Tuesday, July 14, 2015
Are workers’ compensation policies keeping up with demographic changes?
Do you know anyone who holds two or more jobs? How about someone over the age of 65 working part or full-time? Are you seeing more older workers in the workforce? Is the demand on health services going to increase? What are the implications of large scale demographic shifts on our workers’ compensation systems, our communities and our families?
These are just a few of the questions I had a chance to explore in my recent keynote at the 2015 AASCIF Conference in San Francisco. The theme for the event, “Bridging the Future”, is an apt description of the role demographic change is playing in our lives. Take the shift towards older workers, those age 65 and better, continuing to work. I updated data from BLS with recent trends and projections to show that this segment of the population is growing and will continue to participate at substantial levels over the next decade.
We used to think those over the age of 65 might want to ease into retirement through part-time work. This sentiment was borne out in data through the mid-1990s when the proportion of part-time work dominated at about 56% of the employed population age 65+. Then something happened; full-time employment for this group began to rise peaking at about 57% in just before the Great Recession (Dec 2007 to June 2009). It was an open question as to whether the recession would reverse this trend. To answer the question, I extracted the most recent data from the Current Population Survey. In fact, the trend toward more full-time work has continued. Full-time employment now dominates the employed labour force of those over the age of 65 at about 60%.
Beneath the proportions, the data in both Canada and the US shows dramatic and rapid increases in the actual numbers of those over age 65 working full time. I recently extracted Canadian data from Statistics Canada’s Labour Force Survey. Although full-time employment numbers for those over age 65 have always exceeded part-time counts in Canada, since 2000 there has been a dramatic increase in this segment of the labour force. Now, full-time dominates at about 59% of the working population age 65+.
Underpinning these dramatic trends is a growing population of older citizens. In most developed countries, the population of older citizens is growing disproportionately to the overall population. A combination of falling birth rates, improved longevity, changing economic circumstances and increases in knowledge requirements in career preparation have made working longer possible and necessary for many people.
US Social Security offers a Disability Insurance component (SSDI). The demographic cohort known as “babyboomers” are aging through their years of high disability incidence and projected to deplete the SSDI trust by late 2016. Without action by lawmakers, automatic reductions in SSDI benefits will occur. Given that many workers’ compensation systems have SSDI offsets, it begs the question: What happens to workers’ compensation costs if SSDI is reduced (or eliminated)?
Then there is the demographic of “multiple job holders”. I wrote about this phenomenon in my previous post on concurrent employment. While this represents about 6% of jobholders in AASCIF states, certain occupations have a much higher prevalence (28% for firefighters, for example).
AASCIF states in general provide multiple jobholders with better wage protection than non-AASCIF states (many of which exclude concurrent employment from any wage-loss protection). But it raises the question: with the phenomenon of multiple job-holding firmly entrenched in our economy, is it justifiable to deny injured workers compensation for losses from secondary employment by invoking the exclusive remedy?
Another demographic worth examining is income based on educational attainment. An increasing proportion of occupations are knowledge-based and the acquisition of knowledge takes time and money. It is not surprising that income levels are often higher for those with advanced education, training and skill.
Note, however, that compensation rules (maximum insurable, maximum benefits payable, non-refundable waiting periods, and percentage of wage replacement) reduce the workers’ compensation payable well below the often targeted 66 2/3rds gross or 90% of net (“spendable”) earnings. The above chart shows median earnings; for earners at the 75th or 90th percentile, that replacement rate may well be less than 50% of spendable pre-injury earnings. [Current Population Survey as quoted by BLShttp://www.bls.gov/emp/ep_table_001.htm]
Demographic analysis raises other questions. Take, for example, the implications of a society that is changing disproportionately with respect to its age profile. If you were to take a detailed photograph of everyone in a community this year and five years from now, you may find more individuals. If you analysed the pictures and demographics of the individuals, say ages 0 to 19, you may find that all age categories have gotten larger. If this year is 1.00 and five years from now has grown to 1.05, the implication is that there has been a five percent increase population of individuals in that age category. If all categories grow proportionately, the roles (occupations, dependants, retirees) will likely be in the same proportions. But what if the age categories grow disproportionately? That’s what an index-approach showed in my analysis of several states.
The next 15 years show dramatic increases in the proportion of the population aged 65-84 and 85+ while the population of those 19 and under and 20 to 64 remain stable and proportionate to each other. This analysis reveals an important issue regarding “Demographic Age Dependency” and “Economic Dependency”. In the next 15 years, the population “demographically dependent” on the 20 to 64 portion of the population will increase to about 85 for every 100 in that age category. At current participation rates, that means there are more than 100 non-working citizens are now economically dependent on every 100 employed in the labour force. And that ratio will continue to grow.
The call to action here is not simply self-serving. Yes, I am an aging babyboomer and I want generations x, y and z to respect, honour, and provide for their aging predecessors. More than that, however, I want workers’ compensation systems to understand these changes and ensure their policies reflect the changed and changing reality of the workplace. Higher demographic and economic dependency ratios make the guarantee of adequate and equitable compensation for work-related injury increasingly important to more than just the injured worker. Legislative and policy restrictions that limit compensation to as little as half pre-injury earnings levels hurt workers and the people dependent on them… which is ultimately all of us.