IWH briefing explores business cycles and workers’ compensation

Through its publication Issue Briefing, the Institute for Work & Health provides research-based insights to policy-makers. A recently released briefing discusses the impact of today’s shrinking economy on workers’ compensation claim rates.

As the economic crisis continues to reverberate across the globe, questions about its impact on occupational health and safety and the workers’ compensation system are emerging. Are injury rates affected by recessions? Are workers’ compensation claims likely to be more or less frequent? Are work-related injuries likely to be more severe?

A recent Issue Briefing by the Institute for Work & Health (IWH) concisely summarizes past research that addresses these questions. The Institute’s series of briefings aims to provide policy decision-makers with insights into employee health and safety topics based on research evidence.

The Institute for Work & Health has a long history of contributions to policy development, says IWH President Dr. Cameron Mustard. In many instances, our research has been useful in answering specific questions concerning the effectiveness of prevention practices, clinical programs or disability management policies. In other instances, our research has been useful in framing some of the options that policy decision-makers may consider.

Claim rates drop in poor economy

Researched and written by IWH Senior Scientist Dr. Ron Saunders, the March 2009 Issue Briefing looks at the impact of business cycles on workers’ compensation, specifically on claim rates, wage replacement costs and medical costs. Based on studies dating back to 1938, Saunders shows that compensation claim rates drop, relative to the total number of hours worked, when the economy shrinks.

He also explores some of the reasons why rates drop. There may be fewer inexperienced workers because they are the first to be laid off. With lower production, the least safe equipment may not be used. Hazardous industries with higher injury rates may experience the largest decline in employment during recessions.

The recession has a wide-ranging impact, and it is important to pay attention to its effects on the workers’ compensation system, on occupational health and safety, and on worker health more generally, says Saunders. This briefing focuses on workers’ compensation claims, but IWH has also done work on the effects of unemployment on worker health, and I expect this will be an issue of renewed interest.

Next briefing will look at “newness”

This timely issue is one of a number of topics in the Issue Briefing series that may interest policy-makers in compensation boards, ministries of labour and other organizations. The next briefing topic is on the state of being “new” and the risk of workplace injury. Saunders noticed that the theme of “newness” cut across a variety of IWH research: that new workers, young workers, short-term employees, immigrants and new firms were all associated with a risk of higher workplace injury.

Issue Briefing will be published several times each year and will be posted on the Institute’s website: www.iwh.on.ca/issue-briefings.

At a glance: The impact of business cycles on workers’ compensation

The current Issue Briefing from IWH includes these key messages about the relationship between a shrinking economy and workers’ compensation rates and costs.

  • There is a long-term trend in Canada, the United States and a number of other countries towards fewer workers’ compensation claims per hour worked.
  • There is fairly strong evidence that, relative to this trend, the frequency of workers’ compensation claims per hour worked tends to decline in recessions and increase in times of economic recovery. Some possible explanations are that during recessions:
    • there are fewer inexperienced workers;
    • the least safe equipment is taken out of use;
    • the pace of work is slower;
    • workers fearing job loss may defer filing claims; and
    • hazardous industries experience the largest decline in employment.
  • While it is also possible that workers facing layoff are more likely to file claims, the evidence indicates that this is outweighed by factors tending to reduce claims in recessions.
  • The evidence regarding costs per claim — both wage replacement and medical costs — is thinner and somewhat mixed. The available evidence suggests that it is unlikely that recessions would accelerate the growth of these costs.

 Source: At Work, Issue 56, Spring 2009: Institute for Work & Health, Toronto