Adequacy of Workers’ Compensation Income Benefits in Michigan

By Bogdan Savych, H. Allan Hunt

June 8, 2017 Related Topics: Indemnity Benefits

Adequacy of income benefits is one of the long-standing concerns about the performance of workers’ compensation systems. However, we know little about whether income benefits (also called wage-loss or indemnity benefits) provide adequate financial support for injured workers. This study highlights a dimension of worker outcomes that may be useful for policymakers and stakeholders—measures of adequacy of income benefits that workers receive after an injury. 

The study addresses the following questions:

  1. 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?
  2. Does the adequacy measure differ by subgroups with different duration of disability?
  3. 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.

This study focuses on the adequacy of income benefits for injuries in 2004. For every worker in the analysis, the authors directly observed postinjury earnings through the end of 2008 (an average of 4.5 years after the injury). Although the data shed light on experience for injuries that happened more than a decade ago, this information is still valuable since we rarely have an opportunity to examine postinjury earnings or to relate benefit adequacy to postinjury employment patterns. Moreover, this is the first benefit adequacy study of a wage-loss system.

Adequacy of Workers’ Compensation Income Benefits in Michigan. Bogdan Savych and H. Allan Hunt. June 2017. WC-17-20.

Copyright: WCRI

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Research Questions:

  1. 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?
  2. Does the adequacy measure differ by subgroups with different duration of disability?
  3. 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. 

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