Workers’ Compensation and the Changing Age of the Workforce

By Te-Chun Liu

December 1, 2000 Related Topics: System Overview, Other

The number of jobs held by older workers will more than double between 1995 and 2020 as baby boomers – the 19-year generation born between 1945 and 1964 – near retirement. Because older workers injured on the job have higher costs per claim than younger workers, it is important to assess how this increase in the number of older workers will effect workers’ compensation systems.

This study analyzes the effects of the changing age distribution on workers’ compensation claim characteristics from 1970 to 2020 as the size, industry mix and age of the workforce changes in eight states (California, Connecticut, Florida, Georgia, Massachusetts, Minnesota, Pennsylvania and Texas).

According to the study, the growing number of older workers in the workforce occurring between 1995 and 2020 will have little effect on workers’ compensation costs. Total workers’ compensation costs will be .07 percent lower than they would have been if the age of the workforce had not changed. This conclusion is different from what many would expect.

Several factors are at work:

  • Older workers have only slightly higher average costs per claim than middle-aged workers. Because the preponderance of baby-boomers reached middle age by 1995, the increase in costs as this generation becomes "older workers" is not large.
  • Younger workers will outnumber older workers in the workforce. Although the baby boom generation is substantially larger than the generation it precedes, it is not much larger than the generation that follows. By 2010 this next generation surpasses the baby boomers in size, resulting in far greater numbers of younger workers than older workers. Even a doubling of the number of older workers in the workforce, then, translates into only a small percentage increase in the proportion of older workers to younger workers.
  • Older workers file fewer claims than younger workers, offsetting their somewhat higher claim costs.

Note: Change in costs and frequency of claims is from 1995 to the year listed and is expressed as a percentage of costs in list year compared to a forecast where the population did not age.

The study also finds the aging of the labor force has had a notable effect on costs – but it occurred largely from 1970 to 1995 as the baby-boomers moved from the lower cost "young worker" group to the higher cost "middle aged" group. This phenomenon was one contributing factor to the general escalation of workers’ compensation costs that were occurring in the 1980s and early 1990s.

Workers’ Compensation and the Changing Age of the Workforce. Douglas Tattrie, Glenn Gotz, Te-Chun Liu. December 2000. WC-00-6.

Copyright: WCRI

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