MEMORANDUM

To: Paul Bolon, OSHA

From: Chet Fenton, ERG

Date: July 13, 2008

Subject: Data sources for OSHA’s regulatory impact assessments

OSHA regularly uses standard statistical information collected and
published by federal agencies to develop estimates of the numbers of
establishments, firms, and employees affected by OSHA standards. The
primary sources of this statistical information are summarized below.

Basic Profile Data

Economic Census (Bureau of the Census)

The Economic Census is conducted every five years and reports a range of
economic information on a disaggregated industry basis. The Census
provides four key statistics: number of establishments; value of sales,
shipments, receipts, revenue or business done, annual payroll and number
of employees. The Census also provides data about the number of
employees engaged in production occupations and about specialization of
firms by type of product produced. Economic Census statistics are
consistent with those published in Statistics of U.S. Businesses and
County Business Patterns (see below).

Statistics of U.S. Businesses (Bureau of the Census)

Statistics of U.S. Businesses (SUSB) is an annual series that provides
national and subnational economic data by enterprise size and industry.
SUSB covers most of the country's economic activity. The series excludes
data on nonemployer businesses, private households, railroads,
agricultural production, and most government entities. SUSB provides
comprehensive estimates at the 6-digit NAICS level of the number of
establishments, firms, and payroll, broken down by employment size of
firms. For census years (e.g., 2002), the SUSB also provides estimates
of annual receipts at the same level of industry and firm size
disaggregation. Because the SUSB provides estimates on a firm-size
basis, it is the standard source for the data needed to develop small
entity profiles and to analyze small-entity economic impacts.

Tabulations providing data by employment size of firm have been
assembled as far back as 1989. The comparability of data over time may
be affected by definitional changes in establishments, activity status,
and industrial classifications. Starting with the 2003 data year, data
from the Statistics of U.S. Businesses series are published on the basis
of the 2002 North American Industry Classification System (NAICS). Data
for 1998 through 2002 were published based on 1997 NAICS. Most changes
between 1997 NAICS and 2002 NAICS were minor, except within the
construction, wholesale trade, and information sectors.

Statistics of U.S. Businesses basic data items are extracted from the
Business Register, a file of all known single and multi-establishment
companies maintained and updated by the U.S. Census Bureau. The annual
Company Organization Survey provides individual establishment data for
multiestablishment companies. Data for single-establishment companies
are obtained from various Census Bureau programs, such as the Annual
Survey of Manufactures and Current Business Surveys, as well as from
administrative records of the Internal Revenue Service, the Social
Security Administration, and the Bureau of Labor Statistics. 

In accordance with U.S. Code, Title 13, Section 9, no data are published
that would disclose the operations of an individual employer. However,
the number of firms and establishments in an industry classification and
the distribution of these establishments by employment-size class are
not considered to be disclosures. Therefore, this information may be
released even though other information (e.g., number of employees) is
withheld from publications. 

All SUSB data are tabulated from universe files and are not subject to
sampling errors. However, the data are subject to nonsampling errors,
which can be attributed to many sources: inability to identify all cases
in the universe; definition and classification difficulties; differences
in interpretation of questions; errors in recording or coding the data
obtained; and estimation of employers who reported too late to be
included in the tabulations and for records with missing or misreported
data. The accuracy of the data is determined by the joint effects of the
various nonsampling errors. No direct measurement of these effects has
been obtained; however, precautionary steps were taken in all phases of
collection, processing, and tabulation to minimize the effects of
nonsampling errors. 

Estimates of total employment, establishments, and payroll are
consistent with those published in County Business Patterns.

County Business Patterns (Bureau of the Census)

County Business Patterns (CBP) is an annual series that provides
subnational economic data by industry. The series is useful for studying
the economic activity of small areas; analyzing economic changes over
time; and as a benchmark for statistical series, surveys, and databases
between economic censuses. CBP provides annual estimates at the 6-digit
NAICS level of the numbers of establishments, employees, and annual
payroll in each industry. These estimates are further disaggregated by
the employment size of the establishment.

County Business Patterns covers most of the country's economic activity.
The series, however, excludes data on self-employed individuals,
employees of private households, railroad employees, agricultural
production employees, and most government employees.

This series has been published annually since 1964 and at irregular
intervals dating back to 1946. The comparability of data over time may
be affected by definitional changes in establishments, activity status,
and industrial classifications. Data from County Business Patterns are
currently published primarily according to the 2002 North American
Industry Classification System (NAICS).

County Business Patterns basic data items are extracted from the
Business Register, a file of all known single and multiestablishment
employer companies maintained and updated by the U.S. Census Bureau. The
annual Company Organization Survey provides individual establishment
data for multiestablishment companies. Data for single-establishment
companies are obtained from various Census Bureau programs, such as the
Annual Survey of Manufactures and Current Business Surveys, as well as
from administrative record sources.

CBP statistics are subject to the same confidentiality restrictions and
reliability considerations as discussed for the SUSB above. CBP
estimates for total employment, establishments, and payroll are
consistent with those published in the SUSB.

Occupational Employment Statistics (Bureau of Labor Statistics)

The Occupational Employment Statistics (OES) survey is the primary data
source for occupational employment statistics. OES data permit estimates
of the numbers of employees by detailed occupation disaggregated at the
4-digit NAICS industry level. OES also provide data on average and
median wage levels also disaggregated by occupation and industry.

The OES survey is a semiannual mail survey measuring occupational
employment and wage rates for wage and salary workers in nonfarm
establishments in the United States. OES estimates are constructed from
a sample of about 1.2 million establishments. Forms are mailed to
approximately 200,000 establishments in May and November of each year
for a 3-year period. The nationwide response rate for the May 2008
estimates is 78.2 percent based on establishments and 74.3 percent based
on employment. The survey included establishments sampled in the May
2008, November 2007, May 2007, November 2006, May 2006, and November
2005 semiannual panels.

The OES survey uses the Office of Management and Budget (OMB)
occupational classification system, the Standard Occupational
Classification (SOC) system. The OES survey categorizes workers into 801
detailed occupations. Together, these detailed occupations make up 22 of
the 23 major occupational groups. Military specific occupations are not
included in the OES survey. 

The OES survey uses the North American Industry Classification System
(NAICS). The May 2008 estimates and survey data are based on the 2007
NAICS. Earlier panel data and estimates were based on the 2002 NAICS.
The OES survey covers all full- and part-time wage and salary workers in
nonfarm industries. The survey does not include the self-employed,
owners and partners in unincorporated firms, household workers, or
unpaid family workers.

Occupational employment is the estimate of total wage and salary
employment in an occupation across the industries surveyed. The OES
survey defines employment as the number of workers who can be classified
as full- or part-time employees, including workers on paid vacations or
other types of paid leave; workers on unpaid short-term absences;
salaried officers, executives, and staff members of incorporated firms;
employees temporarily assigned to other units; and employees for whom
the reporting unit is their permanent duty station regardless of whether
that unit prepares their paycheck.

Wage estimates from the OES are based on straight-time, gross pay,
exclusive of premium pay. Base rate, cost-of-living allowances,
guaranteed pay, hazardous-duty pay, incentive pay including commissions
and production bonuses, tips, and on-call pay are included. Excluded are
back pay, jury duty pay, overtime pay, severance pay, shift
differentials, nonproduction bonuses, employer cost for supplementary
benefits, and tuition reimbursements. 

Estimates calculated from a sample survey are subject to two types of
error: sampling and nonsampling. Sampling error occurs when estimates
are calculated from a subset (that is, a sample) of the population
instead of the full population. When a sample of the population is
surveyed, there is a chance that the sample estimate of the
characteristic of interest may differ from the population value of that
characteristic. Nonsampling error occurs for a variety of reasons, none
of which are directly connected to sampling. Examples of nonsampling
error include: excessive nonresponse, data incorrectly reported by the
respondent, errors in the administrative data used to create the
sampling frame, data entry mistakes, and mistakes made in editing and
processing the collected data. Every attempt is made to minimize
nonsampling error through survey methods such as data editing,
imputation methods, and benchmarking of data to current employment
totals. 

Other Profile Data

Receipts

Data on value of sales, shipments, receipts, or other business revenues
are available on a disaggregated industry level from the Economic Census
for census years (e.g., 1997, 2002, 2007, etc.) This value for revenues
is also included in the SUSB database for census years and is available
disaggregated by industry and by firm employment size. For non-census
years, OSHA estimates the level of revenues based on the ratio of
receipts to payroll for the most recent census year and the current
payroll level. This method assumes that the revenue-payroll ratio
remains basically unchanged from the previous census year.

Profit Rates

Profit rate statistics used in measuring the economic impact of OSHA
regulations are derived from financial statistics collected by the U.S.
Internal Revenue Service and published annually in the Corporation
Source Book. The IRS reports are based on a stratified statistical
sample of unaudited tax returns filed by corporations during each tax
year.  In 2006, this sample comprised approximately 104,000 returns
drawn from a universe of about 5.8 million active corporate returns
filed during the 2006 tax year.

The IRS data is available for all industry sectors and is disaggregated
on a level comparable to the 4-digit NAICS industry classification
system. OSHA estimates profit rates by calculating the ratio of the
totals for “net income (less deficit)” to “total receipts” as
shown in the income statement table for each industry as presented the
IRS Corporation Source Book publications. This statistic can be
calculated for each industry over an extended time period, permitting
the development of long-run profit measures.

For the present updates of OSHA RIA’s, OSHA is using the average
yearly profit rate for each industry over the 7-year period, 2000 to
2006, the most recent year for which IRS data are available. This time
period includes at the outset the previous business cycle contraction
and trough that occurred in November 2001, and covers much of the
expansion the preceded the recent peak of economic activity that
occurred in December of 2007.

The IRS profit rate statistics are superior to other profit statistics
data sources because they are based on statistical sampling,
comprehensively cover at a disaggregated level all industries
potentially subject to OSHA regulations, and are available on a
consistent basis over an extended time period.

Turnover Rates

Estimates of compliance costs for some OSHA regulatory requirements
(e.g. training) may depend on the number of newly hired or transferred
employees during any given period. Statistics on turnover rates by
industry are obtained from the Job Openings and Labor Turnover Survey
(JOLTS) conducted by the Bureau of Labor Statistics. The program
involves the monthly collection, processing, and dissemination of job
openings and labor turnover data. The data, collected from sampled
establishments on a voluntary basis, include employment, job openings,
hires, quits, layoffs and discharges, and other separations. JOLTS data
permit monthly and annual estimates of turnover rates on an aggregated
industry-sector basis.

Other Wage Data

The Bureau of Labor Statistics National Compensation Survey (NCS)
provides comprehensive measures of   HYPERLINK
"http://www.bls.gov/ncs/ocs/"  occupational wages ;   HYPERLINK
"http://www.bls.gov/ncs/ect/"  employment cost trends ,   HYPERLINK
"http://www.bls.gov/ncs/ebs/"  and benefit incidence  and detailed plan
provisions. Detailed occupational earnings are available for
metropolitan and non-metropolitan areas, broad geographic regions, and
on a national basis. The index component of the NCS, Employer Cost Index
(ECI), measures changes in labor costs. Average hourly employer cost for
employee compensation is presented in the Employer Cost for Employee
Compensation publication. These statistics permit the development of
adjustment factors to estimate the value of fringe benefits associated
with changes in labor requirements. 

 Internal Revenue Service, Corporation Source Book of Statistics of
Income (annual).

 The tax year is defined to include accounting periods extending 12
months beyond the June 30th fiscal year end in each year.

 See National Bureau of Economic Research (NBER), Determination of the
December 2007 Peak in Economic Activity, December 12, 2208; and NBER
Press Release, July 17, 2003.

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