Measuring Income Losses of Injured Workers: A Study of the Wisconsin System

By WCRI

November 1, 1998 Related Topics: Outcomes for Injured Workers

Public policy debates about benefit adequacy and equity require measures of both lost earnings and benefits received by injured workers. In this study we measure earnings losses and earnings replacement in Wisconsin. This helps us understand how the design of the Wisconsin system determines the distribution of benefits, and it may help policymakers decide if the current design adequately meets their system’s goals. It also gives some insights that may be relevant to other states, especially when viewed against the forthcoming results of the growing number of studies that are currently in progress.

The objectives of this study include:

  • To measure lost earnings of workers injured in Wisconsin
  • To quantify the effects of various worker and employer characteristics on losses
  • To determine the earnings replacement achieved by workers' compensation benefits

We also gained some new insights into the relationship between losses and benefits in the Wisconsin system. However, for statistical reasons, we can draw only limited inferences about policies that might improve the adequacy, equity, and return-to-work incentives of benefits provided by Wisconsin’s workers’ compensation system.

We examine the experience of 70,000 workers injured in 1989 and 1990, and their earnings histories from 1988 through 1994.

Key Findings

Workplace injuries often lead to substantial costs for workers and their employers. For men in Wisconsin who lost at least one week’s work during 1989 or 1990, lifetime after-tax lost earnings average $8,320. For women, losses average $9,835. These overall averages hide some important differences among groups of workers.

Overall, one quarter of injured workers in Wisconsin experience about three quarters of the losses. These are workers with a total temporary disability (TTD) duration longer than 16 weeks, PPD benefits, or compromise settlements.

Our research also measures the replacement of lost earnings by workers’ compensation income benefits. Overall, Wisconsin replaces 53 percent of after-tax lifetime losses of injured men and 36 percent of losses incurred by women. These averages conceal some striking differences among groups of workers categorized by their benefit status. Although a majority of injured workers are in groups that receive benefits that provide substantial replacement of their lost earnings, benefit payments for some groups replace a much small proportion of losses.

The report identifies the main factors that affect lost earnings and quantifies the size of each factor. Those factors are:

  • change of employer
  • employer size and change of employer
  • the workers’ preinjury employment continuity
  • age
  • back and carpal tunnel injuries
  • surgical treatment

Measuring the Income Losses of Injured Workers: A Study of the Wisconsin System. Leslie I. Boden and Monica Galizzi. November 1998. WCRI Technical Paper.

Copyright: WCRI

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