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Erosion of Workers Compensation Has Worsened Income Inequality, According to Major Labor Department Study

workers comp inequality Those who study workplace injuries in the U.S. had both good and bad news to report this past week. There are fewer occupational injuries today; but the bad news is those who are hurt now get far less help.

This data comes from an important report just released on how the system is failing to provide adequate treatment and support for people who suffer from workplace accidents — both because of the changing economic climate in which people are getting injured, and because of the disintegration of programs that once paid for them.

Adding Inequality To Injury: The Costs of Failing To Protect Workers Injured On The Job is a 20 page, well-researched, well-sourced paper, complete with 37 endnotes. Here the DOL names the prime culprits in this growing workers compensation crisis: employers who evade workers’ comp responsibilities by misclassifying workers, labeling employees as independent contractors when they really ARE employees, outsourcing high-risk jobs and drawing labor from temp agencies. The injury and benefits statistics that have arisen from this scenario are jaw-dropping: workers’ compensation covers only 21% of the costs of injuries for U.S. employees, while 50% is borne by workers out-of-pocket.

One of the report’s more serious charges, among many, is made in this statement:

Moreover, only a fraction of injured workers receive any workers’ compensation benefits through state workers’ compensation programs. Several studies have found that fewer than 40 percent of eligible workers apply for any workers’ compensation benefits at all. Indeed, recent BLS-supported analyses that match cases reported to workers’ compensation carriers with those cases recorded by their employer on OSHA logs, treated in emergency rooms or admitted to hospitals, found a sizable proportion of injured workers receive no benefits through the workers’ compensation system. For example, a review of all recordable work-related amputations in Massachusetts found that less than 50 percent of the cases received any workers’ compensation benefits.

Much of the focus of the report, then, zeroes in on the growing national issue of economic inequality. In an overview of research on the issue, the Labor Department found that low-wage workers (especially Latinos) suffer disproportionately high injury rates, and that getting hurt can reduce a person’s earnings by up to 15% over 10 years following an accident. In other words, people already at the bottom of the economic latter are MOST at risk of sliding further down after an injury.

“Injuries are knocking many families out of the middle class, and block many low-wage workers from getting out of poverty,” said David Michaels, assistant secretary of labor for Occupational Safety and Health (OSHA).

There are two key aspects to the financial implications of a workplace injury. The first concerns the legal status of a worker who is injured. A stunning number of construction workers are misclassified as independent contractors, which makes them ineligible for workers’ compensation payments. Also, more workers get job placements through temporary staffing agencies, and not only receive less training, but also are less likely to report their injuries because of their vulnerable status. In fact, businesses often contract out the most dangerous tasks at a job site, enabling them to keep their own workers’ compensation premiums to a minimum.

The second problem is the degradation of workers’ compensation system itself. That issue is addressed by the second report out from this week, published by ProPublica and NPR. This study looks at ways employers have lobbied their state legislators to get out of paying the same rates they used to pay for workers’ compensation. As a consequence, workers are left with a bigger chunk of the bill, and when injured, they often receive inadequate treatment.

“The cutbacks have been so drastic in some places that they virtually guarantee injured workers will plummet into poverty,” write authors Henry Grabell and Howard Berkes. “Workers often battle insurance companies for years to get the surgeries, prescriptions and basic help their doctors recommend.” (We urge any worker in this situation to seek the help of a workers compensation attorney!)

This comprehensive study found that over the past 12 years, 33 states have cut back on workers’ compensation regulations, or reduced/eliminated procedures that would have formerly been covered from an injury, along with the duration that benefits last. In addition, while businesses have argued that reforms are needed because workers’ compensation costs are too high, the data shows that premiums have dropped to lower levels than at any point since the early 1990s.

Yet of course somebody still has to pay for those injuries: and it’s increasingly taxpayers.

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Emery Reddy