Document 9LmZERbOdymdKGwZ6z9qp0N65

Federal Register / Vol. 51, No.. 119 /. Friday, June 20, 1986 / Rules and Regulations 22669 Table 29.--Item Cost Estimates for Control Requirements in Construction--Continued Unil co$t (in 1984 doBari) Comments usod to develop estimates Exposure monitoring: SampGng................... Analysis.....-.....', Medical exams.. Training_______ 300.00/ techiitidan/day 30.00/pei sample. 100.00/pet exam. Varies with type and taxation of training. Exhibits 84-473.,84-474, 179. 312A. 2S6 and 272: and hearing transcript d iWy 11. 1984. pages 89. 92. 137 and 165-192. end Juno 29. 1984 pogeil7. Exhibits 84-473, 84-474. 123A, 256 end 272; and hearing transcript oi Jufy 2, 1984. pages 52 end 253. and June 29, 1984, page 117 and 204. Exhibits 84-473 and 84-474; hearing transcript of June 20. 1984. pago 179; Juno 29. 1984. page 201 and July 11. 1984. page 69. Source: U.S. Department of labor. OS HA. Office of Regulatory Analysis. OSHA's annual compliance cost estimate of $45.4 million for routine maintenance in general industry was developed based on the assumption that due to economies of scale.over 78,000 establishments would hire contract labor to perform activities such as the removal and installation of asbestos insulation and gaskets. Thus, although the total costs ini this sector may appear large, the estimated average compliance cost to each establishment is less than $600 per year. Costs of this magnitude are clearly affordable. According to the 1982 Census of Construction Industries, receipts for SIC 1795, Wrecking and Demolition, were $378.9 million(1982 dollars). Given the estimated annual compliance costs of $13.8 million (1984 dollars), the cost-torevenue ratio in this sector is approximately 3.8 percent Based upon this estimate, it' appears that.the demolition sector may have financial difficulty complying with the requirements of the revised standard. Demolition activity, however, is frequently associated with new construction and it is likely that any ' compliance.cost increase for this segment of the construction industry will be shifted forward to the buyer. Economic Impact and Regulatory Flexibility Analysis Introduction ' According to the.RTI report. "An. accurate assessment of the actual impacts depends on the supply and demand conditions facing each sector" [Exhibit 84-473, p. 52]. If an industry is characterized by inelastic demand, for example, then the industry can afford . relatively high compliance costs (compared to revenues) because these -costs can be passed on to consumers. Conversely, if an industry is characterized by an elastic demand and low profits, then it may not be able to afford even small increases in costs. In order.to account for these factors, therefore, OSHA developed a partial equilibrium demand-supply model. OSHA used the industry compliance cost estimates developed in the previous section, together with reasonable estimates of demand and supply elasticities, to examine the probable economic impacts of the revised standard on the affected industry groups. Impacts on the primary and secondary manufacturing sectors were derived from the Agency's demandsupply model. Impacts on the service industries and construction sectors were based on the methodology presented in the CONSAD report [Exhibit 84-474, Chapter 5] and on estimates of the economy's demand for the repair and construction services offered by these industries. The application of this economic modeling indicates that the direct compliance costs of the standard, after accounting for new output levels, will be approximately $453.5 million per year. The compliance costs for each major industry group are estimated to be $27.3 million for primary manufacturing;.$29.2 million for secondary'manufacturing; .$3.9 million for ship repair; $44.6 million for automotive repair and $348.5 million for construction. Since these estimates account for the changes in output that the new standard will cause, they are technically more accurate than the estimates of total compliance costs (presented in the previous section) based on current output levels. In order to estimate the total cost of the standard to the U.S. economy, OSHA added the excess burden (or dead weight loss) of the revised standard to the estimates presented above. The dead weight loss represents the lost value to buyers and sellers due to transactions that are currently taking place but will no longer take place after the implementation of the revised standard. For example, if the buyer formerly purchased 1,000 sheets of a product, those 1,000 sheets represent a value to the buyer at least as great as the price paid. If, as a result of a higher .product price due to the revised standard, only 600 sheets are bought, then'the buyer loses the benefit formerly received on 400 sheets. This is a loss to the buyers but it is a gain to no one (i.e.. a dead weight loss to the U.S. economy). The sum of the direct compliance costs and the dead weight losses is the total social cost of the new standard (assuming negligible displacement costs). OSHA estimates that the dead weight loss will be approximately $1.7 million per year and the total annual social cost of the new regulation will be $455.2 million. Primary and Secondary Manufacturing Economic Impacts. In order to examine the effects of the regulation on producers of asbestos-containing products, OSHA calculated not only the compliance costs borne by suppliers but also the percentage change in profits of suppliers. This information is presented in Table 30. It is important to recognize that a decline in profit from manufacturing an asbestos-containing product does not translate into an identical decline in profit to the firm. Many asbestos producers also manufacture non-asbestos substitute goods, and, increased demand for these substitutes will partially offset declines presented in Table 30. For example, most automotive brake rebuilding shops can use non-asbestos parts. If a brake remanufacturing shop anticipates losses of $20,000 per year in profits as a result of the new asbestos standard, it could substitute noil-asbestos brake parts. Thus, the results presented in Table 30 reflect the extent to which the. manufacturing of asbestos products becomes more or less attractive to firms. It does not predict the complete effect on the profitability of firms switching to non-asbestos products. As can be seen from Table 30, the model predicts that most of the sectors will experience only small changes in profits due to compliance with the provisions of the revised standard. In. three sectors (i.e., primary A/C pipe, primary flooring, and secondary A/C sheet) profits are expected to increase . due to a decline in the price of inputs, and in nine other sectors profits are expected to decline by less than 6 cents on the dollar. In only 3 out of the 15 modeled sectors (i.e., primary A/C sheet and friction products manufacturing and secondary asbestos gasket manufacturing) are profits expected to decline significantly. GLEASON-000917