an industry-by-industry basis using the industry-specific wage rates presented in the Industrial Profile chapter (Chapter II) of this analysis.

Table V-1. Assumptions Used to Develop Costs for Provisions of the Proposed Rule

Provision When Required Hours or Costs Involved Level of Staff or
Expertise Required
Familiarization Costs to Review Standard to Determine Applicability to Establishment and Ability to Grandfather In (Cost to All General Industry Firms) Initially for all establishments in general industry 1 Hour Manager
Cost to Investigate whether an MSD or Persistent Symptoms are Covered by the Standard (Cost to All General Industry Firms) All establishments with manufacturing or manual handling jobs; for other general industry establishments, only when an MSD occurs 0.25 hour of managerial time and 0.25 hour of employee time per recordable MSD Manager who has received initial training
Cost to Implement Initial Program (designating responsible persons, providing resources, etc.) (Basic Program) Establishments with basic programs: all with manual handling or manufacturing jobs; otherwise, only if MSD occurs 1 hour Manager with initial training
Cost to Provide Managerial Training as Part of Management Leadership (Basic Program) Establishments with basic programs: all with manual handling or manufacturing jobs; otherwise, only if MSD occurs 2 Hours Manager
Cost to Set up Reporting System (Basic Program) Establishments with basic programs: all with manual handling or manufacturing jobs; otherwise, only if MSD occurs 1 hour Manager with initial training
Cost to Provide Employee Information (Basic Program) Establishments with basic programs: all with manual handling or manufacturing jobs; otherwise, only if MSD occurs 0.5 hour per employee plus 0.5 hour managerial time Manager with initial training
Provision When Required Hours or Costs Involved Level of Staff or Expertise Required
Cost to Provide Managerial Training in Establishments with Full Program If persistent symptoms or an MSD occurs in manufacturing or manual handling establishments; otherwise, only when an MSD occurs 16 hours of managerial time Manager with initial training
Cost to Train Employees in Establishments with Full Programs All establishments having problem jobs 1 hour of employee time per affected employee, 2 hours of managerial time per problem job to provide training; 25% of employers able to use quick fix option and these therefore do not need to conduct employee training. Manager with training required for the full program
Cost of Job Hazard Analysis (Full Program) All establishments with problem jobs 1 hour of managerial time plus 1 hour employee time per problem job Manager with full program training
Cost to Evaluate Job Controls (Full Program) All establishments with problem jobs 2-16 hours of employee and 2-32 hours of managerial time, depending on problem job; in 15% of cases, $2,000 for consulting ergonomist's time is assumed to be required In 85% of cases, manager with full program training; in 15% of cases, consultant ergonomist.
Cost to Administer MSD Management (Full Program) All establishments with problem jobs 1 hour of managerial time per MSD Manager with full program training, health care professional, or ergonomist
Cost to Do Record- keeping (Full Program) All establishments with an MSD or persistent symptoms 0.25 hour of supervisory time per MSD Supervisor
Provision When Required Hours or Costs Involved Level of Staff or Expertise Required
Cost to Conduct Program Evaluation (Full Program) All establishments with full programs 4 hours of managerial time in the three years following occurrence of covered MSD. For 25% of problem jobs able to use quick fix option, no program evaluation is conducted. Manager with full program training
Cost To Implement Job Controls -- Engineering, work practice, or administrative controls Job control costs: all establishments with problem jobs Costs per job intervention per affected employee vary by industry and occupational groups and are presented in detail in Tables V-9 to V-13 (affected employees include the employee incurring the covered MSD and all other employees in the establishment with the same job) Covered under costs calculated for evaluating and implementing controls (above)
Cost to Provide Work Restriction Protection All establishments with problem jobs $1,293 per MSD Covered in costs for administering MSD management, above

The total costs of the proposed standard for all covered establishments are summarized Table V-2. OSHA estimates that the annualized cost of the proposed standard is $3.4 billion (shown in the SUBTOTAL column of the table). As noted, the Work Restriction Protection provision is estimated to shift from employees to employers an additional $876 million annually, bringing the total estimated annualized cost of the proposed standard for employers to $4.2 billion.

The industries with total annualized costs to employers of more than $100 million per year are:

  • Hospitals (SIC 805) -- $345 million;
  • Trucking and Courier Services (SIC 421) -- $204 million;
  • Grocery Stores (SIC 541) -- $195 million;
  • Department Stores (SIC 531) -- $149 million
  • Nursing Homes (SIC 806) -- $159 million; and
  • Eating and Drinking Places (SIC 581) -- $148 million.

These industries typically have many establishments, relatively high rates of MSDs, and involve manual handling in at least some jobs.

Table V-3 shows the costs for each industry in the first year of the standard's implementation. Because the standard is actually phased in over a longer time frame than is reflected in the analysis used to develop the costs in Table V-3, the costs in Table V-3 substantially overestimate true first year costs. Table V-4 shows aggregate costs, on a year-by-year basis, over the first 10 years of the standard's implementation. These estimates also overestimate costs in the early years of the standard by ignoring the standard's extended phase-in.

Costs to All General Industry Establishments

There are two kinds of costs that employers in all general industry establishments will incur, even if their establishment subsequently is determined not to be covered by the scope of the standard or is grandfathered in because an effective ergonomics program is already in place. First, OSHA assumes that all general industry establishments will need to assign a manager to read the standard and determine whether their establishment is covered by it. Second, all general industry establishments will be required to evaluate every reported MSD (and, for those in manufacturing or manual handling jobs, persistent symptoms for which information is available) to determine if it is a covered MSD, as defined by the standard.

OSHA estimates that it will require one hour of managerial time to determine if the establishment falls within the scope of the standard ("familiarization time") and, in the case of establishments with existing ergonomics programs, to determine if their program is one that can be grandfathered in. These costs are referred to in this analysis as "familiarization" costs (see Table V-2). To determine the total costs of the proposed standard for general industry establishments incurring only these two costs, the cost for one hour of managerial time was multiplied by the number of establishments in general industry (see the Industrial Profile chapter (Chapter II) for the derivation of the number of establishments in general industry). At least one of the SBREFA Panel Small Entity Representatives (SERs) believed that the standard would impose extensive familiarization costs even on employers to whom it did not apply, because these employers would have to read and analyze the standard to determine whether it did or did not apply to them (Ex. 23). OSHA agrees that some familiarization will be necessary and has added costs for all general industry employers to become familiar with the standard. However, OSHA believes that this SER's estimate of 40 to 60 hours for familiarization by employers in establishments not within the scope of the standard is excessive. Nevertheless, in response to this SER's comment and the Panel's recommendation, OSHA has expanded the scope and definitions sections of the proposed rule to clarify its application and to give examples of operations and jobs that are included in and excluded from the scope. OSHA believes that these clarifications to the rule will make the extensive review envisioned by this SER unnecessary. The Agency also plans to have expert system software available on-line to aid employers in following the standard when it becomes effective.

All covered general industry employers will also need to evaluate any MSDs or persistent symptoms that occur to determine whether they are covered MSDs, as defined by the standard. OSHA estimates that this evaluation will require 15 minutes of managerial and 15 minutes of employee time per MSD incurred. These personnel costs were multiplied by OSHA's estimate of the number of MSDs occurring in each industry to estimate the total costs of this evaluation process (see the Industrial Profile and the Benefits chapters of this analysis (Chapters II and IV, respectively) for discussions of the derivation of the number of MSDs by industry).

A number of SERs and Panel participants expressed concern about the effect of the proposed standard on the rates of reported MSDs; these commenters believe that the greater awareness of MSDs resulting from promulgation of an OSHA ergonomics standard would be likely to result in the reporting of more MSDs by employees, and that the rule's prohibition of employer actions that might discourage reporting and its work restriction protection provisions would also lead to the reporting of more MSDs (Ex. 23). Although there may initially be an increase in the number of MSDs reported in some cases, respondents to the 1993 OSHA ergonomics survey found that, among employers who reported experiencing a measurable effect from their ergonomics programs, the net effect in the number of MSDs reported was a decrease in the number of reported MSDs, even in the first year. Although some employers responding to the survey reported increased reporting, more reported a decrease, and nearly all respondents reported decreases in the number of MSDs reported after the first year (ERG 1999). Further support for OSHA's belief that any increase in MSD reporting that follows the implementation of an ergonomics program will be short-lived comes from NIOSH's 1997 "Primer" on ergonomics programs. NIOSH reports that, in one plant in which pre- and post program MSD rates were monitored, the numbers of OSHA recordables per 100 workers were 55 and 75 in the two years before program implementation, respectively, and 80 and 59, respectively, in the two 6-month periods after implementation. Thus, the MSD incidence rate continued to rise in the first 6 months of the post-implementation period, but then fell by more than 27% in the second post-implementation (i.e., 6-month) period (NIOSH 1998, p. 38). OSHA believes that the prompt and full reporting of MSDs at the earliest stages is essential to cost-effective ergonomics programs: more reporting generally means that less severe MSDs, or signs and symptoms that have not reached the level of reportable MSDs, are reported early, which reduces employee pain and suffering and the employer's costs of compliance later on.

The costs of these two provisions -- those for familiarization with the standard and those for evaluating all MSDs to determine whether they are covered MSDs, as defined by this standard-- are shown for all general industry establishments in Table V-5. This table shows that the costs of familiarization for all general industry establishments are $25 million per year, and those for evaluating MSDs to determine whether they are covered are $83 million per year.

Costs of the Basic Program

The basic program applies to all general industry establishments with manufacturing operations or manual handling jobs, and to all general industry establishments with a covered MSD. The proposed standard includes the following elements in the basic program (with associated cost elements noted in parentheses):

  • Management leadership and initial program implementation, including allocation of resources and assignment of program responsibilities (implement initial program);

  • Information and training for responsible managers (provide managerial training as part of management leadership);

  • Establishment of an employee reporting system and procedures to protect against discrimination for employees participating in the program or reporting hazards (set up reporting system); and

  • Provision of the information employees need to recognize the signs and symptoms of MSDs and MSD hazards (employee information).

OSHA estimates that the costs of establishing the basic program, including managerial training, set-up time to make sure employees are aware of the importance of reporting MSDs early, and establishing a reporting system to deal with them, will be modest. The assumptions underlying these unit cost estimates are shown in Table V-1. The unit costs for these provisions were used to estimate total annualized costs by multiplying the unit costs of a basic program times the number of establishments required by the standard to have a basic program, derived in the Industrial Profile chapter (Chapter II). As Table V-6 shows, the annualized cost of the basic program for all general industry employers is estimated to be $107 million.

Costs of the Full Program

When an employee in an establishment reports an MSD (or, in establishments with manufacturing or manual handling jobs, persistent symptoms), and the employer determines first that the case is an OSHA-recordable MSD and second that it is a covered MSD, as defined by this standard, the employer must implement a full program. This program must include the following activities and would therefore impose their associated costs:

  • Training for Managers

  • Training for Employees

  • Job Hazard Analysis

  • Evaluation of Appropriate Job Controls

  • Management of MSDs

  • Recordkeeping

  • Program Evaluation.

The actual costs of implementing job controls and of providing work restriction protection are discussed in subsequent sections of this chapter. This section discusses those costs that consist primarily of labor costs, e.g., the costs of training, conducting job hazard analyses, and administering the full program.

Training for Managers

OSHA estimates that, to be able to properly administer a full program and to minimize the use of expensive consultants, each affected establishment will provide one manager with 16 hours of training. This training may be administered in any number of ways: through formal lessons or by individual study, for example. A variety of material already exists that would enable a manager to learn the basic elements of ergonomics through study; OSHA will also be disseminating outreach material that managers will be able to use for this purpose. This analysis assumes that management training will be needed whenever an establishment without a program is required by the standard to have one. Thus if an establishment maintains a full program for its problem jobs for three years, does not have a covered MSD in those jobs for three years, and subsequently drops back to the basic program (except for the maintenance of controls in the problem job), management training would again be needed if a covered MSD recurs in a problem job. On the other hand, if an establishment's employees experience a covered MSD every year, and the establishment thus needs to maintain a full program continuously, the analysis assumes that the establishment will not subsequently need to train a new ergonomics program manager when a new covered MSD occurs.

Training for Employees

The analysis estimates that the employee training required in establishments with a full program for their problem jobs can be accomplished in one hour. Employee training is required of all employees working in problem jobs. (Twenty-five percent of all problem jobs will not require a full program because they are assumed to adopt the quick fix option.) A manager who has received the full program managerial training described above is assumed to be capable of providing this training, and preparing for and conducting this employee training is assumed to require two hours of the manager's time. In estimating the costs of employee training, OSHA multiplied the costs of one hour of employee time times the number of affected employees (derived in the Benefits chapter). It was assumed that one manager would provide the necessary training to all employees in the establishment's problem jobs in a single class, and that two hours of that manager's time would be necessary to accomplish this. In almost all cases, the number of persons in a job will be 20 or fewer, a number that can reasonably be accommodated in a single class. OSHA has ignored the potential cost savings that larger firms may be able to achieve by training employees in several problem jobs in the same class.

Job Hazard Analysis

As defined in the proposed standard, job hazard analysis is the task of identifying the work activities and job conditions in the problem job and then determining the risk factors in that job that may have given rise to a covered MSD. The costs for job hazard analysis do not include those for implementing the engineering, work practice, and/or administrative controls to materially reduce these risk factors. (The costs of selecting appropriate controls are considered, for the purposes of this economic analysis, part of the costs of job control, discussed below.) Job hazard analysis is the task of analyzing the job to identify the problem, while job control is the task of intervening to solve the problem. This economic analysis assumes that job hazard analysis requires the time of a trained manager. As part of this analysis, the manager is required to discuss the job with the affected employee(s) and to observe the affected employee(s) performing the job. Many checklists are available to assist managers in performing job hazard analyses, and the standard itself provides a list of job conditions and physical work activities commonly associated with various risk factors. Using this list or a checklist, OSHA estimates that performing a job hazard analysis will require one hour of managerial time and one hour of employee time per covered MSD. The costs of this personnel time were multiplied by the number of covered MSDs projected to occur in establishments with problem jobs that do not already have an effective ergonomics program in place.

Evaluating Job Controls

Once the employer/manager has identified the risk factors involved in a job, the employer must determine how these risk factors can be controlled. David Alexander of Auburn Engineers, a nationally recognized ergonomist and an ergonomics consultant to OSHA, estimated that approximately 50 percent of all problem jobs can be fixed in-house by someone with relatively little background in ergonomics. He estimated that another 35 percent of jobs could be fixed by a trained ergonomics program manager. For the remainder of jobs -- or approximately 15 percent of all problem jobs -- he estimated that outside expertise in the form of an ergonomics consultant will be required to satisfactorily fix the job.

Many SERs indicated that they believed they would need to bring in consultants to comply with the standard if a covered MSD occurred in their establishment. Although obtaining such outside expertise is always an option for employers, the Agency believes, based on conversations with a number of practicing ergonomists, that this is not required by the standard, is not current industry practice, and is an expense that should therefore not be attributed to the standard. As discussed above, Mr. Alexander estimates that professional ergonomists will be required only for 5-25% of problem jobs (and, on average, only for about 15% of such jobs), and will not be needed at all to set up a basic ergonomics program. For the purposes of estimating the costs of job hazard analysis, OSHA is using the approximate midpoint of Mr. Alexander's estimate, or 15 percent.

Some SERs indicated that they thought such a consultant would cost a minimum of $2,000 for a walk-through of their facility (Ex. 23). Although OSHA estimates that a walk-through by an ergonomics consultant of an entire facility employing 100 or more employees may cost $2,000, the average establishment in the United States employs only 17 workers. Nevertheless, for costing purposes, OSHA has conservatively assigned costs of $2,000 for job hazard analyses to the 15% of problem jobs estimated to need a consultant's expertise. The problem jobs demanding the skills of a professional ergonomist are likely to be those requiring unique fixes or those needing extensive job controls. Three things should be noted, however, at this point. First, the likelihood that an establishment will need a "high end" control approach depends, in part, on how far along the establishment is in its ergonomic program. OSHA's Expert Ergonomics Panel (see Appendix A) indicated that companies without a functioning ergonomics program that are just starting out tend initially to have many problem jobs that can be addressed with relatively easy, low-cost ergonomic fixes, while companies with mature programs have generally already corrected many of these easy problems. Therefore, for the many firms first implementing ergonomics programs because of the standard, both the costs of analyzing jobs and correcting them may be lower than the experience of OSHA's ergonomics consultants would suggest. Second, the assumed rate of $125 an hour for an ergonomist's time ($2,000/16 hours) is based on the typical rate for a certified professional ergonomist. (Formal statistical data on rates are not available; this rate is an estimate made by Mr. Alexander.) Mr. Alexander believes that a number of ergonomists and others with less specialized engineering backgrounds may be able to solve many of these problems, generally at a lower hourly rate (ERG, 1999). Third, the existence of an OSHA ergonomics rule will, over time, lead to a greater number of standardized solutions; indeed, the issuance of the standard may have the effect of altering the marketplace for solutions and the transfer of information, in that ergonomic solutions may be used less for proprietary economic advantage and become more a matter of customary practice.

After considering the comments of the SERs and SBREFA Panel members (Ex. 23), and after asking ergonomists at Auburn Engineers how much time was required for analysis, the Agency has developed the estimates shown in Table V-7 concerning the amount of time ergonomics program managers, supervisors, employees, and ergonomists, respectively, will be needed. The Agency's analysis now assumes that correcting ergonomic hazards will require a more intensive analytical effort and more labor than was the case when the SBREFA Panel was in session. OSHA estimates that this range of costs will apply equally to all industries. The Analysis assumes that every industry will have some jobs that are easily analyzed and others that require more effort, such as the need for ergonomic consultants.

Table V-7. Time Required to Evaluate Appropriate Job Controls

Level of Effort Employee Time Supervisor Time Ergonomics Program Manager Time Ergonomics Consultant Time
A (50% of problem jobs) 2 employees for 2 hours each 2 hours None None
B (35% of problem jobs) 2 employees for 8 hours each 8 hours 8 hours None
C (15% of problem jobs) 2 employees for 16 hours each 16 hours 16 hours 16 hours

MSD Management

Since meeting with the SBREFA Panel and consulting with the SERs, OSHA has increased its estimates of the amount of time needed to deal with the MSD management requirements of the proposed standard. OSHA now assumes (see Table V-1) that 1 hour of managerial time (ergonomist, ergo team leader, safety or health professional) will be needed to manage each covered MSD. As discussed in detail in the work restriction protection section of this chapter, the best evidence the Agency has indicates that many lost workday MSDs reported to the BLS enter the workers' compensation system, which means that most managers are already familiar with MSD management issues.

Recordkeeping Requirements

Firms with fewer than 10 employees are not required by the proposed standard to keep any records, unless they avail themselves of the rule's quick fix option. This approach to recordkeeping is designed to allow very small firms to be exempt from documentation requirements. Some small-business SERs and stakeholders have told OSHA that they would choose to keep records despite the rule's exemption. Employers are always free to do more than the standard requires; however, for the purpose of estimating regulatory costs, only those costs required by provisions of the standard are taken.

Firms that do not meet this size threshold, however, must keep the following records:

  • Employee reports of MSDs, episodes of persistent symptoms (in manufacturing and manual handling jobs), and responses to those reports;

  • Results of job hazard analyses;

  • Hazard control records;

  • Quick fix records;

  • Ergonomic program evaluations; and

  • MSD management records.

OSHA assumes that it will take 15 minutes (0.25 hour) of the time of a supervisory worker to handle these various records for each covered MSD reported.

Program Evaluation

Workplaces with full programs are required to review those programs periodically and at least every three years to ensure that they are in compliance with the standard. OSHA assumes that it will take 4 hours of management time to perform this review every year in establishments whose problem jobs cannot be fixed through the quick fix option. The typical firm, with only 15 employees, is assumed to need to perform only one program evaluation over the 10 year time period covered by this analysis. Larger firms with more MSDs are assumed to need to conduct program evaluations for at least some jobs every year.

The costs of each element of the full program, and for the full program as a whole, are shown in Table V-8. Table V-8 shows that the full program will impose annualized costs of $828 million on establishments in general industry.

Costs of Ergonomic Job Interventions

Under the proposed OSHA ergonomics program standard, employers whose employees experience MSDs that are covered by the standard are required to institute controls for the problem job held by the injured employee(s) as well for other job(s) (called "same jobs" in this analysis) in the establishment that involve the same physical work activities or conditions as the job in which the employee was injured. The cost estimates for job interventions that OSHA provided to the SBREFA Panel and the SERs were criticized by some SERs as being too low. These SERs believe that some ergonomics interventions involve significant costs for engineering control fixes; their estimates exceeded $100,000 for some problem jobs (Ex. 23).

OSHA agrees that a small percentage of problem jobs may require expensive controls, but believes that many reports of very costly interventions actually reflect management decisions to make extensive process changes to improve productivity rather than ergonomics interventions to reduce injuries. In such cases, a reduction in MSD hazards is only one of the benefits that will result from the change. In other words, in these cases, the problem job could have been fixed much less expensively, but the company decided, for a variety of production-related reasons, that a complete reengineering of the process would be more cost-effective in the long run. A case in point is the example provided by Janet Kerley of Lead-Rite, Inc., one of the SERs, who described a company that modified the jobs of 13 workers at a cost of $150,000 but simultaneously achieved a substantial "increase in production" that "probably justified" the costs expended (Ex. 23). Some of the most common fixes, such as those occurring in the office environment, typically cost only a few hundred dollars (many of the scenarios in Appendix A to Chapter III reflect this fact). However, to be sure that OSHA's estimates of the costs of job interventions were conservative, and to ensure that labor savings were appropriately accounted for, OSHA asked the assistance of its Expert Ergonomics Panel in estimating the costs of job interventions and explicitly in accounting for the labor savings associated with the estimates of the costs of job interventions. (The issues addressed by the Panel and their responses are described in more detail in Appendix A of this chapter.)

This section describes the methodology OSHA used to estimate the costs of the ergonomic interventions (i.e., engineering, work practice, or administrative controls) required by the proposed standard for problem jobs. To estimate the costs of ergonomic job interventions, OSHA developed average costs for the job interventions for specific occupational groups rather than for individual industries. This approach was adopted because the costs of job interventions are determined more by the nature of the occupation than the nature of the industry. For example, the kind and costs of job interventions for keyboard users, delivery truck operators, and janitors will be similar regardless of the industry in which the keyboard use, delivery, or janitorial work occurs. On the other hand, simply knowing that an employee works in a particular industry provides little information on the nature of the job intervention needed, since an employee in a given industry could be a keyboard operator, a delivery truck driver, or a janitor. However, since OSHA's cost and economic impact analysis must be conducted by industry, OSHA needed to convert the costs of compliance for occupational groups into costs for industries. The steps in the analysis needed to perform this conversion are:

  1. Define occupational groups
  2. Estimate the average cost of job interventions by occupational group
  3. Develop estimates of the labor savings offsets (i.e., productivity gains) associated with the average cost of job interventions by occupational group
  4. Apply the resulting labor savings offsets to the average costs of job interventions by occupational group to determine the average net costs of job interventions by occupational group
  5. Determine the average net costs of job interventions by industry from the average net costs of job interventions by occupational group
  6. Estimate the total annualized net costs of job interventions by 3-digit industry.

The remainder of this section discusses each of these steps in turn.

Define Occupational Groups

To define the best set of occupational groups to use to estimate the costs of job interventions, OSHA first examined all occupations in the BLS Occupational Employment Survey (OES) (BLS, 1997b) and classified them into groups that exhibited commonality with respect to MSD risks and physical work activities. In the absence of published literature about these commonalities, OSHA used data from the Agency's 1993 ergonomics survey, input from ergonomists, and its own professional judgment to aggregate occupational groups. OSHA created a total of 26 occupational groups representing all of general industry; these groups are defined on the basis of three primary criteria:

  • Similarity of musculoskeletal risk factors,

  • Number of BLS MSD lost workday cases reported, and

  • Other factors that allowed aggregation for estimation purposes.(2)

The occupational groups were also structured to:

  • Separate occupational groups with different types of controls and MSD rates while assuring good representation of cost scenarios (which were used for the purpose of determining productivity gains or losses).

  • Capture the notion of similarity of job interventions. Because the same average costs are assigned to all occupations within a given group, this methodology tries to classify jobs by similarity of ergonomic interventions.

The occupational groupings follow the basic structure of the Occupational Employment Survey (OES) classification system. Table V-9 lists the resulting occupational groupings. Appendix B provides a listing of the occupations placed in each occupational group, using the two most common occupational title systems, i.e., the OES occupational titles and the Bureau of the Census occupational titles.

Estimate Average Costs of Job Interventions by Occupational Group

To develop unit costs for each occupational group, OSHA first asked the ergonomists from each consulting company represented on the Expert Panel to separately (i.e., by company) estimate the average costs of job interventions for each occupational group. The ergonomists in each company were instructed to draw on their professional experience in designing and implementing ergonomic interventions for workplaces throughout industry to develop these cost distributions. OSHA averaged the costs developed by the ergonomists from each of the three ergonomics consulting companies to obtain the average unit cost of interventions for each occupational group.

In general, the ergonomists agreed that most ergonomics interventions can be accomplished at a present value of less than $500 per problem job, and that most interventions cost less than $200 per problem job. Table V-10, taken from MacLeod 1995, lists fifty examples of ergonomic interventions costing less than $200; these are the kinds of interventions the Panel frequently pointed to. Occasionally, however, the ergonomists stated that an intervention might cost more than $10,000. Neverthless, the average cost of interventions is much lower than this. A study published by the Professional Physical Therapy Services Company, for example, found that the average cost of an ergonomic modification is $327, with computer chair adjustment being the single most common ergonomic intervention (cited in Kohn 1997). Table V-11 summarizes the net present value of the average costs of job interventions by occupational group estimated by these expert ergonomists. Although the job control cost estimates made by individual ergonomists sometimes varied substantially for specific occupational groups, it is important to note that their average estimates were within approximately 31 percent of each other.

Develop Estimates of Labor Savings Offsets Associated with the Average Costs of Job Interventions

There is widespread agreement in the ergonomics community that ergonomic interventions enhance productivity, and often do so dramatically (Tichauer 1991, Oxenburgh 1991, NIOSH 1998, Helander and Burri 1995, Kohn 1997, OTA 1995). Ergonomists are concerned with the safety, effectiveness and efficiency of industrial processes, and achieving these objectives often improves productivity (OTA 1995). NIOSH (1998) defines ergonomics as "the science of fitting workplace conditions and job demands to the capabilities of the working population" and adds that "Effective and successful "fits" assure higher productivity, avoidance of illness and injury risks, and increased satisfaction among the workforce." A recent article in the International Journal of Ergonomics sums up the point as follows: "There is an increasing recognition that ergonomics is important, not only for worker comfort, safety and health but to improve productivity and quality in manufacturing" (Helander and Burri 1995). These authors emphasize that "ergonomic improvements.... have a dual purpose: worker comfort and plant productivity. In the business world, ergonomics must be considered another tool for improving work environments for people and overall productivity." Oxenburgh (1991) summarized his extensive experience in installing ergonomic controls that increase productivity this way: "the payback period in most ergonomic interventions is less than one year, most frequently about 6 months."

It is not surprising that ergonomic interventions improve productivity. Many of the more costly ergonomic improvements involve automating portions of jobs in ways that can be expected to improve productivity, and almost all ergonomic improvements make the job easier and less fatiguing for the worker, making it possible for the worker to do more work in the same (or less) time. In addition to such direct effects on productivity, ergonomic interventions often pay for themselves by:

  • reducing absenteeism because a worker is less likely to take time off to recover from muscle soreness, fatigue, etc.;

  • reducing turnover, particularly since new workers are more likely to find an ergonomically designed job within their physical capacity;

  • improving product quality because fewer errors are made when processes are more automated and demand less physical effort.

These positive productivity impacts are supported by the experience of many employers. OSHA's 1993 ergonomics survey of general industry employers found that 30 percent of those employers who had implemented ergonomics engineering controls reported that their ergonomics programs had had measurable impacts on productivity. On the average, these employers (including the few employers who reported that their controls had had negative impacts on productivity) reported a weighted average productivity improvement of 7 percent (ERG, 1999). A review of the case studies of ergonomics programs discussed in Chapter IV found that one program in four reported increased productivity; however, only a few of these studies quantified the magnitude of this increase.

In this section, OSHA has focused on measured improvements in the amount of labor required to do a specific task. OSHA has not attempted to quantify the effects of ergonomic interventions in reducing absenteeism and turnover or in improving product quality, although the Agency believes that such effects are substantial. Table V-12 illustrates a series of case studies of ergonomic interventions that resulted in measurable productivity gains. Most of the changes shown in the table involve significant redesigns of work. Across this group of case studies, which are limited to those published, peer-reviewed studies that report a measurable productivity gain, the productivity increases averaged 51%, and payback periods averaged less than 10 months. Many of the other case studies discussed in the preamble to the proposed rule in this economic analysis reported that the ergonomic interventions described yielded productivity gains but did not quantify these gains. There are many reasons why these gains are not routinely reported in the literature: the absence of pre- and post-intervention measures of productivity; the difficulty of measuring productivity gains that involve a wide range of jobs, different personnel, and different interventions; and the difficulty of measuring the productivity gains associated with such interventions as early reporting procedures and employee information and training.

Table V-13 presents summaries of the many "success stories" presented in Chapter IV of this analysis that reported on the productivity improvements, often in non-quantified terms, of ergonomic interventions undertaken by companies in general industry. These studies also demonstrate that productivity gains, ranging from 5 to 300%, have occurred as a result of ergonomic interventions. These gains are in addition to the reduced pain and suffering avoided by these ergonomic interventions and are also in addition to the direct cost savings these employers achieved by avoiding the workers' compensation and other direct and indirect costs of occupational injuries and illnesses.

In addition to the substantial interventions represented by these success stories, many routine ergonomic improvements produce productivity gains. For example, providing a head set to a catalog sales operator or providing an adjustable work surface to a worker performing an assembly line task can yield meaningful productivity improvements. Even administrative controls, such as job rotation and micro-breaks, which may appear on the surface to decrease productivity, actually increase it. One study found that an administrative control (job rotation) yielded a $14,000 increase in product yield over 6 months (Tichauer 1991). In OSHA's survey, 20 percent of respondents implementing administrative controls only reported that these controls resulted in measurable improvements in productivity (ERG 1999). Dainoff found that allowing workers to take micro-breaks - - an effective way of restoring blood flow to tired muscles and thus preventing MSDs - - increases productivity (Dainoff 1999).

However, such improvements in productivity are often hard to measure. In assessing productivity effects in this section of the economic analysis, OSHA has quantified productivity offsets only in those cases where productivity gains were measured in an actual workplace that installed ergonomic controls similar to those that employers installing controls to achieve substantial reductions in the risk factors they have identified in their job hazard analyses will implement.

OSHA relied on estimates of the costs and productivity effects of the scenarios shown in Appendix III-A of the Technological Feasibility chapter (Chapter III) of this Preliminary Economic Analysis to estimate the labor savings associated with job interventions. (The role of the scenarios in the economic analysis is discussed in detail in Appendix V-A to this cost chapter.) As shown in that appendix, OSHA developed cost and labor savings estimates for each scenario presented in Appendix III-A of the Technological Feasibility chapter (Chapter III). However, the Expert Ergonomics Panel, which was given these scenarios to use as a starting point in their deliberations, reported that the scenarios tended to overestimate the costs of job interventions, partly because they represented interventions that were sufficiently high tech or unusual to be featured in the technical literature (the source of most of the scenarios). Because OSHA assumes, based on input from its ergonomics consultant David Alexander and the ergonomists on the Expert Ergonomics Panel, that many of the interventions required by the standard to fix problem jobs will not require high tech or unusual interventions, OSHA did not use the scenarios as the basis to estimate the costs of job interventions. The scenarios did, however, provide good data to use as the basis for calculating the magnitude of the labor savings (i.e., productivity offsets) often associated with ergonomic interventions. This was done in the following way: first, OSHA compiled the labor savings estimates reported in the original technical literature (or other sources) of the scenarios. Both the costs and the labor savings estimates were then individually reviewed by members of the Expert Ergonomics Panel and were adjusted based on the scenario-by-scenario comments of these experts. In a few cases, the panelists added labor savings to a given scenario when they had evidence that the job intervention reported on in that scenario was associated, in their direct experience, with documented labor savings. Because many of the scenarios focused exclusively on the novelty of the job intervention and neglected to mention labor savings (and, as explained above, OSHA believes that most ergonomics interventions actually yield such productivity gains), the Agency believes that the magnitude of the labor savings reported in this economic analysis is likely to be substantially understated.

Though the scenarios were not used to develop the costs of job controls for the cost analysis, the scenario costs are consistent with the cost estimates for higher-tech interventions reflected in the cost analysis. To the extent that the scenario costs are under- or overestimated, this would cause OSHA to review the basis of its estimates of the costs of job controls. OSHA welcomes the submission of additional scenarios. These submissions could contain only a detailed job description. However, information on the job controls applied, their effectiveness, and their costs would also be valuable.

Second, the estimates of labor savings needed to be translated into per-worker labor savings estimates. These were derived as follows:

LSi = WAGEi x TH/year x PRODi x ADJi

where:

i = Scenario,

LS = Labor savings,

WAGE = Wage rate applicable to the industrial setting described (from Table II-8),

TH = Hours per year the task is performed

PROD = Estimated productivity percentage where productivity is reported as the percentage increase in output, and

ADJ = Adjustment factor of 1 - 1/(1 + PROD), which translates the reported productivity gain in output into output per worker (i.e., a reported 100 percent increase in productivity is translated into a 50 percent increase in output per worker since the same output can now be produced with half the labor input).(3)

Third, the job activities described in some of the scenarios are not performed by the worker on a full-time basis (i.e., for 2,000 hours/year). In computing the total labor savings attributable to the ergonomic controls implemented to fix the problem job represented by each scenario, OSHA used the data in the scenario concerning the number of hours the task described by the scenario was performed. If the scenario provided no information on the number of hours the task was performed (approximately one-third of all scenarios failed to include this information), OSHA assumed that the task was performed for 1,500 hours per year (this percentage is the average number of hours worked by workers engaged in the jobs described by the scenarios).

Fourth, OSHA compared the present value costs of each scenario with the labor savings for each scenario to derive a measure of the net cost of control for each scenario. For these calculations, OSHA subtracted the labor savings from the per-worker gross control costs to derive a net ergonomic control cost. For those cases where the reported labor savings exceeded the estimated control costs, OSHA assigned a zero net control cost to the scenario, i.e., OSHA did not ascribe a negative cost to that scenario. Productivity savings in excess of net ergonomic control costs are reported in the table as surplus labor savings. Table V-14 presents these costs, labor savings, and net costs for each scenario.

Apply Labor Savings Offsets to Average Costs of Job Intervention by Occupational Group to Determine Average Net Costs of Job Interventions by Occupational Group

The labor savings figures for each scenario were then aggregated by occupational groups (see Table V-15 for this mapping process). Next, the control costs, labor savings, and net control costs were averaged across each occupational group. Table V-16 presents these results. As discussed in Appendix V-A, OSHA did not rely on the scenarios to estimate control costs because of the Expert Ergonomics Panel's concern that they represented high-end rather average-cost ergonomic interventions. However, the scenarios represent the best available data on the labor savings benefits of ergonomic interventions to address problem jobs. To use the scenario data on labor savings appropriately while still recognizing the ergonomists' concerns about their high costs, OSHA used a ratio of labor savings benefits over control costs. Reliance on this ratio, rather than on the absolute value of net labor savings, controls for the somewhat high-tech nature of the scenarios (i.e., high cost interventions) but allows the labor savings benefits of ergonomic interventions to be taken into account in the analysis. These ratios are also shown in Table V-16. The ratios were multiplied by the costs of ergonomic interventions estimated by the Expert Ergonomics Panel to estimate the value of the labor savings, and the labor savings were deducted from the gross costs to determine net costs. The resulting net costs are shown in Table V-16.

Determine Average Net Costs of Job Interventions by Industry from Average Net Costs of Job Interventions by Occupational Group

Using the National Industry Staffing Patterns data and the previously identified 26 occupational groups, OSHA computed the distribution of employment by occupational group across all affected 3-digit SIC industries.(4) For example, in a given 3-digit SIC industry with 20,000 machine operators and 5,000 technicians, OSHA assumed on average that the occupational distribution for each establishment in that industry is 80 percent machine operators and 20 percent white collar workers. The occupational groups are widely distributed among the 3-digit SIC industries, and they vary in total employment size from approximately 81,370 employees to as many as 19.3 million employees.

To derive the average cost of the ergonomic interventions employers are likely to implement, it was necessary to forecast the number of MSDs occurring, by industry and occupational group. To do this, OSHA combined the number of MSD cases reported in the BLS MSD statistics for each of the occupational groups, and then divided these by the total employment computed from the National Industry Staffing Patterns data for each occupational group. The cost of instituting ergonomic interventions for a given establishment is dependent on many factors: 3-digit SIC, occupational group, estimated rate of MSD occurrence, and the distribution of employment across the 26 occupational categories. OSHA used the following formula to compute the cost of fixing a "problem" job in each industry, taking account of all of the above considerations:

Ci = (S ((SEMPij x MSDj x EMPi ) x OCCj ) / (S ((SEMPij x MSDj x EMPi )
         j                                                           j

where:

i = 3-digit SIC industry,

j = Occupational group,

SEMPij = Share of employment in industry I of occupation j

MSDij = Estimated MSD rate for occupation j (the lost workday MSD rate from the risk assessment),

EMPi = Employment in Industry i

OCCj = Per-employee cost of "fixing" a job for occupation j, and

Ci = Average cost of job interventions for industry i.

To help clarify and summarize the steps outlined in this section for computing the costs of job controls, Tables V-17 to V-19 illustrate how the gross costs of job controls were derived for a single occupation, machine operators, light. Table V-17 shows the ergonomics consultants' estimates for this occupational group, which were used to derive the gross costs per employee for this occupational group. Table V-18 shows the individual scenarios relevant to this occupational group and how they were averaged to produce an estimated ratio of average net control costs to average total control costs. Finally Table V-19 shows how the costs from the previous two tables were combined to produce an estimate of the net control costs for this occupational group.

Table V-20 illustrates the calculation of the average cost of a job intervention for SIC 371, motor vehicles and parts. The first column (A) shows the costs of job controls per worker (OCCj in the above formula) for each occupational group. Column B shows the percentage of total industry employment in each occupation (SEMPij in the above formula). Column C shows the number of employees in each occupation, calculated by multiplying column C times total industry employment. Column D shows the lost workday MSD rate (MSDij in the above formula) for each occupational group. Column E is the weighting factor for costs for each occupational group, and is computed by multiplying Column C times Column D. Column F is created by multiplying Column E times Column A. The weighted average job control costs-- $756 per worker--for the industry are then computed as the sum of column F ($5,661,445) divided by the sum of Column E (7,492).

The average costs per affected employee needing job interventions for all industries are shown in Table V-21. Productivity offsets reduce the costs of job controls $1.3 billion per year.

Determining Total Costs of Ergonomic Interventions (Job Controls)

The total annualized costs of ergonomic interventions (job controls) were obtained by multiplying the average control costs per industry by the number of employees requiring job interventions in that industry, as determined in the Benefits chapter (Chapter IV) of this analysis. The industry-by-industry results of this calculation are also shown in Table V-21. The annualized costs of the job controls OSHA believes employers in general industry will implement are $2.3 billion per year across establishments in all of general industry.

WORK RESTRICTION PROTECTION

The proposed standard requires employers to provide temporary work restrictions where these are necessary or are recommended by the health care professional or others for employees whose MSDs warrant such restrictions. While on work restriction protection (WRP), the employer must maintain the employee's current net take-home pay (90% of net take-home pay if the worker is absent from work) and benefits for up to a period of 6 months. OSHA's estimates of the costs of work restriction protection are derived from workers' compensation data. OSHA uses data on the costs of temporary total disabilities for MSDs to derive estimates of how much employers may need to spend on work restriction protection because the workers' compensation system seldom decides on permanent partial disabilities in less than 6 months, and such payments are not designed to cover full loss of pay.

OSHA's derivation of the costs of workers' compensation disabilities begins with an estimated average value of claims of $8,000 per MSD workers' compensation case (Webster and Snook, 1994). To determine what portion of this value of claims represents temporary total disability, OSHA first estimated the percentage of the claim going to medical payments, and then estimated what portion of the remaining value of the claim goes to temporary total disability.

Based on nationwide estimates for all claims from the U.S. Social Security Administration, an average of 58 percent of these payments are paid out for indemnity, and the remaining 42 percent are paid out for medical costs (USSA, 1993). (No data are available on MSD claims alone) Berkowitz and Burton (Berkowitz and Burton, 1987) estimated that temporary total disability cases account for 38.5 percent of all indemnity payments for all workers' compensation claims. The other segment of cases, partial permanent disability cases, would not be dealt with by this provision, since the employer is not required to provide benefits in cases of permanent disability. Only the indemnity portion is relevant for this analysis. Thus the total indemnity cost of cases potentially dealt with by this provision is $1,783 ($8,000 x .385 x .58). However, data from Liberty Mutual Insurance Company (Liberty Mutual 1998) show that 70% of the costs of temporary disabilities are associated with those temporary disabilities lasting more than 6 months. As a result, this figure was reduced by 30% to $1,259 ($1,783 x 0.7).

Worker compensation payments typically cover 90 percent of the injured worker's take-home pay and provide no coverage for the worker's benefits. To determine the costs of WRP, OSHA calculated the value of benefits of injured workers. BLS estimates that benefits averaged 39% of wage income in 1997 (BLS, 1997). However, a component of these benefits, the "legally required benefits," which include Social Security and workers' compensation contributions, would not be required if an employee were not working. These legally required benefits constitute 12% of wages, leaving a residual 27% of wages to be covered by WRP. Other benefits, such as health insurance, may or may not be continued by employers in the absence of WRP. Taking account of this factors, the average value of work restriction protection is $1,884.

Most cases requiring WRP will be covered by workers' compensation. Hanrahan (1987) indicates that approximately 69 percent of OSHA recordable injuries are covered by workers' compensation in Wisconsin. Where worker compensation payments are available, the costs of WRP to the employer would be reduced to only the value of employee benefits. Finally, OSHA needed to account for cases that do not enter the worker compensation system because they last for less than the waiting period for the state. To calculate these costs, OSHA used BLS data on the distribution of length of time away from work for MSDs. Taking account of all of these factors, the average weighted cost of a WRP case is estimated to be $877 per case.

Reliance on this approach tends to overestimate the costs of WRP, for the following reasons. First, many small firms do not provide as large a benefits package as OSHA assumes in this analysis and thus would incur lower costs than those estimated here to replace lost benefits. Second, many firms will choose to continue benefits while a worker is out with an MSD even in the absence of a formal WRP policy. OSHA is aware that many firms have formal medical removal (work restriction) protection policies in place. OSHA's 1993 nationwide telephone ergonomics survey indicated that an average of 32.4 percent of employees in affected industries were covered by a medical removal plan that would satisfy the requirements of the WRP provision in the proposal (ERG 1999). In establishments with 1-19 employees, this percentage dropped to 8.9 percent. Although OSHA believes that other establishments may respond similarly in such circumstances, the Agency has no data indicating what percentage of employers might choose to do so. The cost estimates for WRP are shown in Table V-22. Total costs of WRP by industry were computed by multiplying the cost of WRP per MSD by the total number of MSDs involving lost worktime.

This estimate of the costs of WRP does not take into consideration employers' sick or other paid leave policies. To the extent that employers already have leave policies in place that would cover all or part of the period of work restriction removal, employers would incur lower incremental costs than those shown here. BLS indicates that approximately half of all employees in small establishments are provided sick leave, although this figure decreases for "blue collar" workers in these small establishments (BLS, 1997a). The percentage of employees provided with sick leave in larger establishments is somewhat higher. Although the costs of WRP represent a cost to employers, they are not a cost to society, because such payments represent an income transfer from employees to employers. In other words, employees are currently experiencing these costs when they incur a work-related MSD.

A number of SERs (Ex. 23) speculated about the effect of including WRP in the ergonomics standard out of concern that greater awareness, coupled with the removal of disincentives to employee reporting, would increase the number of MSDs reported, as well as fear that employees might take advantage of the protections provided by this provision to claim MSDs fraudulently. Although it is not possible to predict with accuracy what effect the WRP provision and the rest of the standard will have on the reporting of MSDs, it is worth noting that companies with ergonomics programs already in place, including programs that provided employees with alternate "light-duty" work, reported a net decrease in the number of reported MSDs, even in the first year of the program (ERG, 1999). In addition, as discussed earlier in this chapter, any increase in the number of reported MSDs is likely to be short lived.

Summary

This cost of compliance chapter has presented the costs of OSHA's proposed ergonomics program standard. Costs were presented on a per-provision and per-industry (3-digit SIC) basis. The annualized costs of the proposal are $3.4 billion, and the costs to employers are $4.2 billion per year.

REFERENCES

Berkowitz, M., and Burton, J. [Berkowitz and Burton, 1987] Permanent Partial Disability Benefits In Worker Compensation. W. E. Upjohn Institute for Employment Research, Kalamazoo, Michigan, 1987. (Ex. 26-1605).

Bureau of Labor Statistics. [BLS, 1997]. Employer Costs for Employee Compensation survey. Bureau of Labor Statistics. 1997. http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.bls.gov/ecthome.htm (Ex. 26-1591).

Bureau of Labor Statistics. [BLS, 1997a]. Employee Benefits Survey 1994-1996. 1997http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.bls.gov/ebshome.htm (Ex. 26-1593).

Bureau of Labor Statistics. [BLS, 1997b] National Industry Staffing Patterns. Estimates from the Occupational Employment Statistics Survey, 1996. http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.bls.gov/oes/oes_ispd.htm (Ex. 26-1583).

Bureau of Labor Statistics. [BLS, 1997c] Occupational Employment Statistics, Dictionary of Occupations. Bureau of Labor Statistics. 1997. http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.bls.gov/oeshome.htm (Ex. 26-1592).

Bureau of Labor Statistics. [BLS, 1997d] Occupational Employment Statistics Survey, 1996. http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.bls.gov/oeshome.htm (Ex. 26-1584).

Bureau of Labor Statistics. [BLS, 1996] Unpublished data from the 1996 BLS Survey of Occupational Injuries and Illnesses. Bureau of Labor Statistics. (Ex. 26-1413).

Bureau of the Census, Department of Commerce, 1998. County Business Patterns, 1996. (Ex. 28-2).

Cohen, A.L., Gjessing, C.C., Fine, L.J., Bernard, B.P., McGlothlin, J.D. (1997). [NIOSH 1998] Elements of Ergonomics Programs: A Primer Based on Workplace Evaluations of Musculoskeletal Disorders. Cincinnati, OH: U.S. Department of Health and Human Services, Public Health Service, Centers for Disease Control and Prevention, National Institute for Occupational Safety and Health. DHHS(NIOSH) Publication No. 97-117. (Ex. 26-2)

Dainoff, Marvin J. [Dainoff, 1999] The Effect of Ergonomic Worktools on Productivity in Today's Workstation Design Center for Ergonomic Research. Miami University, Oxford, Ohio. (http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.ergosystems.com/miami.htm (Ex.26-1634).

Eastern Research Group. [ERG, 1999] Description of Cost Estimates of Ergonomic Controls Under Draft OSHA Ergonomics Standard Lexington, MA. 1999. (Ex. 28-7).

Hanrahan, Lawrence P. [Hanrahan, 1987] "Appendix E: A Comparison of the BLS Annual Survey to Workers' Compensation for Wisconsin in 1984 and 1985", Counting Injuries and Illnesses in the Workplace: Proposals for a Better System, National Academy Press, 1987. (Ex. 28-4).

Helander MG, Burri GJ. (1995). Cost effectiveness of ergonomics and quality improvements in electronics manufacturing. International Journal of Industrial Ergonomics, 15:137-151. (Ex. 26-1423).

Kohn, J.P. (1997). Ergonomic Process Management: A Blueprint for Quality and Compliance. Boca Raton: Lewis Publishers. (Ex. 26-1408).

Liberty Mutual Research Center. 1998 Annual Report. Low Back Pain Research, Ex. 26-54.

Macleod, Dan (Macleod, 1995). The Ergonomics Edge: Improving Safety, Quality, and Productivity. Van Nostrand Reinhold (New York, New York, 1995). (Ex. 26-1598).

National Institute for Occupational Safety and Health [NIOSH, 1997] Elements of Ergonomics Programs: A Primer based on Workplace Evaluations of Musculoskeletal Disorders, Department of Health and Human Services NIOSH, Public Health Service, Centers for Disease Control and Prevention, NIOSH. March 1997. DHSS (NIOSH) Publication Number No. 97-117. (Ex. 26-2).

National Occupational Information Coordinating Committee. [NOICC, 1999] Master Crosswalk. National Occupational Coordinating Committee, Crosswalk and Data Center. 1999. http://scripts.osha-slc.gov/PHP/redirect.php?url=http://www.state.ia.us/government/wd/ncdc/

Office of Management and Budget. [OMB, 1992] "Circular No. A-94, Revised (Transmittal Memo No. 64)". October 29, 1992. (Ex. 26-1606).

OTA (Office of Technology Assessment). (1984). Preventing Illness and Injury in the Workplace. Washington, D.C.: Congress of the United States, Office of Technology Assessment. (Ex. 26-1426).

Oxenburgh, M. (1991). Increasing Productivity and Profit through Health & Safety. CCH International. Ex. 26-1041 (Ex. 26-1041)

"Survey finds employers slow to implement ergonomic plans" [Sacramento Bee, 1999] Sacramento Bee, June 9, 1999, p. G1. (Ex. 26-1597).

Tichauer, E.R. (1991). Ergonomics. In: Patty's Industrial Hygiene and Toxicology, Vol. I, Part B, General Principles, 4th edition. New York: John Wiley & Sons, Inc. (Ex. 26-1428).

U.S. Social Security Administration. [USSA, 1993] Annual Statistical Supplement to the Social Security Bulletin. Washington, D.C., 1993. (Ex. 26-1585)

Webster, B. and S. Snook [Webster and Snook, 1994] The Cost of 1989 Workers' Compensation Low Back Pain Claims. Spine, 19:10, pp. 1111-1116. 1994. (Ex. 26-43).



APPENDIX A: THE EXPERT ERGONOMICS PANEL

OSHA developed its estimates of the costs of job controls using four ergonomic consultants and ergonomics consulting firms: (1) Dave Alexander of Auburn Engineers of Auburn, Alabama; (2) Phil Jacobs, of Minneapolis, Minnesota; (3) Sheree Gibson, of Simpsonville, SC; and (4) Ergonomic Control Technologies (ECT) of Oyster Bay, NY.

For the SBREFA Panel and the SERs, OSHA consulted with Dave Alexander of Auburn Engineers, a nationally recognized ergonomics consultant, to determine the distribution of costs for ergonomic interventions in various situations. After the SBREFA Panel, OSHA, with the assistance of Auburn Engineers, developed a series of scenarios, or individual job hazard analyses, based on case studies in the literature on ergonomic interventions. (These scenarios are presented in Appendix A to Chapter III, Technological Feasibility.) Auburn Engineers and OSHA ergonomists and economists first developed estimated costs for the controls selected for the problem jobs represented by each of these scenarios, separated the scenarios into occupational groups, and developed unit costs for each occupational group based on the average costs for all of the scenarios applicable to that occupational group. (These scenario-by-scenario costs were presented in Table V-12 of the text.)

OSHA then sent these scenarios, along with their weighting and occupational assignments, to three nationally recognized ergonomic consultants: (1) Phil Jacobs, of Minneapolis, Minnesota (2) Sheree Gibson, of Simpsonville, SC and (3) Ergonomic Control Technologies (ECT) of Oyster Bay, NY. Each ergonomic consultant was sent a complete set of scenarios and a scenario evaluation form to be completed for each scenario. This form provided for the consultants' views on the completeness of the description of the scenario, the realism of the solution proposed, and the accuracy of the resulting cost and productivity estimates. The form also asked the consultant's view of the frequency with which job fixes in the cost range represented by the scenarios would be observed for the relevant occupational group.

The panelists evaluated the scenarios and the weighting schemes and provided a number of valuable comments in the form of written comments and two conference calls. The ergonomists also provided some general comments on the scenarios in these discussions. Among their comments was one to the effect that the group of scenarios lacked a representative selection of "quick fix" scenarios. Phil Jacobs in particular suggested that there was a publication bias in the scenarios-he found them to be disproportionately weighted with high-tech engineering solutions, which are also relatively expensive. There was a consensus among the consultants that many of the solutions to ergonomic problems are in fact simple, inexpensive, and nonproprietary, and therefore tend not to be written about.

In the third stage, three groups of ergonomic consultants (Auburn Engineers, ETC, and Phil Jacobs) provided detailed estimates of the likely mean costs of controls for each of the 26 occupational groups.




Footnote(1) Because the standard phases in over 3 years, present value benefits would be approximately 23 percent lower than those presented here. Costs would be lower by a slightly smaller percentage because some elements of the standard with relatively lower costs are implemented in the first and second year following the effective date of the standard. (Back to Text)
Footnote(2) The BLS Occupational Injury and Illness Survey and the survey of occupations by industry use different systems for defining occupations. Injuries and illnesses are classified by the Occupational Employment Survey (OES) definitions, while National Industrial Staffing Patterns, the source for occupational data by industry, uses Bureau of Census occupational classifications. In order to use data from both sources, OSHA employed a "crosswalk" table developed by an intergovernmental committee (NOICC, 1999). In some cases an occupation that was classified in an occupational category in the OES fell into two occupational groups in the Census classification system. In such cases, OSHA looked at the number of times the classification was assigned to a given group. For instance, when a classification appeared in one occupational group three times while appearing in the second occupational group only once, it was assigned to the first occupational group. Where the occupation appeared in each occupational group an equal number of times, the classification was assigned at random. Situations involving multiple occupational groups usually occurred for residual classifications such as miscellaneous machine operators not elsewhere classified, with relatively small employment totals. As a result, this procedure should not have resulted in a serious distortion of results. (Back to Text)
Footnote(3)OSHA does not assume that capital productivity remains unchanged. OSHA's cost analysis takes costs for every capital expenditure and accounts for any costs caused by decreased capital productivity. OSHA has not, however, taken into account in this analysis those cases where the ergonomic intervention may have improved capital productivity by leading to slower capital depreciation or better capital utilization. (Back to Text)
Footnote(4) National Industry Staffing Patterns does not report employment statistics for SICs 0810 to 0850 and 0910 to 0970. For these SICs, OSHA used the occupational distribution for SIC 0700. (Back to Text)
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