New federal heat standard offers novel distributional analysis to determine which workers benefit and how
The U.S. Department of Labor recently released a much-anticipated proposed rule that promises to protect workers from on-the-job injuries and deaths that result from toiling in the heat. The timing of the proposal was apt, given the high temperatures experienced across the country over the past few weeks.
As the Washington Center for Equitable Growth previously documented—evidence that was used by the Labor Department to justify its new proposal—worker injuries and deaths are much more common on hot days than on more temperate ones. Employees are more likely to experience both ailments directly caused by high temperatures, such as heat stroke, and indirect injuries that may not be formally categorized as weather-related—and may actually happen indoors—such as falling from heights, being struck by a moving vehicle, or mishandling dangerous machinery. These direct and indirect heat-based injuries not only are heartbreaking for families and communities, but also hurt firms’ bottom line by reducing their workers’ productivity.
The new proposal from the Labor Department’s Occupational Safety and Health Administration would require employers to offer water and as-needed breaks when the heat index, which combines temperature and humidity, reaches 80 degrees Fahrenheit. More stringent rules, including mandatory 15-minute breaks every 2 hours, would go into effect when the heat index reaches 90 degrees. Importantly, these requirements apply to both indoor and outdoor workers, though largely sedentary office workers, as well as remote workers, are excluded.
As most federal agencies do when drafting proposed rules, the Occupational Safety and Health Administration provides a regulatory impact analysis as part of its proposal, describing the costs and benefits of enacting the rule and comparing the proposal to possible alternatives. In this case, the agency finds that its proposal would yield $9.2 billion in benefits each year at an annual cost of $7.8 billion.
Yet the analysis that accompanies the heat standard proposal goes further than just counting the costs and benefits. It also provides a fairly in-depth and novel analysis of the distributional effects of the rule—or, said another way, to whom those costs and benefits accrue—finding that there will be a “positive impact” on underserved populations.
This distributional analysis, which focuses on low-income and historically underserved populations, is a response by the agency to President Joe Biden’s 2021 executive order on advancing equity for these groups across federal government agencies. It also reflects the White House Office of Management and Budget’s 2023 revision of the Circular A-4, a guidance document that enhanced what agencies are directed to do to take equity into account when making regulatory policy decisions.
Though other recently proposed regulatory policies—such as the Department of Labor’s overtime regulation—included some distributional analysis by demographic groups, the new proposed standard for “Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings” provides a more thorough disaggregation of impacts.
The agency finds, for example, that workers from historically underserved communities have “greater exposure to occupational heat-related hazards, with more severe outcomes that impact their ability to work.” More specifically, it finds that men earning less than $60,000 a year are nearly twice as likely to be exposed to workplace heat-related hazards than women. (See Figure 1.)
Figure 1
The distributional analysis of the heat rule also finds that low-income Hispanic workers are more likely to be exposed to workplace heat-related hazards than workers of other races and ethnicities—a distinction especially acute in outdoor work settings. (See Figure 2.)
Figure 2
The analysis also finds that heat-related injuries and illnesses and heat-related fatalities are concentrated among workers who are low income, in peak earning years (ages 35 to 54), male, or Hispanic. These populations average 1,066 heat-related injuries and seven heat-related fatalities each year—though there is good reason to think these are underestimates.
Additionally, the Occupational Safety and Health Administration does a partial analysis of which businesses might face the highest cost of compliance with the new rule, including by looking at minority-owned firms that report being in financially precarious circumstances. Elsewhere in the regulatory impact analysis, the agency thoroughly examines, industry by industry, the economic feasibility of complying with the proposal, as well as the likely effects of the proposal on small businesses, finding that compliance costs are not prohibitive.
Given the complexities involved with conducting a comprehensive distributional investigation, there are still areas where the agency’s analysis could improve. The agency fails, for example, to examine granularly how the costs associated with the heat standard might be passed on to consumers or workers, instead merely gesturing at how sector-specific supply and demand elasticities will determine ultimate incidence of costs.
Additionally, the agency does not attempt to weight the costs and benefits by income, a new option provided to agencies under the revised Circular A-4. Weighting effectively equalizes the dollar-denominated preferences of high- and low-income U.S. workers, counteracting the high-income biases inherent in certain cost-benefit methodologies, such as determining would-be beneficiaries’ “willingness to pay” for regulatory changes.
Since the benefits from the heat standard proposal are exclusively the result of reduced worker fatalities and nonfatal injuries—which are already quantified in a standardized way that corrects in part for the bias against low-income people (for example, the value of a statistical life)—it would not make sense to weight this rule’s official benefits. But using an appendix to start experimenting with various weighting approaches on unofficial benefits, such as how a heat standard would enhance workers’ job satisfaction, would have been a welcome development.
The agency’s analysis also fails to formally quantify some of the more speculative economic spillovers that a national heat standard could deliver, such as a higher supply of labor, lower worker turnover, and higher cognitive processing. That said, the proposal’s authors do summarize that evidence in their analysis.
Less substantively, the agency’s ultimate conclusion about the proposed rule’s distributional impact is buried on page 989 of a 1,156-page, multipart document. More prominently highlighting these important findings, as well as the total costs and benefits, for policymakers and other readers would be useful.
Finally, the regulatory impact analysis uses current temperature information to estimate how many 80- and 90-degree-plus days businesses will face going forward, but there is little reckoning with the proverbial elephant in the room: that heat waves are becoming more severe and more frequent almost every year due to climate change. Taking this into account would likely increase both the costs and benefits of the rule. As such, it might not make a difference in the final conclusion, but it would more accurately describe the urgent need to adopt the proposed rule.
Overall, though, this proposed heat rule marks a major step toward more thorough regulatory impact analyses that take not just overall costs and benefits into account, but also studies to whom those costs and benefits accrue. This will ensure that the most vulnerable workers, who often have the most to gain, are more fully taken into account, rather than using a calculation that tends to favor higher-income, White workers and business owners. We hope other federal agencies follow suit and continue to improve on the Occupational Safety and Health Administration’s distributional work in this proposed rule.
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