The Decision Regulation Impact Statement (RIS) focuses on the prohibition of the use of engineered stone. It provides an overview of the background, objectives, and purpose of government intervention in this matter.
The DRIS considers three options and analyses their costs, benefits, and potential health outcomes. The report also includes consultation feedback and provides a recommendation for the best option.
Background of the Statement
On February 28, 2023, the Work Health and Safety (WHS) ministers reviewed the recommendations presented in the Decision Regulation Impact Statement: Managing the risks associated with respirable crystalline silica (RCS) in workplaces, commonly referred to as the Silica Decision RIS. They reached an agreement that the Safe Work Australia Agency (the Agency) should conduct further analysis and consultation regarding the potential impacts of prohibiting the use of engineered stone under the model WHS laws (DEWR 2023). Notably, these considerations encompass:
- Evaluation of silica content levels and other risk factors.
- The establishment of a national licensing system for work involving products not subject to a ban.
- The implementation of a national licensing system for work involving legacy products.
This Decision Regulation Impact Statement (Decision RIS) delves into the regulatory implications of various options within the model WHS laws regarding the prohibition of engineered stone usage. It supplements the body of evidence and analysis previously assessed by WHS ministers and should be referenced alongside the Silica Decision RIS.
Importantly, it’s crucial to note that the prohibition of engineered stone importation falls outside the scope of this Decision RIS, as this matter falls under the jurisdiction of the Commonwealth. The Department of Employment and Workplace Relations is responsible for examining the import ban on engineered stone (DEWR 2023).
The development of this Decision RIS was informed by feedback from stakeholders provided in response to a consultation paper released by the Agency in March 2023. Additionally, it benefited from insights gathered during a workshop held by the Safe Work Australia Members (Members) in April 2023. Furthermore, the Decision RIS incorporates findings from an independent expert review of scientific evidence related to the risk profile of working with engineered stone conducted by the University of Adelaide. It also encompasses an economic impact analysis carried out by independent consultants, Ernst & Young Pty Ltd (EY).
This Decision RIS adheres to the guidelines outlined in the Regulatory Impact Analysis Guide for Ministers’ Meetings and National Standard Setting Bodies, as revised in June 2023 (the Guide). The Office of Impact Analysis (OIA) has verified that this Decision RIS aligns with the prerequisites detailed in the Guide.
Statement of the Problem
The RIS identifies the problem of the health risks associated with the use of engineered stone. It highlights the need for government intervention to address these risks and protect the health and safety of workers in the industry.
In recent years, there has been a concerning rise in cases of silicosis and silica-related illnesses among Australian workers, particularly those exposed to silica dust during the processing of engineered stone. Engineered stone labourers are disproportionately affected for several key reasons, exacerbated by the specific hazards associated with engineered stone dust.
Engineered stone differs from natural stone in its characteristics; often softer and more malleable, resulting in higher daily processing rates and prolonged exposure. Evidence suggests that the Respirable Crystalline Silica (RCS) generated from engineered stone possesses different properties than RCS from natural stone, with additional elements in engineered stone dust posing extra health risks or worsening the effects of RCS exposure.
Despite robust model Work Health and Safety (WHS) laws in place since 2011, there has been substantial non-compliance with obligations imposed by these laws by both PCBUs and workers. Historically, the engineered stone industry has faced inadequate compliance activities given the extent of the risk.
The nature of the engineered stone industry, primarily composed of small businesses with minimal entry barriers and a culturally diverse workforce, has arguably contributed to non-compliance and the surge in silicosis cases. PCBUs in this industry often had limited awareness of engineered stone risks and their responsibilities to manage them, while workers lacked knowledge about their rights and responsibilities.
Due to the industry’s characteristics, essential mechanisms within the model WHS laws, such as health and safety representatives or committees, were less likely to be present. These entities can play a crucial role in monitoring compliance with WHS laws and addressing health and safety concerns.
Impact Analysis Approach
The RIS follows a comprehensive approach to analyse the impact of the prohibition options. It assesses the options relative to the base case and monetizes costs to industry and government where possible. The health benefits of each option are qualitatively assessed, and a breakeven analysis is conducted to determine the number of avoided deaths and illnesses required to offset the costs.
This Impact Analysis Methodology is designed to furnish a comprehensive comprehension of the implications and expenses tied to the prohibition of engineered stone use.
It consists of several key stages:
1) Define the Market:
At this initial stage, an exhaustive analysis of the current state of the engineered stone industry is conducted. This includes identifying the number of PCBUs (Persons Conducting Business or Undertaking) by their size, quantifying the workforce engaged with engineered stone, and recognizing alternative consumer products.
2) Impact Identification:
In this phase, the decisions that the engineered stone industry is anticipated to make under each prohibition option are outlined. This includes a meticulous evaluation of the repercussions for both PCBUs and workers.
3) Cost Identification:
This facet of the analysis pinpoints the specific costs that PCBUs and workers would incur due to the prohibition on engineered stone. This encompasses compliance costs, expenses related to business closures, and government costs associated with implementing a licensing framework.
4) Cost Assessment:
The analysis proceeds to estimate the costs pertaining to each proposed prohibition option, encompassing PCBUs, workers, and government expenditures.
5) Breakeven Analysis:
To ascertain the critical financial thresholds, a breakeven analysis is carried out. It translates the monetary benefits into the requisite number of prevented deaths and illnesses for each option to achieve equilibrium.
By scrutinising various facets such as the market, impacts, costs, and breakeven analysis, it serves as an invaluable tool for informing the decision-making process.
Identifying Decisions and Monetisable Impacts to Industry
The RIS outlines the business decisions that engineered stone PCBUs (Persons Conducting a Business or Undertaking) and other industry PCBUs may make in response to the prohibition options. It also identifies the respective monetisable costs of these decisions.
1) Engineered Stone PBCUs
Primary participants in the engineered stone sector, referred to as PCBUs (Persons Conducting a Business or Undertaking), are primarily engaged in the fabrication and installation of new engineered stone. Their occupational activities, encompassing cutting, polishing, and grinding processes, expose them to elevated levels of Respirable Crystalline Silica (RCS). The estimated count of such PCBUs in Australia falls within the range of 750 to 1,250. This diverse group comprises sole traders, small businesses with 1 to 20 employees, and medium-sized businesses with 21-200 employees. Due to their direct and substantial RCS exposure, they face the highest health risks within this industry.
Workers in this domain typically acquire their skills and expertise through on-the-job training, as opposed to formal qualifications. They rely on an array of equipment, spanning from computer-controlled cutting devices to handheld tools, for the processing of engineered stone. It is essential to note that the assumption here is that no engineered stone PCBUs are involved in legacy engineered stonework. Consequently, they are expected to continue fabricating and installing engineered stone products with lower silica content.
2) Other Industry PBCUs
A decision tree outlines the potential actions that PCBUs in industries other than engineered stone may take in response to the prohibition.
The data presented in the document reveals that an estimated 179,750 PCBUs in various industries are presently involved in activities related to engineered stone. This category comprises sole traders, small businesses employing 1 to 19 individuals, and medium to large businesses with 20 employees or more.
3) Number of Other Industry PCBUs
Within the estimated 179,750 PCBUs from various industries, their distribution is as follows: 55% are sole traders, 44% are small businesses, and the remaining 1% falls under the medium to large business category. These ratios are derived from the ANZSIC classifications and business size data, as delineated in the document.
4) Anticipated Impact on Other Industry PCBUs
The document’s underlying assumption is that the proposed prohibition options will not significantly impact the other industry PCBUs. It is postulated that these entities will not experience exits from the industry or the redundancy of their workforce due to the prohibition options. This stems from the fact that working with engineered stone is not their primary endeavour, and the overall demand for their services remains consistent. Therefore, any impact on these PCBUs pertains mainly to their interaction with legacy-engineered stone products.
5) Global Assumptions
The document underscores that no costs associated with retraining workers have been taken into account for engineered stone PCBUs venturing into natural stone or elevating the proportion of their business activities involving natural stone. This assumption rests on the premise that most engineered stone PCBUs already engage with natural stone in some capacity. The primary distinction lies in the requirement for a higher skill level to manage the relatively more brittle natural stone slabs.
Additionally, no costs for retraining workers to operate with alternative products have been factored in for engineered stone PCBUs diversifying into alternative products or increasing their involvement with these options. This is founded on the belief that the skills of existing workers may be adaptable and transferrable to these changes.
Crucially, no revenue losses are anticipated during the transitional period to natural stone, alternative products, or potential business closures. It is postulated that the implementation phase will provide engineered stone PCBUs with the opportunity to fulfil their extant orders, deplete their engineered stone inventories, and foster their new ventures, be it in natural stone, alternative products, or other business pursuits.
Overview of Monetisable Costs
This document furnishes an encompassing view of monetised costs associated with different options for prohibiting engineered stone use, comprising Option 1, Option 2, and Option 3. In total, the projected costs for all options amount to $133.0 million. These comprehensive expenses encompass the establishment of a licensing framework for legacy product handling and the provision of income and vocational training assistance to affected workers.
a) Costs Incurred by Engineered Stone PCBUs
Under Option 1, the anticipated expenses for engineered stone PCBUs stand at $4.8 million. These outlays incorporate redundancy costs, predominantly expected to be shouldered by medium-sized businesses. Testing costs specific to engineered stone PCBUs are relatively modest when compared to the overall projected expenses of the prohibition. This primarily stems from the lion’s share of costs being linked to the licensing framework for legacy product management, with a presumed impact on other industry PCBUs.
b) Costs to the Government
Option 1 is anticipated to impose a total cost of approximately $108.2 million on the government. This sum encompasses the roll-out of a licensing framework for legacy product management, amounting to $107.5 million over the appraisal period. Furthermore, the government is expected to allocate $0.7 million over the appraisal period for Jobseeker payments to displaced workers and financial incentive disbursements for apprenticeships. It is assumed that Jobseeker payments will be extended to workers displaced following the closure of sole traders and small businesses.
c) Breakeven Analysis
Contained within the document is a breakeven analysis that gauges the number of illnesses and fatalities necessary to counterbalance the costs incurred by each prohibition option. The breakeven point, indicating the number of silicosis cases that must be averted, was calculated by dividing the net present cost across the appraisal period by the expected value attributed to life preservation and illness prevention, standing at $4.9 million. Table 16 presents the outcomes of the breakeven analysis, delineating the expense of each option over the appraisal period and the total count of silicosis cases that need to be prevented to offset these costs.
Consultation and Stakeholder Feedback
The consultation process concerning the Decision Regulation Impact Statement (Decision RIS) regarding the potential prohibition of engineered stone use transpired during the period spanning from March to April 2023.
During this window, stakeholders were cordially invited to share their insights on three distinct options:
Option 1: Enforcing a comprehensive ban on the utilization of all engineered stone.
Option 2: Imposing a ban on the use of engineered stone comprising 40% or more crystalline silica.
Option 3: Prohibiting the use of engineered stone containing 40% or more crystalline silica while concurrently introducing a licensing system for PCBUs engaged in activities related to engineered stone with less than 40% crystalline silica content.
Over this period, a total of 114 submissions were thoughtfully submitted by a diverse array of stakeholders. These contributors encompass PCBUs actively involved in engineered stone practices, industry associations, labour unions, as well as government entities.
The invaluable insights furnished by these stakeholders formed a critical foundation for the impact analysis conducted as part of the Decision RIS.
To ensure a comprehensive evaluation of the feedback received, submissions were meticulously assessed in consideration of factors such as the representation of individual and small-scale organisations, submissions presented on behalf of a collective membership, and the specialised expertise brought by certain organisations.
Ultimately, this multifaceted feedback significantly contributed to the thorough evaluation of available options and the formulation of the most judicious approach concerning the potential prohibition of engineered stone usage.
Best Option and Implementation
The RIS concludes with a recommendation for the best option to address the health risks associated with engineered stone.
Among the available alternatives, Option 2 emerges as the most cost-effective approach. This strategy entails the prohibition of engineered stone characterised by 40% or more crystalline silica content. This choice anticipates the least total cost impact, presuming the absence of business closures or worker displacement. Furthermore, it anticipates the availability of lower-silica products to meet market demands, thus ensuring a seamless transition.
To execute Option 2, the establishment of a licensing framework is necessary for PCBUs engaged with engineered stone containing less than 40% crystalline silica. The cost projection for implementing this licensing system for legacy products is estimated at $240.5 million over the appraisal period. It’s important to note that the majority of the economic cost associated with each option is attributed to this specific aspect. The financial implications for PCBUs, government entities, and non-licensed workers are minimal under Option 2.
Qualitative Gains Arising from Engineered Stone Prohibition
The prohibition of engineered stone usage yields qualitative advantages that manifest as enhanced well-being and quality of life for individuals involved in the engineered stone sector. Nevertheless, it is challenging to subject these health gains to quantitative assessment. Moreover, there exist unquantified indirect advantages that pertain to Persons Conducting Business or Undertaking (PCBUs), government entities, and the wider community. The decision to abstain from monetizing these indirect gains is either to prevent duplicity or due to the inherent difficulty in assigning a monetary value. These unquantified indirect advantages encompass minimised government expenditures, amplified worker efficiency and engagement, reduced financial burdens on PCBUs, and better health and quality of life for the families and associates of labourers in this sector.