Wage Loss Monitoring for Injured Workers in California's Workers' Compensation System

2014–2015 Injury Year Findings (Second Interim Report)

by Michael Dworsky, Stephanie Rennane, Nicholas Broten

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Research Questions

  1. What are the trends in earnings losses for the average injured worker in California with injury dates from 2005 through 2015?
  2. What are the trends for workers with indemnity benefits?
  3. How do earnings losses for 2014–2015 injuries compare with earnings losses for earlier injury years?
  4. How do differences in earnings loss levels and changes across subgroups of injuries compare?

This report presents new estimates of wage loss for workers in California who suffered a workplace injury or illness in 2014–2015 and compares these estimates with trends before, during, and after the Great Recession. The authors matched injured workers with control workers in the same firm at the time of injury with similar characteristics and analyzed the impact of injury on labor market outcomes, including earnings and employment.

Relative earnings over the second year after injury have been flat for workers injured in California since the Great Recession. On average, workers injured in 2014 and 2015 earned 93 percent of what they otherwise would have. These earnings losses were driven by workers who received indemnity benefits. This represents a slight increase from the 92 percent level estimated for workers injured during the Great Recession, but earnings remain lower than the pre-recession average of 96 percent. Relative earnings were lower for workers in small firms, workers with low job tenure, workers with low earnings prior to injury, and workers with cumulative injuries. Workers with cumulative injuries in Southern California were found to have particularly poor labor market outcomes, with relative earnings nearly 20 percentage points lower for workers in Southern California, compared with 8.5 percentage points lower for workers with cumulative injuries in the rest of the state. Continued monitoring of wage loss in future reports will provide a more complete picture of outcomes for permanently disabled workers as the effects of recent policy changes and economic expansion unfold. Additional research and policy attention should be paid to workers with cumulative injuries throughout the state and specifically in Southern California.

Key Findings

Overall worker labor market outcomes were flat compared with workers injured in 2013

  • Injured workers' relative earnings were at 93 percent by the end of the second year after injury for workers injured in 2014–2015.
  • This finding was a slight increase from 92 percent for workers injured during the Great Recession of 2008–2009 and the recovery period of 2010–2012, but it was still lower than the pre-recession average relative earnings of 96 percent.

Relative earnings varied by industry and nature of injury

  • Workers in administrative support, manufacturing, retail, construction, and wholesale had significantly lower than average relative earnings than the average for all workers with indemnity benefits.
  • Workers with cumulative injuries experienced relative earnings approximately 14 percentage points lower than the overall average for workers with indemnity benefits.

Workers with cumulative injuries in Southern California experienced particularly poor outcomes

  • Workers with cumulative injuries outside Southern California had relative earnings approximately 8.5 percentage points lower than the overall indemnity average, while those with cumulative injuries in Southern California had relative earnings 15–20 percentage points lower than the overall indemnity average.

There is increased "churn" in the labor market for injured workers

  • While the relative employment share remained the same as for workers injured in earlier years, the share returning to the at-injury employer declined.
  • The share of injured workers with high job tenure (at least one year at the current firm) at the time of injury also declined slightly in the most recent injury cohorts.

Recommendations

  • Continued monitoring of labor market outcomes for the 2016–2017 and subsequent injury cohorts is needed to fully understand trends in wage loss and understand the impacts of Senate Bill 863. Given the slow pace of medical recovery and claim resolution for severe injuries, data on earnings losses several years after injury are necessary to directly assess the long-term impact of permanently disabling injuries. In addition, since Senate Bill 863 was fully implemented in 2014, reforms to medical care delivery, changes to permanent disability ratings, and the establishment of the return-to-work benefit will need to be further evaluated in future reports using recent data.
  • Given existing concerns about medical cost, indemnity claim frequency, and fraud in Southern California, the finding that earnings losses are systematically worse for cumulative injuries in Southern California indicates that this group warrants additional analyses in research and continued attention from policymakers. The analyses also identified differential earnings losses by pre-injury wages (with lower earners having lower relative earnings after injury) and by industry (with workers in administrative support, construction, manufacturing, retail, and wholesale experiencing lower relative earnings). For some of these industries, such as manufacturing, the trends likely reflect slower recovery in industries that were most affected by the Great Recession and could indicate groups that would benefit from additional services, such as vocational rehabilitation or other return-to-work interventions.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data and Methods for Wage Loss Monitoring

  • Chapter Three

    Labor Market Impacts of Workplace Injury: Trends Through 2015

  • Chapter Four

    Labor Market Impacts of Workplace Injury: Differences in Earnings Loss Across Groups of Injured Workers Through 2015

  • Appendix

    Methods and Supplementary Results

Research conducted by

The research described in this report was prepared for the State of California Department of Industrial Relations and conducted by the RAND Institute for Civil Justice (ICJ), part of the Justice Policy Program within RAND Social and Economic Well-Being.

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