Academic journal article Independent Review

How Minnesota Adopted Workers' Compensation

Academic journal article Independent Review

How Minnesota Adopted Workers' Compensation

Article excerpt

The adoption of workers' compensation in the 1910s represents a significant event in the economic, legal, and political history of the United States. Workers' compensation legislation is one of the major tort reforms of this century, shifting liability for workplace accidents from negligence liability to a form of shared strict liability. The legislation marked a radical shift in how employees received compensation for the wage losses and medical expenses arising from industrial accidents. Whereas post-accident benefits were unpredictable and relatively meager under the negligence liability system, compensation for workplace accidents was much more certain and generous under the new regime. Contemporary reformers and subsequent social and labor historians hailed the legislation as the first instance of social insurance in the United States (Ely 1908; Eastman 1910; Conyngton 1917; Lubove 1967; Weinstein 1967; Goldin forthcoming). Further, compensation laws in many states expanded the roles of legislators and administrative agencies, while diminishing the influence of the courts in settling disputes between employers and their workers over workplace accident compensation.

Although most of the social insurance programs that exist today were at least proposed during the Progressive Era, only workers' compensation gained rapid support and adoption across the country. Within a decade forty-two of the forty-eight states had adopted compensation legislation; by 1921 only Arkansas, Florida, Mississippi, Missouri, North Carolina, and South Carolina had yet to enact a law. As Harry Weiss (1966) noted, "No other kind of labor legislation gained such general acceptance in so brief a period in this country" (575). Employers, workers, and insurance companies all anticipated gains from the introduction of workers' compensation. Employers could pass some of the costs of the higher post-accident compensation on to workers through wage offsets (Fishback and Kantor 1995). Moreover, under the new regime employers could predict their accident costs With more precision, and workers' compensation produced less acrimony than the traditional negligence system. Risk-averse workers, despite "buying" the higher benefits, benefited because they faced problems in purchasing their desired amounts of private accident insurance early in the twentieth century. The switch to workers' compensation left them better insured against workplace accident risk, and the laws enabled the insurance industry to expand its coverage of this risk (Kantor and Fishback forthcoming).

Several changes in the workplace accident environment in the early 1900s combined to pique these groups' interest in establishing workers' compensation. Workplace accident risk rose, state legislatures adopted a series of employers' liability laws, and court decisions limited employers' defenses in liability suits, all of which combined to substantially increase liability insurance premiums. By 1910 the worsening workplace accident liability crisis had led many employers to favor workers' compensation. At the same time, increasingly powerful labor unions shifted their focus from reforming the negligence liability system to fully supporting workers' compensation. Our econometric analysis of the legislative decisions to adopt workers' compensation across the United States confirms that the degree of the "liability crisis" in each state was an important determinant of the adoption of workers' compensation (Fishback and Kantor forthcoming).

Although a broad-based coalition of different interests supported workers' compensation, in some states the passage of the legislation required great efforts. The intense political debates over the legislation in the early twentieth century concerned not so much the law's adoption as the specific form it would take. Aspects such as industry coverage, the size of firms to be covered, the level of wage benefits, the maximum allowable benefits, medical and hospital coverage, the waiting period, the means of insuring, and the provisions for conflict resolution evoked contention because they determined how the income generated from the law's adoption would be distributed. …

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