Loss-Cost Impact of Aging U.S. Workforce May Not Be as Severe as Once Thought

The American workforce is aging, but the impact that having more employees in their 50s and 60s will have on workers’ compensation loss costs may not be as negative as originally thought, according to new research from the National Council on Compensation Insurance Inc. (NCCI).

In a report, “Workers Compensation and the Aging Workforce,” NCCI says older workers do generally tend to have higher loss costs per worker—but only if “older” is very broadly defined.

“All groups of workers age 35 to 64 appear to have similar costs per worker,” says NCCI. The report adds, “Workers 20 to 24 have markedly lower severities and loss costs, and workers 25 to 34 fall in the middle.”

“These are reassuring findings in that an aging workforce may have a less negative impact on loss costs per worker than originally thought,” the report adds.

Outlining patterns seen in the age of the U.S. workforce, NCCI says workers 45 and older are accounting for an increasing share, with workers 55 to 64 “growing steadily” and workers 45 to 54 showing a modest increase. The share of workers 45 and older has increased from 34 percent in 2000 to 42 percent in 2010.

The correlating decline in younger workers has been seen most heavily in the 35-to-44 age group.

The difference in loss costs between older and younger workers comes down to severity, rather than frequency, NCCI says. “Severity for older workers is roughly 50 percent higher than for younger workers, with variation in the mix of injuries accounting for half this difference.”

Older workers, the report notes, tend to suffer more rotator-cuff and knee injuries, which are more expensive than the back and ankle sprains typically suffered by younger workers.

Indemnity severity also comes into play, driven by the typically higher wages earned by older workers. But NCCI notes that, from a workers’ comp perspective, these higher costs are offset “at least to some extent” by the higher premiums for older workers due to the higher wages they earn.

As for frequency, NCCI says differences in age groups observed in the 1990s have largely disappeared. “The long-standing tenet that younger workers have much higher injury rates is no longer true,” the report adds.