When the U.S. recession finally ends, workers' compensation systems will have to function in a "shrunken new normal" economy requiring cost cuts, one leading industry figure warned.
Richard Victor, executive director of the Workers' Compensation Research Institute, delivered that prognosis at the opening of the Boston-based WCRI's annual conference, which was telecast to 350 attendees at cities across the country.
The post-recession reality, he predicted, will be an economy with a "shrunken new normal," with tremendous pressures to reduce costs and businesses with smaller payrolls.
In that environment, according to Mr. Victor–who holds a doctorate degree in economics–successful businesses will do more with less and successful workers' comp systems will eliminate unnecessary costs, particularly money paid by employers that does not improve the outcome of efforts to return employees to work.
There are, he said, opportunities to eliminate costs that have both short- and long-term effects.
WCRI, for example, has been examining ways to eliminate "unnecessary" prescriptions and litigation. Preliminary study information was offered to conference participants that WCRI said could not be made public at this time because the early research is subject to change.
Mr. Victor said that for workers' comp agencies, the shrunken economy will mean performing the same mission with less revenue.
In the "new normal" economy that emerges following this recession, in addition to smaller payrolls there will be higher unemployment, Mr. Victor said.
"This is not a typical downturn. Many observers believe we will not return where we were," he warned, counting himself as one who sees a different U.S. economy ahead.
"We are headed to a new equilibrium sized to the true level of demand," he said, noting this will be brought on by a fall in prices, the closing of factories and malls, and a reduction in government services.
Because of retiring baby boomers, Mr. Victor said, the United States will go back to a lower level of employees even when there is a recovery.
But in the shrunken economy, he added, many will be returning to less productive jobs at lower wages.
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