Injured Workers’ Lost Income Adds Up to Thousands

On-the-job injuries, like layoffs, are life-altering events. A worker can lose tens of thousands of dollars in earnings over many years as a result, according to a new RAND study.

The researchers used data from California’s workers’ compensation system to investigate what happened to injured workers’ earnings over a 14-year period. They were interested in the people whose injuries were serious enough to prevent them from working for a significant amount of time.

These injured workers, who had either a temporary or permanent disability and received workers’ compensation, were compared with workers with minor injuries who didn’t miss any work or were out for fewer than four days.

After their injuries, the workers with significant lost time earned $920 less per quarter, on average, than they would have in the absence of the injuries. The reduction in earnings was driven mostly by people who stopped working after they were injured, including some who returned to work initially but were not able to maintain their employment over the longer term.

The drop in earnings due to long-term injuries persisted for years, adding up to more than $50,000 over the 14-year follow-up period in the study. “The estimated employment and earnings reductions are large and immediate,” researchers Michael Dworsky and David Powell said.

The researchers also found that the risk of workers leaving the labor force after an injury, whether or not it resulted in a disability, accelerated sharply after turning 55, though people with long-term injuries were at greater risk.

They also noted that, in some cases, workers who had remained employed after being injured probably decided to apply for Social Security disability benefits when they reached age 55 and a change in the program’s eligibility rules makes it easier to qualify. However, other factors not reflected in this study can’t be ruled out, such as pension rules that could encourage older workers to leave the labor force at 55.

Since workers remain at elevated risk of leaving the labor force even several years after an injury, the researchers suggested that this may justify providing them with “active labor market interventions” to promote rehabilitation and re-employment. The interventions could be in the form of job training and placement assistance, wage subsidies, or funding for employer accommodations.

To read this study by Michael Dworsky and David Powell, see “The Long-term Effects of Workplace Injury on Labor Market Outcomes: Evidence from California.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.