GB720 Unit 8 Regulatory Impact Assessment Example

How Hot Is Too Hot: A Unit 8 Regulatory Impact Assessment of OSHA's Proposed Heat Rule at an Alabama Plant

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Purdue University Global

GB720: Business Policy in a Global Economy

Unit 8 Regulatory Impact Assessment

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[Date]

Harwell Structures, its plant and every figure are composite and illustrative; the proposed rule, federal guidance and sources cited are real.

Guidance and Its Dates

The assessment follows the structure federal agencies use for regulatory analysis. Executive Order 12866, issued in 1993, tells agencies to weigh what major rules cost against what they deliver (Executive Office of the President, 1993). Office of Management and Budget Circular A-4, issued in 2003, sets out how to do so, including the use of discount rates of 3 and 7 percent (Office of Management and Budget, 2003). A revision of Circular A-4 issued in November 2023 lowered the default discount rate to 2 percent (Office of Management and Budget, 2023). Guidance on regulatory analysis has changed across administrations, and this assessment claims no current status for either version; it reports results under the 2003 rates as its main case and the 2023 rate as a sensitivity case.

The Proposed Rule

In 2024 OSHA proposed a national standard to prevent heat illness and injury at work, indoors and outdoors (Occupational Safety and Health Administration, 2024). As proposed, it would require employers to develop a written heat injury and illness prevention plan, identify heat hazards and monitor conditions, and take specified actions at two thresholds. At an initial heat trigger, a heat index of 80 degrees Fahrenheit, employers would provide drinking water, break areas with cooling, and acclimatization protections for new and returning workers. At a high heat trigger, a heat index of 90 degrees, employers would also provide a paid rest break of at least 15 minutes every two hours, observe workers for signs of heat illness and issue hazard alerts. The proposal also requires training. The assessment treats these provisions as proposed, since the rule may change or never be finalized.

Baseline

The baseline is the plant as it operates now. The west Alabama plant employs about 700 people, of whom about 420 work on stamping and welding lines where summer heat is greatest. The plant already provides water stations, large fans on the lines and two paid 10-minute breaks per eight-hour shift. It has no written heat plan, no formal acclimatization schedule and no heat index monitoring at workstations. Plant records from the past three summers show nine recorded heat-related illnesses on the hot lines, about three a year, one of which required hospitalization. Temperature logs kept by the maintenance team suggest the heat index at the welding cells reaches or exceeds 90 degrees on about 65 working days a year, from June through September.

Costs

Rest breaks at the high heat trigger. The largest cost. On the 65 days above the high heat trigger, the rule would require breaks of at least 15 minutes every two hours, about 45 minutes in an eight-hour shift, compared with the 20 minutes the plant now provides. The additional 25 minutes per worker per shift, for 420 workers at a loaded wage of about 28.50 dollars an hour, costs about 324,000 dollars a year.

Acclimatization. New and returning workers would follow a schedule of gradually increasing exposure during their first week in hot conditions. The plant hires about 120 production workers a year, many during the summer. If each loses about 20 productive hours to acclimatization, the cost is about 68,000 dollars a year.

Plan, monitoring and training. Developing the written plan would cost about 14,000 dollars once. Heat index monitors at workstations would cost about 12,000 dollars. Annual training for all 700 employees, about an hour each, plus a trainer, would cost about 26,000 dollars. A heat safety coordinator at a quarter of a full-time position would cost about 22,000 dollars a year.

Total. Recurring costs come to about 440,000 dollars a year, plus about 26,000 dollars in one-time costs. Over ten years, the present value is about 3.8 million dollars at 3 percent, 3.1 million at 7 percent and 4.0 million at 2 percent.

Benefits

Benefits are carried as ranges, because the evidence on how much such rules reduce heat illness is limited. Avoided heat illnesses: if the rule reduced the plant's three annual cases by half to four-fifths, it would avoid about 1.5 to 2.4 cases a year. Each case costs the plant between about 8,000 and 40,000 dollars in medical costs, lost time and investigation, so avoided costs range from about 12,000 to 96,000 dollars a year. Avoided serious outcomes: the risk of a heat-related death at the plant is small, but federal analyses value reductions in mortality risk using a value of a statistical life of more than 13 million dollars; a reduction in annual fatality risk of one in a hundred thousand for each of 420 workers would be valued at roughly 55,000 dollars a year. Productivity and injuries: research using workers' compensation records suggests that hot days increase workplace injuries of all kinds, not only heat illness (Park et al., 2021), so reductions in heat exposure may reduce other injuries as well. These effects are real but not quantified here.

The quantified benefits, roughly 70,000 to 150,000 dollars a year, are well below the costs. The unquantified benefits, including other injuries avoided and productivity in cooler conditions, would need to be large to close the gap.

At this plant the rule's costs are measurable and its largest benefits are not, which is exactly where impact assessments are hardest to read.

Sensitivity

The cost estimate is most sensitive to the number of days above the high heat trigger. If the plant's welding cells exceeded a heat index of 90 on 45 days rather than 65, the break cost would fall to about 224,000 dollars a year; at 85 days it would rise to about 424,000. The benefit estimate is most sensitive to the assumed effectiveness of the rule in preventing heat illness, which no study of indoor manufacturing has measured precisely. Under every combination tested, quantified costs exceed quantified benefits, so the case for the rule at this plant depends on the unquantified benefits and on the plant's choice of compliance method.

Distribution: Who the Rule Favors

The rule's costs fall more heavily on plants in hot regions, on plants without existing cooling and on employers with many workers in heat-exposed jobs. Competitors in cooler states, and plants that have already invested in air-conditioned work areas, would bear lower costs. Large employers can spread plan development and training costs more easily than small ones. Workers on the hot lines would be the main beneficiaries, through lower risk of illness and more rest.

An Alternative the Plant Could Choose

The proposal's break requirement would not apply where workstations are cooled below the trigger. Installing spot cooling at the welding cells, estimated at about 180,000 dollars in capital and 20,000 dollars a year in energy, could keep many workstations below a heat index of 90 and avoid much of the break cost. On these estimates, cooling would pay for itself within a year, which suggests the rule's main effect at this plant would be to accelerate an investment in cooling rather than to add breaks permanently.

Limits

The assessment covers one plant and a proposal that may change. Its benefit estimates rest on assumptions about effectiveness that the plant's small number of cases cannot test.

References

Executive Office of the President. (1993). Executive Order 12866: Regulatory planning and review. Federal Register, 58, 51735.

Occupational Safety and Health Administration. (2024). Heat injury and illness prevention in outdoor and indoor work settings. Federal Register, 89, 70698.

Office of Management and Budget. (2003). Circular A-4: Regulatory analysis. Executive Office of the President.

Office of Management and Budget. (2023). Circular A-4: Regulatory analysis. Executive Office of the President.

Park, R. J., Pankratz, N., & Behrer, A. P. (2021). Temperature, workplace safety, and labor market inequality (IZA Discussion Paper No. 14560). IZA Institute of Labor Economics.