The Second Century of Workers' Compensation Programs

By Works, Richard | Monthly Labor Review, October 2018 | Go to article overview

The Second Century of Workers' Compensation Programs


Works, Richard, Monthly Labor Review


Workers' Compensation: Analysis for Its Second Century. By H. Allan Hunt and Marcus Dillender. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 2017, 138 pp., $14.99 paperback.

Workers' Compensation, by H. Allan Hunt and Marcus Dillender, provides a concise analysis of workers' compensation programs in the United States and Canada by focusing on three issues: adequacy of benefits, return to work, and injury prevention. The authors, both senior economists at the W. E. Upjohn Institute, have extensive experience in research related to labor economics, particularly worker compensation and health. Their five-chapter book is divided into three sections, each discussing one of the aforementioned issues, and includes introductory and concluding chapters.

In the section on adequacy of benefits, the authors discuss empirical evidence from research based on data from the United States and Canada. They note disagreements (due to various reasons) regarding the optimal means for determining how to measure the adequacy of benefits. They identify some workers' compensation systems that use better measurement approaches than others. Their analysis favors the use of earnings replacement rates over loss replacement rates in investigating the adequacy of benefits.

The earnings replacement rate is a calculated ratio (a fraction). The numerator is the sum of workers' compensation income benefits and postinjury earnings. The total estimated earnings without injury (comparison earnings) are in the denominator. Adding the postinjury earnings considers the residual earnings capacity of injured workers. The loss replacement rate is also a calculated ratio. However, its numerator is the workers' compensation income benefits, and its denominator is the difference between comparison earnings and postinjury earnings. Compared with the loss replacement rate, the earnings replacement rate results in a higher measured replacement rate because of mathematics, but it more accurately reflects that most injured workers return to work and that their earnings losses are temporary. The earnings replacement rate uses the perspective of the worker--and the worker's income flow--rather than the perspective of the workers' compensation system.

In the book's section on return to work, the authors observe that workers' compensation programs focus on prevention, compensation, and rehabilitation. However, return to work has emerged as the primary goal after a disability or illness, aiming to restore a worker to his or her previous status quo. The authors explore research and policy initiatives that address return to work, providing examples of such policies.

The determinants of return to work are multidimensional, including, among other things, medical treatment, rehabilitative services, employer policies, injured worker characteristics, and job requirements. To address the cost of workers' compensation, larger companies adopt a technique known as disability management--a set of practices designed to minimize the disabling impact of injuries during employment. …

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