Workers’ Comp Costs Grew Faster Than Wages

NU Online News Service, 3:31 p.m. EDT? Workers’ compensation costs for employers grew at a faster percentage than wages did in 2001, mostly because the economic downturn discouraged rapid salary increases, according to a new study.

The report, released today by the National Academy of Social Insurance, a Washington, D.C.-based nonprofit research group, also pointed out that the continuing economic volatility has resulted in the slowest growth in U.S. wages in more than a decade.

According to these research findings, this is the first time that workers’ comp benefit levels rose at a faster percentage than wages since 1992. It was also the first time since 1993 that employers’ costs for workers’ comp grew faster than wages.

In 2001, overall wages grew by 2.4 percent, the study found. On the other hand, total workers’ comp benefits rose by 3.5 percent to $49.4 billion–this translated into one-dollar-and-seven-cents worth of benefit for every $100 wage that year, a one-cent increase compared to 2000.

Still, this benefit-to-wage ratio is far lower than figures from the 1990s. The benefit-to-wage rate reached its peak in 1992, the study said, at $1.68 per $100 of wages.

Regarding employers’ costs for workers’ comp–which reflect premiums charged by insurers–the study said the figure jumped by eight percent to $63.9 billion in 2001. The employer costs-to-wage ratio was $1.39 per each $100 wages that year, compared to $1.32 in 2000. This rate is also far below the numbers from the 1990s. For instance, the study noted that, in 1993, the employer costs-to-wage rate was $2.16 per $100 of wages.

Despite the slight increase in employers’ costs for workers’ comp and benefits paid out to workers in 2001, the overall trend of the past decade can still be described as a “long-term decline,” according to the study.

John Burton Jr., chairman of the NASI panel that oversees the study, explained that this long-term decline in benefits and costs relative to wages since 1992 is largely due to fewer reported accidents and fewer claims for workers’ comp.

Mr. Burton said that, according to U.S. Department of Labor figures, workplace accidents that result in lost work days fell from three to 1.7 per 100 full-time workers between 1992 and 2001.

“Other reasons for the decline include more active management of medical care and more efficient return-to-work programs and other efforts to reduce costs,” he added.

But these benefits also have potential pitfalls, according to Mr. Burton. “Some are concerned that initiatives to control costs, discourage fraud and tighten eligibility requirements cause injured workers to be denied benefits or discouraged from claiming them,” he said.