>Costs and Benefits of Ergonomics Regulations

Mark P. Berkman

National Economic Research Associates, Inc.
444 Market Street, Suite 910
San Francisco, California 94111

INTRODUCTION AND SUMMARY

Although preliminary results from an Occupational Health and Safety Administration (OSHA) study indicate that the benefits of a federal ergonomics regulation would greatly exceed the costs, there are good reasons to doubt that this is the case, at least for all industries. First, OSHA's hypothesis that workplace changes explain the growth in reported repetitive motion injuries (also referred to as repeated trauma disorders, RTDs) is not supported by any careful analysis. In fact, the available evidence suggests that workplace changes do not explain the growth in reported injuries. In addition, there is no basis to conclude that the general modifications suggested by the rule will actually reduce repetitive motion injuries in particular industries. Thus, the benefits of a federal regulation have yet to be demonstrated.

Second, OSHA's study does not present detailed and industry specific compliance cost estimates. As a result, the costs of a federal ergonomics regulation are not well established. A recent study conducted for the American Trucking Associations demonstrates that specific industry costs could be considerably higher than OSHA's preliminary estimates.

The trucking industry analysis also pointed out that even using OSHA's cost and benefit estimates, the regulation as it would apply to the trucking industry did not pass a cost-enefit test. Given the potential costs of ergonomics controls and the questionable benefits, much more research should be completed before a national regulation is designed and implemented.

DO WORKPLACE CHANGES EXPLAIN THE RAPID GROWTH IN REPORTED REPEATED TRAUMA DISORDERS?

OSHA points to the rapid growth in repeated trauma disorders to justify the imposition of an ergonomics protection standard. See Figure 1. OSHA's estimated benefits of the standard are based on the current high levels of RTDs and the assumption that these could be reduced by requiring certain protection procedures. OSHA asserts that the rapid increase in RTDs can be explained largely by continued reliance on unassisted lifting, carrying, pushing/pulling of loads; the increasing specialization of work, and faster pace of work ("Summary of the Economic Analysis and Regulatory Flexibility Analysis, March 1995, p. 2).

There is, however, no careful analysis presented to support this hypothesis. In fact, the available evidence raises serious questions about its validity. There is no evidence that the number of jobs requiring unassisted lifting, carrying, or pushing/pulling of loads has increased. OSHA refers to continuing, not necessarily increasing, numbers of jobs requiring such activities. The number of manual labor jobs involving such activities, in fact, may have even fallen over time. The evidence regarding the impact of increased specialization of work and faster pace of work is also lacking.

For example, increased specialization and faster work pace should have led to notable improvements in productivity. Overall non-farm business productivity, however, grew by only 1.1 percent annually between 1984 and 1994. At the same time, the rate of reported RTDs increased 25 percent annually (.5 per thousand workers in 1984 to 3.9 per thousand workers in 1994). RTDs outpaced productivity by a factor of almost 8 . As shown in Figure 2, a similar pattern is found for the transportation industry alone where the growth rate in the reported number of RTDs has outpaced productivity by a factor of almost 10.

Other factors must account for the dramatic growth in RTDs. One critical factor may be the effect that increased benefits have on reporting injuries. Economists studying the relationship between workers' compensation and injury rates have consistently found that higher benefits levels result in higher injury rates. Robert Smith of Cornell University conducted a survey of the literature on this topic a few years ago and concluded that, "the results [of empirical studies of the relationship between workers' compensation and injury rates] are as clear as any in the field of applied economics: there is a positive relationship between benefits and recorded injuries". He also found that claims for difficult-to-assess injuries -sprains and strains- should be more sensitive to benefits increases than claims for other injuries. As shown in Figure 3, the change in sprain and strain claims track very closely with the growth in benefits levels. Thus, there is reason to believe that the level of reported RTDs greatly overstates the level of actual injury and, as a consequence, the benefits of reducing RTDs through regulation.

HOW MUCH WILL OSHA'S ERGONOMICS STANDARD COST?

OSHA estimated that the standard under consideration would cost U.S. industries $4.4 billion annually. Approximately 86 percent of this cost, $3.8 billion, would be for engineering and administrative controls designed to eliminate risk factors associated with RTDs. No specific engineering or administrative controls were identified for particular industries. Costs to industries were estimated based on costs associated with 23 broad occupational groupings. Since no specific controls were identified, it is difficult to assess or independently estimate compliance costs. Cost estimates for the trucking industry, based on the kinds of controls industry health and safety experts suggested may be necessary, indicate that OSHA may have substantially underestimated compliance costs. Annual trucking industry costs alone could reach $6.5 billion (approximately $5.0 billion in the for-hire trucking sector contained in SIC 42). These costs are based on improvements in truck suspension to avoid exposure to vibration (a RTD risk factor according to OSHA), installation of lift gates on 20 percent more trucks to avoid bending and lifting, increased labor costs because of reduced hours per shift to avoid exposure to vibration and awkward positions, and greater automation of terminal facilities to avoid bending, lifting and other risk factors identified by OSHA. In view of this result, much greater clarification of what engineering and administrative controls will meet OSHA's standard is needed before reliable cost estimates can be made at the industry level.

CONCLUSION

OSHA's preliminary cost-benefit analysis is insufficient to support the adoption of a broad national ergonomics standard applied to all industries. Even using OSHA's own benefit and cost estimates, such a standard cannot be justified for all industries. For example, costs exceed the benefits for the trucking industry according to OSHA's estimates. More detailed analysis is likely to reveal that OSHA has underestimated the costs of the standard and overestimated the benefits. Therefore, no national standard should be contemplated without substantial additional research.

¹Occupational Safety and Health Administration, Draft Proposed Ergonomics Protection Standard, Chapter V, Preliminary Quantitative Risk Assessment, Chapter VII, Summary of the Economic Analysis and Regulatory Flexibility Analysis, March 1995.

²National Economic Research Associates, Ergonomics and Economics: The Impact of OSHA's Proposed Ergonomics Standard in the U.S. Trucking Industry, prepared for the ATA Foundation, Alexandria, VA: American Trucking Associations Foundation, October 1996.

³Bureau of Labor Statistics, U.S. Department of Labor, Monthly Labor Review, December 1996, Table 40.

⁴Robert Smith, Have OSHA and Workers Compensation Made the Workplace Safer?, in Lewen et al., Research Frontiers in Industrial Relations and Human Resources, Madison, Wisconsin: Industrial Relations Research Associates, 1992, pp. 557-586.