Understanding The Needs of Small Business

Transcription

1 Understanding The Needs of Small Business Presented to The OSHA Compliance Assistance Conference September 24-26, 2002 Washington, D.C. g Bruce D. Phillips, Senior Fellow, Regulatory Studies Research Foundation Washington, D.C. g Contact: bruce.phillips@nfib.org

2 PRESENTATION OUTLINE How do small firms learn about regulations? Has it changed recently? Workplace and Safety Issues What do small firms want? What do small firms actually do? * The Regulatory Impact Model A New Tool for Calculating Total Regulatory Costs.

3 How Do Small Firms Learn About Regulations? (Percentage of firms responding) Trade or business group (70 pct) The media (60 percent) U.S. Department of Labor (70 percent) The Internet (48 percent) Existing Company Policies/Practices (75 pct)

4 Has This Knowledge Changed Recently? Yes, small firms sometimes less dependent upon attorneys or consultants; Yes, the Internet is becoming more useful for firms with more than 10 employees; Yes, employers are more likely to provide safety training Employees often offer to discuss new regulations with employers (e.g. FMLA, ADA)

5 Major Workplace Security/Safety Issues for Small Firms-What Do They Worry About?? Workplace Accidents (43 pct) Traffic Accidents (38 pct) Over 50 percent of employees in small firms drive cars as part of their jobs Workplace Violence (4 pct) Post 9/11, do small firms want restricted access to their business 70 percent say no

6 Who is responsible for safety issues in small firms (Firms with less than 250 employees) The owner 75 percent of the time; An employee 14 percent of the time A safety committee about 12 percent of the time. Note: Totals do not add precisely to percent

7 Small Firm Safety Policies 55 percent of small firms (less than 250 employees) have written safety rules and policies; 60 percent of small firms have safety training and safety awareness as part of a new employees job orientation.

8 Where do small firms believe they receive the most useful safety information paid or unpaid? An insurance company 41 percent of the time; A non-profit organization or a trade association 24 percent of the time; A government agency 16 percent of the time SBA s Small Business Development Centers about 12 percent of the time.

9 Why do small firms request on-site safety consultations? (Percent of respondents) Routine safety check 26 percent of the time; Ensure compliance is up-to-date 16 percent of the time; Reduce insurance costs or requested by insurance company 14 percent of the time; Educate employees or part of marketing package 10 percent of the time.

10 What Do Small Firms Do To Address These Concerns? Screen drivers licenses, backgrounds of potential employees; Conduct periodic safety inspections of their workplaces; 60 percent of inspections conducted by the owner; Only 20 percent have attended safety or training seminar during the past 12 months.

11 Who conducts on-site safety consultations? Insurance companies 33 percent of the time these are often free; Engineering and consulting firms- 35 percent of the time-these are not free; A government safety agency 16 percent of the time A non-profit organization such as a trade association

12 Voluntary Protection Partnerships Do small firms participate in Voluntary Protection Partnerships? No, less than 2 percent indicated such participation in a recent NFIB Research Foundation study. Would small firms participate in organized trade association or insurance seminars? Maybe!

13 Workmen s Compensation (WC) Policies If small firms received a break in their WC policies, how likely would they be to send an employee to a training seminar? Highly likely (29 pct); Somewhat likely (27 pct) Not at all likely( 33 pct); It would be useful to cross tabulate this data by industry sector, age of firm, and firm size.

14 IMPLICATION: SMALL FIRMS ARE VERY SENSTIVE TO POLICIES WHICH LOWER COSTS OR REDUCE TAXES.

15 Price Sensitivity Small firms despite many voluntary inspections and the use of paid consultants still view safety investments as a business cost; Firms are very sensitive to additional costs required by safety investments especially in these times of lean profits.

16 What Compliance Challenges Remain? Ways are needed to motivate more owners with fewer than 10 employees about safety issues; These firms represent 70 percent of all employer firms! Because of time constraints, compliance seminars/focus groups should be near the owners place of business; Internet may be increasingly useful but training must be industry specific.

17 The Regulatory Impact Model (RIM) A NEW TOOL FOR STUDYING THE COST OF REGULATIONS

18 What Is The Regulatory Impact Model? The Regulatory Impact Model (RIM) compares a baseline economic forecast of the U.S. one without a new regulation to a forecast of the economy when the regulation is introduced. The RIM consists of two parts: a regulatory interface and a 7 region inter-industry econometric forecasting model called REMI, leased from Regional Economic Models, Inc. The RIM combines the calculation of direct, indirect and induced economic costs.

19 Studying A New Regulation With RIM

20 The Proposed OSHA Safety & Health Program Rule What kinds of costs will this rule generate? How do we apply the RIM? Where does basic cost data come from?

21 First, Provide Basic Info To The RIM Model Name of Project, Industry Detail, Firm or Establishment, Forecast Period, etc.

22 Start a New Project Using the RIM Expand the OSHA Safety & Health Program Rule to Firms With Less Than 100 Employees

23 Define Two Major Industry Clusters Labor Intensive Firms Labor Intensive Firms like Services, Retail Trade have Lower Compliance Costs (their employees are in less dangerous jobs) Capital Intensive Firms Capital Intensive Firms in Manufacturing, Construction, Wholesale Trade, Agriculture have Higher Compliance Costs

24 Amount Of Costs Costs in the labor intensive sectors are assumed to be about $2,000 per firm based upon a 1999 SBREFA panel. Costs in the capital intensive sectors are assumed to be $4.500 per firm based upon the 1999 SBREFA panel. Note: These are direct costs only.

25 Labor Intensive Costs Management and Leadership Costs Hazard Identification and Assessment Costs Hazard Prevention and Control Costs Information and Training Costs Program Evaluation Costs

26 Assumptions Most costs are estimated at $50 per hour. The most expensive costs are the Hazard Prevention and Control Program for which a consultant is required. All costs in the labor intensive sectors are assumed to be $2,050 per firm. All costs in the capital intensive sectors are assumed to be $4,500 per firm.

27 Labor Costs

28 Fees

29 Associating Costs RIM requires a user to state which costs are associated or linked with each major industry sector. It also requires a user to tell the model what percentage of each major industry is already complying with a new regulation. This is difficult data to find often the government does not even know!

30 Associate Costs With Each Sector

31 Include Percentage Already In Compliance in Each Sector 60 Percent of Small Firms With Under 20 employees would comply if OSHA Health and Safety Program rule is extended to them. (This is an assumption). 75 Percent of Larger Firms (> 20 employees) Estimated To Comply. 90 Percent of Larger Firms in Mfg, Mining, etc Estimated To Be In Compliance. Note: The model allows compliance rates to grow over time & vary by industry sector.

32 Get Ready to run the Model Read the Control Forecast Without the Regulation-- Into the Regional Economic Model (REMI)

33 U.S. Run Or Regional Run? Depending upon the application, the RIM model can be run for the U.S. only, or as a 7 sector model. Depending upon which version is chosen, either 4 tables or 28 tables (1 for each of 7 regions) will have to be exported back into the RIM model.

34 Where Else Do Small Firm Owners Get Advice? From a new NFIB Poll ( From (in order of importance): Family members (e.g. spouse) 56% Business partners (35%) Accountants, bankers, lawyers, consultants(31%) Other business owners (25%) Web-Sites (15% - 20%)

35 Generate Costs for the Regional Economic Model (REMI)

36 REMI The REMI Model Should Calculate All Regulatory Costs: Direct Costs Indirect Costs Induced Costs

37 Run the REMI Model

38 Display Differences For the U.S. Using the REMI Model With & Without the OSHA Regulations

39 Export REMI Output to the RIM Model for Each of the 7 Regions

40 Read Summary U.S. Output Also called Super Summary Table - includes income, employment and general macro variable differences from the baseline forecast

41 Export Summary Employment Differences by Industry for 7 Regions & the U.S.

42 REMI Results Are Read Using The RIM Software

43 Disaggregate Employment by Firm Size

44 What Are The Age/Gender Effects of the OSHA Regulation? These are based upon the distribution of population from the Census.

45 What Are The RIM Results In The Aggregate From the OSHA Health & Safety Program Rule? About 80K jobs lost in in the entire economy during first three years generally from firms with fewer than 20 employees. Most jobs lost in construction, restaurants, trucking and other retail firms. About $4 billion will be lost to the consumption sector when the regulation is introduced, but consultants will gain.

46 Disaggregate Employment Output by Geographic Region and/or State-This is for MASS

47 Save REMI Results Using Excel Files

48 Read & Edit the Output Files as MS Excel Files

49 Limitations & Extensions Of The RIM Industry detail is 2 digit only will expand to new Census 5 digit NAICS codes. Most regulations require this level of industry detail. Model needs a demographic module to input data by age and gender to better estimate cost effects. Cost inputs section for paperwork regulations needs improvement. More detailed size increments are desirable.

50 Things To Remember: 1. Save REMI forecast with a unique name to be able re-run the REMI portion separately without retyping input data. 2. Save all output in separate folders to make it easier to recall calculations during the next trial iteration of the model.

51 Other Regulations Studied Using RIM Scheduled Postal Rate Increases (USPS). Limited English Proficiency Requirements (HHS). Security Regulations of Hazardous Materials Transporters (DOT). Commercial Mail Receiving Agency Rules (USPS). Lowering Thresholds For Lead Reporting (EPA). New Food Labeling For Trans Fatty Acids (FDA). Changes to the Fair Labor Standards Act (FLSA).

52 Section 610 Reviews (SBREFA) NFIB and small business owners deeply appreciate SBREFA Section 610 Reviews!!! Thank you for your attention.