Work Comp Income Benefits Fall Short

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Adequacy of income benefits is one of the long-standing concerns about the performance of workers’ compensation systems. However, there is little known about whether income benefits (also called wage-loss or indemnity benefits) provide adequate financial support for injured workers.

According to a new study based on Michigan data, the total earnings and income benefits an average worker received within 10 years after an injury stack up to just 88 percent of what a worker would have earned if not injured.

The study — published by the Workers Compensation Research Institute (WCRI) — highlights a dimension of worker outcomes that may be useful for policymakers and stakeholders when measuring the adequacy of income benefits that workers receive after an injury.

The WCRI study asks:

After 10 years, the earnings and income benefits an average worker received were projected to be 88% of what a worker would have earned if not injured.

• How does the total income that workers receive after an injury from benefits and earnings compare with what workers could have earned without an injury?

• Does the adequacy measure differ by subgroups with different duration of disability?

• How many workers experience large declines in total income after an injury and how does this compare with what is observed for comparable workers without an injury.

The study, Adequacy of Workers’ Compensation Income Benefits in Michigan, found that:

• Within 10 years after an injury, the earnings and income benefits an average worker received were projected to be 88 percent of what a worker would have earned if not injured. However, these aggregate results hide important differences across different types of workers.

• Workers with one to 12 months of temporary disability benefits had total income that was projected to replace 91 to 95 percent of earnings had they not been injured. Workers with permanent partial disability and/or lump-sum payments had total income that was projected, within 10 years post-injury, to replace 69 percent of earnings had they not been injured.

Post-injury employment patterns may contribute to the estimates of adequacy presented above. WCRI is an independent, not-for-profit research organization in Cambridge, Mass.

Topics Profit Loss Workers' Compensation

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