Amalgamated Clothing and Textile Workers Union THE ECONOMIC IMPACT OF THE OSHA COTTON DUST STANDARD The standard established by OSHA to protect textile workers from exposure to excessive cotton dust is threatened by the textile industry's claim that a less stringent standard would offer adequate protection for workers' health without imposing the "inordinate" burden of cleaning up the mills entailed in the present cotton dust standard. The American Textile Manufacturers Institute (ATMI) has urged OSHA to set "more realistic permissible exposure limits" in view of the "uncertainty as to whether the limits can be maintained.. (and) in a number of cases, the economics of the situation make it impossible to justify the expenditures that would be required to achieve the permissible exposure limit(s)." (ATMI Submission to OSHA, April 23, 1982, p.9). The textile industry has been complaining about the cost of complying with the standard's dust-control requirements since OSHA first proposed a standard in 1976. Industry's claim that the required engineering controls are economically infeasible was thoroughly investigated by OSHA in hearings held in 1977; the claim was found to be without merit. In the words of the preamble of the standard, "the evidence in the record indicates that the costs of compliance are not overly burdensome to industry." (43FR27379) The ATMI appealed the OSHA standard in the courts. It argued that the "the standard is prohibitively expensive because it imposes extremely severe financial burdens on a vulnerable industry." (ATMI brief in Case No. 78-1562 p. 59). The U.S. Court of Appeals for the District of Columbia rejected this claim, as did the Supreme Court. In spite of the courts' affirmation of the standard, OSHA has responded to the textile industry's continued complaints by initiating a review of the cotton dust standard. In a Notice of February 9, 1982 (47FR5906) OSHA requested the public to address the question of whether the cotton dust standard is cost-effective. Specific information was requested "concerning those provisions which may be made clearer, more effective or less burdensome." Under the standard cotton textile workplaces are required to install ventilation equipment and work practices to achieve the following permissible exposure limits: These limits were mandated to become effective March 1984. Many companies have already initiated programs to reduce dust levels well in advance of this target date. The "handwriting on the wall" since June 1978 (when the current standard was promulgated) has stimulated a widespread move to utilize improved technology as a means of combining dust reduction with productivity enhancement. As noted in a recent study conducted for the Office of Technology Assessments: "modernization in the cotton textile industry (has resulted in) ... simultaneous improvements in both productivity and in lowering dust levels in the plants." (R. Ruttenberg, Compliance with the OSHA Cotton Dust Rule: The Role of ProductivityImproving Technology," p. 29). Industry Progress to date: 81% in Compliance Data submitted by the textile industry in response to OSHA's 1982 notice indicate that considerable progress has been made toward reaching the permissible exposure limits which will be required as of March 1984. The ATMI reported on the results of a survey of its 200 members, to which approximately 50 companies (with 72,500 workers covered by the standard) responded. These are summarized in Exhibits A and B; copies are appended. Exhibit A shows the percentage of the employees covered by the survey who were working in each of 12 specified operations and in "other" operations. Exhibit B presents a distribution of dust level measurements for each of the 12 operations specified in Exhibit A. More than half of the dust levels reported were below the permissible exposure limits (PEL) in 11 of the 12 operations surveyed: the one exception (the Opening operation) accounted for only 1.8% of the covered workers. Applying the percentage distribution of workers in the various operations (Exhibit A) to the proportions who were exposed to less than the PEL (Exhibit B) yields an over-all measure of the degree of compliance with the PEL: 80.9% of the workers were exposed to less than the PEL (Exhibit C). It is evident from the results of the ATMI survey of its members that a large proportion of the industry has already achieved substantial compliance under the PEL's which are to become effective in March 1984 under the OSHA standard. Another indication of the extent to which the industry has already reached compliance is the fact that spending for employee safety and health is reported by the McGraw-Hill Department of Economics to have peaked in 1980: annual expenditures projected for 1982-83 average $111.6 million, compared to $116.0 million spent in 1979 and 127.7 million in 1980 (Exhibit D). Comparison of Economic In order to test the industry's claim that the standard has imposed an inordinate burden on its financial viability, ACTWU has conducted a study of the economic performance of a group of companies whose good-faith efforts to meet the standard have resulted in substantial compliance prior to the 1984 deadline. group consists of the following: Burlington Industries, Inc. Cannon Mills Co. Cone Mills Corp. Dan River Inc. Fieldcrest Mills, Inc. Stevens (J.P.) & Co., Inc. West Point-Pepperell, Inc. This At a recent hearing of the Subcommittee on Investigation and Oversight of the House Committee on Science and Technology the above group of firms was described by an ATMI representative as "those companies which have well-developed programs to control the problem of cotton dust." (Proceedings, hearing on the OSHA cotton dust standard, Subcommittee on Investigation and Oversight, House Committee on Science and Technology, September 22, 1982.) Comparison of the economic performance of this group with that of the textile industry as a whole since 1978 clearly demonstrates that the increased capital expenditures generated by the need to comply with the OSHA standard have been associated with a lesser reduction in earnings for these corporations compared to the industry. The results of this comparison are presented in Chart 1. The performance of the group of seven (herein referred to as the "sample firms") has been compared with the over-all industry data with respect to the following parameters: In order to prevent differences in company-size from confounding the comparisons, expenditures for new plant and equipment (capital expenditures) have been divided by the number of employees in each firm. As indicated in Table 1, the average expenditure per employee for the sample firms was $1,338 in 1978, compared to the industry average of $1,538. Thus, the average capital expenditure rate for sample firms was 13% below the industry average in 1978. The cotton dust standard went into effect in March 1980. The average capital expenditure per employee for sample firms rose to $2,862 in 1980, 47% higher than the industry average of $1,941. Again in 1981 the sample firms' capital expenditure rate ($2,684) substanitally exceeded the industry average ($1,954) an excess of 37%. Profit Rates Comparison of the average profit rates of sample firms and the industry as a whole (Tables 2 and 3) indicates that the sample firms have improved their performance, in comparison to the rest of the industry since 1978. Both on the basis of comparison of the returns on investment (profits per dollar of net worth) and the sales margins (profits per dollar of sales), the record of sample firms has improved relative to the industry averages since 1978, and in 1981 (the latest available year) the sample firms' profit rates were substantially higher than the industry averages. Return on Investment The sample firms' average return on investment was 8.5% in 1978 compared to the industry average of 11.1% (Table 2). This 23% deficit was converted to an excess in 1980, when the average return for sample firms rose to 9.9% compared to 8.6% for the industry. Profits per dollar of net worth for the sample firms continued to exceed the industry average in 1981. Margin on Sales When measured in terms of profit margin on sales, the sample firms' record showed less of a decline than the indistry as a whole. In 1978 the sample firms' average margine was 3.6% compared to 3.1% for the industry. By 1981 the sample firms average margin fell to 3.4% compared to 2.4% for the industry. U.S. Industry Maintains Competitive In testimony before the Subcommittee on Investigations and Oversight of the House Committee on Science and Technology, James H. Martin, Jr., vice-president of the ATMI, claimed that "the burdens imposed upon the industry by government regulations which are not conducive to more effective operations are of little help to our world competitive position." He cited the OSHA cotton dust standard as an example of the "counterproductive" diversion of scarce assets required by excessive government regulation. (Proceedings, 9/22/82). The fact is that the U.S. industry has improved its competitive position in relation to foreign producers of cotton textiles. A recent study by the University of South Carolina shows that in the decade of the seventies the value of U.S. exports of woven cotton fabrics increased at the rate of $52 million a year while U.S. imports rose at an annual rate of $28 million, resulting in a favorable trade balance of more than $227 million in 1979 (The U.S. Textile Mill Products Industry: Strategies for the 1980's and Beyond, University of South Carolina, 1982). Annual data through 1979 are presented in Exhibit E. While imports have grown relative to exports since 1979 this development reflects exchange-rate changes. As noted in the abovecited University of South Carolina report, "from 1979 to 1981, the U.S. dollar strengthened significantly against most world currencies. This change . . . should have brought about reduced exports and increased imports during 1981 and 1982 assuming other factors did not change. Indeed in 1981 U.S. textile imports increased 22% over 1980 while exports fell slightly (.4%). " Conclusion The above data on foreign trade in cotton fabrics and the comparative economic performance of a group of seven firms [companies which constitute the study group for the recent ATMI survey of health-effects of exposure to cotton dust (the "Imbus Report") ] provide strong evidence of the fact that compliance with the cotton dust standard has not impaired the financial viability of the industry. Indeed, the economic performance of these com panies reflects the positive stimulus provided by the standard to the modernization of the textile industry and the consequent improvements in productivity. Chart 1 provides a graphic presentation of the close association between the relative performance of the sample firms with respect to capital expenditures, returns on net worth and profit margins on sales. |