Study Estimating EHS Regulations Cost Business $65 Billion Annually “Vastly Overstated”

Oct. 5, 2011
A 2010 study by Nicole V. Crain and W. Mark Crain (Crain and Crain 2010, 29-31) conducted for the Small Business Administration’s Office of Advocacy often is cited by opponents of new federal workplace regulations to support their opinion that OSHA regulations are bad for the economy. However, another group of researchers claim the Crain and Crain study is poorly researched and includes “vastly overstated costs.”

Crain and Crain attributed more than 99 percent of the $65-billion estimated cost of regulations adopted in the 1970s, 1980s and 1990s to occupational safety and health regulations. According to an issue brief from the Economic Policy Institute (EPI), “Deconstructing Crain and Crain: Estimated Cost of OSHA Regulations Is Way Off Base,” by EPI Vice President Ross Eisenbrey and Director of Regulatory Policy Research Isaac Shapiro, the Crains’ estimate is problematic for three reasons:

  • First, pre-issuance cost estimates of regulations more than 10 years old are unreliable because different methodologies have been used in different time periods. Also, businesses have adjusted to changes they were required to make due to new regulations, and the cost estimates do not account for these changes.
  • Second, Crain and Crain based their estimate on a series of studies that trace back to a 1974 National Association of Manufacturers (NAM) survey. Not only is NAM traditionally opposed to regulations, their archives center is unable to find the 1974 survey, so researchers are unable to evaluate whether it was accurate. In effect, the Crains inflate the cost of OSHA regulations to match the costs supposedly found in the 1974 survey by NAM.
  • Finally, the Crain and Crain estimate counts fines as a regulatory cost. Because estimates of compliance costs assume all firms comply completely with new rules, Crain and Crain are effectively double-counting. Fines actually paid by employers are a negligible cost.

The most recent Office of Management and Budget report on the costs of regulation calculates the combined annual cost of major OSHA regulations adopted in the 10-year period from fiscal 2001 through fiscal 2010 to be $500 million in 2001 dollars. Crain and Crain, appropriately, rely on similar OMB data to estimate that major OSHA rules adopted from 2001 through 2008 cost a combined $471 million in 2009 dollars. But that $471 million figure accounts for less than 1 percent of Crain and Crain’s overall annual cost estimate of $65 billion for all OSHA rules.

“The combined annual compliance cost of major OSHA rules adopted over the past 10 years is about a half billion dollars,” concluded Eisenbrey and Shapiro. “Although the agency was significantly more active in preceding decades, yielding both higher compliance costs and benefits, Crain and Crain’s estimate of $64 billion a year in combined annual compliance costs of all OSHA rules prior to 2001 does not come close to withstanding scrutiny.”

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