Should OSHA Enact New Regulations to Protect Outdoor Workers from the Heat?

The Trump Administration will face a decision on whether to enact OSHA Regulation proposed by the Biden Administration that intended to protect workers from high outdoor heat. Here is a 2024 Biden Administration statement about the proposed regulation and here is an article from today’s New York Times.

In January 2025, Joe Tracy and I released this AEI Working Paper providing a prospective analysis of the OSHA rules. After conducting this analysis, I believe that the Trump Administration should block these Biden Administration regulations from being implemented.

Here is the introduction of our paper

Introduction

During the Biden Administration, the Occupational Safety and Health Administration (OSHA) proposed new rules to protect workers from heat exposure. The intent of this regulation was to improve worker quality of life and reduce health impacts. In this paper, we explore the trends in heat-related worker injuries and the likely unintended consequences of this regulation. By pointing out these “Peltzman Effects”, we seek to highlight the existing data gaps that limit the regulator’s efforts to improve worker quality of life and the opportunities for market-based mitigation of these heat-related risks.

We share OSHA’s goal of protecting vulnerable workers, but we reject the claim that the proposed regulations will achieve this goal at low cost, or that they will significantly benefit the workers who choose to work in these exposed industries and jobs.

OSHA argues that its “light-touch” approach taken so far has not sufficiently reduced heat related job risks. OSHA justifies its proposed new rules by combining a statistical argument (that heat kills and injures) with an economic argument that, due to market failures, many U.S. firms are not investing enough to protect workers from their job hazards. The basic argument is that workers accepting jobs featuring extreme heat exposure are both unaware of the extent of this exposure and how the heat may affect their health and well-being both in the short run and in the long run. In this case, a type of “false advertising” takes place as workers take jobs that offer a given wage, but they are unaware of the health dangers inherent in taking such a job.

In our prospective analysis of this major rule change, we present a critical analysis of the existing statistical literature that claims to study the causal effects of heat exposure on worker safety. These studies fail to account for worker heterogeneity and worker choice. Put simply, workers systematically choose what jobs they work at. Their choice depends on many factors including; what local job opportunities are available to them, how susceptible are these individuals to such heat, and the degree to which these workers are aware of the effects of heat on their health and the pro-active steps they can take to offset these negative impacts?

We explain how the research of the Nobel Laureate James Heckman informs our analysis of the OSHA regulatory design. In justifying its choice of regulations, OSHA implicitly assumes that all workers of a given race and age are identical and equally affected by heat exposure. In the spirit of Sam Peltzman’s research on the “unintended consequences” of regulation, we present a microeconomic analysis of how workers and firms will be affected by this regulation (Peltzman 1975). Whether vulnerable workers are likely to gain from such regulation hinges on whether the regulated firms have market power in the output and labor markets. We present a detailed analysis of this claim and contrast it with the predictions from microeconomics in cases where the regulated firms instead face perfect competition in both the output and the labor markets. We argue that in those less competitive labor markets that OSHA is most intent on regulating, the costs of the regulation will more likely be shifted to workers. This is an example of an unintended consequence that is common with regulation.

To preview our main findings, the death count from on-the-job heat is already very low. OSHA reports that there were 43 heat-related job fatalities in 2022. (BLS, 2024 ) OSHA reports an average of 34 heat-related job fatalities per year over the period from 1992 to 2022 (BLS, 2024)

Over this period, heat-related job fatalities represented less than 1 percent of all job fatalities. OSHA claims that heat-related fatalities are significantly undercounted. We discuss the research paper that OSHA relies on to substantiate this claim and argue that this conclusion is unjustified.

OSHA has pointed to several empirical studies to make its case that the current “business as usual” approach can be improved through the proposed government interventions. As we discuss below, these empirical studies ignore many economic incentive effects that determine sorting of workers across employers, employer investments in safety, and worker efforts to self insure.

In support of its rulemaking, OSHA points out that many American workers are exposed to high heat as they work in outdoor jobs in agriculture and construction as well as indoor jobs in factories and warehouses. The typical worker in these industries is often less educated and more likely to be a minority, and some have pre-existing medical conditions that make them more susceptible to heat related illnesses and risk of death. The U.S. workforce is aging, and more American adults are obese and have rising rates of Type 2 diabetes and other chronic health conditions that put them at greater risk from heat exposure.

While OSHA intends to improve worker quality of life, the proposed rule ignores basic lessons from economics. Our economic analysis demonstrates that the benefits from this regulation will be lower and the costs will be higher than OSHA anticipates. In their discussion, OSHA systematically downplays how firms and workers react to incentives.

Firms have incentives to take proactive steps to protect workers because they will have to pay a wage premium (“combat pay”) if workers find their job quality of life to be worse than their other alternatives. Otherwise, at the margin, employees will quit and move to another job. Turnover is expensive as firms have to undertake searching and on-boarding replacement employees. In addition, firms also benefit from putting in place efficient practices that help to maintain worker productivity on hot days. (For example, to reduce pacing.)

The joint decisions of workers and firms together determine a worker’s actual exposure to extreme heat. Workers typically have a degree of choice over where they live and work, what job they take and what shifts they agree to work. They have a strong self-interest in figuring out whether the work conditions at a specific employer are too onerous for them. They do this both through job search before joining a firm, as well as on-the-job learning. If workers discover after being hired that a job environment is worse than they anticipated (and that they are compensated for), then they have an incentive to quit and look for a new job. Workers who agree to work an afternoon summer day’s shift that is predicted to reach a high temperature can also take measures to protect themselves from the heat.

An extensive economics literature has established that jobs with unpleasant attributes must pay higher wages to attract and retain workers (a “compensating wage” differential). Areas with extreme heat exposure will also feature lower rents because people can move to more pleasant places. In this sense, workers who live and work in extremely hot places are compensated with higher wages and lower rents (Gyourko and Tracy 1991). With the extra purchasing power, they can purchase market inputs (foods, cooling equipment to protect themselves) as well as save to be able to cover the costs of moving to a different market.

In the absence of new regulations, there are reasons to believe that the adverse health and productivity effects of heat exposure will decline further rather than worsen over time. Design progress in cooling equipment is accelerating and the price of these improved products is declining. Innovations in equipment design can reduce the exertion required by workers that accentuates heat-related health risks. Personal monitoring devices can alert workers when they should take a break. Put simply, outdoor workers want to be productive and maintain their health and quality of life. There are enough of these individuals and employers that their aggregate demand for better solutions is triggering endogenous innovation. The private sector is the engine of adaptation as long as entrepreneurs anticipate that aggregate demand is rising (and government stays out of the way).

The benefits of OSHA’s new proposed rules depend on what would be the worker safety time trend in the absence of the new regulations. The value added from OSHA’s rules will likely be small and declining over time. Heat-related injuries (HRIs) are a small category of overall workplace injuries indicating a limited scope for positive impact. There is also no evidence of a rising trend in this category of injuries which raises the question of why a significant change in OSHA’s approach is needed at this time. There is no existing or impending “crisis” in HRIs that calls for new forceful regulation. This does not imply, however, that there are no constructive steps that OSHA can take to reduce job-related heat exposure health risks.

The costs of these proposed regulations are likely to be borne by small firms. Large firms have more adaptation strategies for coping with new regulations and can spread out the fixed compliance costs over a larger number of projects. The same regulations impose larger relative costs on smaller firms. In this sense, the introduction of new rules could differentially benefit larger firms creating barriers to entry (and operation) for new firms. At the same time, new firms generate more job growth and provide a dynamism to local economies as well as a path of upward economic mobility associated with starting and growing a firm.

We conclude our study with an alternative lighter touch regulatory proposal for how OSHA can better achieve its stated goals at lower social cost. OSHA is proposing regulations while facing considerable uncertainty about the firms and the workers it is regulating. The OSHA rule makers have not been clear about the Frank Knight “knowledge problem” and their lack of an understanding of the inner workings of the firms that they are regulating. Asymmetric information issues arise as firms know much more about their day-to-day operations than the regulators. The preponderance of small employers in industries such as construction will hinder effective regulatory action. The collective knowledge of markets vastly exceeds that of OSHA, giving markets an inherent advantage at finding efficient solutions. We view the major market failure in this setting to be the dissemination of low-cost, high-quality information about daily outdoor job risks. Thus, we propose that OSHA play the role of an “honest broker” in conveying trustworthy information about job attributes that are tied to industries and places. We also emphasize that the cost of regulation depends not only on the design of OSHA’s rules, but also on how OSHA implements its rules.

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New Thoughts as of June 17th 2025

The Biden Administration’s regulators implicitly embrace the worldview that workers are “passive victims” with few strategies to protect themselves from a well known threat.

The Biden Administration also implicitly embraces a worldview that labor markets are not competitive and that some outdoor firms have market power and thus are able to exploit workers. For undocumented immigrants, there may be some truth to this claim. An interesting economics issue arises here. Using the language of Marxist Economics, if firms can expropriate surplus from workers, wouldn’t these firms want the workers to be healthy and productive so that there is more to extract? Economists should recall Mancur Olson’s point about the stationary bandit who has an incentive for the place to prosper because he gets a % of the output. A similar point was made by Fogel and Engermen in their book; Time on the Cross.

From conducting this research, I am also really surprised by how little the Biden Administration knew about how workers are treated at different firms. The lack of knowledge and the lack of relevant Big Data collection by OSHA here is shocking.