Illusionary Safety: Are you just playing a role?

A theatrical production only works as entertainment to the extent of the audience’s willingness to suspend its skepticism, ignore reality and buy into the illusion.   Despite the drama and theatrics sometimes present, the workplace is not a stage and buying in to illusionary safety can be harmful or even deadly. 

“I never believed it would happen to me.”  Claim managers, medical professionals, and paramedics hear this repeatedly; many of us will even admit privately to saying the same thing. Most workers know the hazards present in their workplace but many underestimates their own risk and over-estimate their immunity from harm.  This dissonance between objective risk and individual perception of personal risk is often resolved in favour of adopting a sense of invincibility, the idea that some imaginary third wall protects the individual from even apparent risks in the work underway around them.  Many have been injured or died by accepting the illusion of safety over the reality of risk. 

Workplace injuries shatter the illusion of safety.  In workplaces where a life-altering injury occurs, co-workers often report an increase in the belief that “it can happen to me”; immediately following a workplace fatality or serious injury, everyone in the workplace is more alert to the potential of harm.  Workers and supervisors are alive to the reality of risk and believe in that reality.  This heightened vigilance, however, often fades with time.  New personnel, changed work procedures and the passage of time reset the stage, allowing workplace participants to slip back into the illusory mindset.  Objective observation of active violations of safe work procedures, for example, might be called out in the months following a serious event but selectively or even willingly overlooked as time passes.

Costumes and stagecraft distract from reality and contribute to the illusion in motion pictures and theatrical productions.  Context matters; uniforms and safety gear in a workplace are there to support safety not an illusion.  There is nothing inherently safe or protective about a strip of reflective cloth, but safety vests are more than costuming.  They are part of a system of safety, controlling hazards and minimizing risks.

Personal protective equipment (PPE)and other safety gear are not props.  Wearing safety goggles on your head and hearing protection around your neck are actions more akin to theatrical costuming than workplace health and safety.  A roofer wearing a fall arrest harness but failing to attach it or a deli worker wearing latex gloves but texting between serving customers— are examples of acting, not safety.  A caregiver gliding hands under cool water with little or no cleanser is acting—telling a story through actions that mimic reality but do nothing to ameliorate risk.  If you skip the hand washing and PPE when no one is around, you are deluding yourself and may still be putting others at risk. 

The first rule of improv is to say “yes ; work is not improvisational theatre.  If you don’t know how to do a task, lack training on equipment, or are unsure about risks, you have a right and responsibility to say “no.”  If you don’t have the right tool or lack the appropriate PPE, don’t improvise; every improvisation introduces new and potentially unanticipated risks.  The health and safety of yourself or others may be compromised by improvising.  A handkerchief is not a substitute for a respirator.

Safe work procedures may seem like a script or stage instructions but they are more than that.  They are specifically designed to control hazards, not entertain or engage audiences.  It is not enough to put on a safety “act”; there is a real difference between acting and being safe on the job.   That’s even true when acting is the job.  After all, actors and stunt artists are workers, too. Theatrical effects may create the illusion of danger and mayhem but are achieved by strict adherence to safety; engineering controls, safe working procedures and even choreography are essential to safety in modern stagecraft.

Safety is not stage magic:  an illusion with the appearance of truth (apologies to Tennessee Williams).  If you buy into illusionary safety, you are choosing to ignore the inherent risk reality of your workplace.  Putting on a safety act and reciting platitudes about safety hide the hard reality of hazards in the pleasant guise of illusionary safety. 

Engaging in illusionary safety is not just deluding yourself; it forces co-workers and other persons in the workplace into supporting roles or an unwitting audience in your production. Work is not performance art or street acting.  The safety of others depends on you.  Illusionary safety puts others at risk.

Don’t just “play the part” of a safety professional. Be one.  

Does everybody have a side gig? And what does that mean for Workers’ Comp and OH&S?

“I can’t do it, Matt.  I am boarding a flight to Seattle.  I have a DJ gig Saturday night so there is no way I can be back on site this weekend.”

You can’t help but overhear cellphone conversations while waiting in a crowded airport boarding gate lounge.  The man next to me at the Oakland airport was juggling the demands of his primary job and his “side gig” (or “side hustle”).  As he explained to his supervisor, this weekend job was paying him big money, so he could not just walk away from it and come to work Sunday to finish the welding job at the client’s workplace. 

Multiple-job holding, gigs and side gigs

This worker was not alone.  The firefighter across the aisle was telling his mate about his off-shift work as an electrician.  The government policy adviser next to me was marking term papers from the class he teaches on-line.  

On a recent cab trip to the airport, my driver explained his other jobs.  He helps connect foreign students with employers during the days he is not driving and travels abroad three or four times a year to help recruit students, arrange for their applications and visas.  He took two calls related to this work during our drive to the airport. 

A colleague at a recent Washington DC meeting hailed a driver for his trip to the airport.  He swears by the ride-hailing services he uses as he travels in the US and internationally.  Uber and Lyft have more than  4.4 million drivers between them—that’s more drivers than the population of half the states in the US. 

Gig jobs appear everywhere in my own community.  A local social media site hosted a post from one enterprising worker:  house and dog sitting services … as long as your home has wifi internet access so he or she could work on-line.  For online workers, the possibility of being employed by several people at essentially the same time can be a reality.  My trek to Ikea confronted me with TaskRabbit as a resource, to have a “tasker” assemble my next purchase.  And a DoorDash “dasher”,  Skip the Dishes courier or Uber Eats driver is apparently ready to deliver our next food order to my front door. 

Gig jobs are not limited to driving or wielding a hex key.  Technology enabled platforms like Upwork, Freelancer, and Fiverr have expanded the market place for freelance services in categories from graphic design to jingle creation .  The listing opportunities are even referred to as “ggs” on some platforms. 

We used to think in terms of hiring the neighbour’s teenage as a babysitter, dogwalker or housekeeper but demographic change alone means the once ubiquitous supply of task-specific labour is now a scarce resource.  Task services like Care.com now broker those limited engagements for child care, special needs care, senior care, pet care, housekeeping and tutoring. Care.com’s Q4 2018 report states “total caregivers grew to 13.4 million at the end of the fourth quarter of 2018, an increase of 14% over the same period of 2017.”

One workers’ compensation CEO raised this issue during a recent project consultation.  She believed there were a growing number of gig workers—many of whom are multi-job holders; she worried about the risks this phenomenon imposed on workers and the consequences for workers’ comp and occupational health and safety.  

Shifts away from traditional employment models

Evidence of a fundamental change is occurring in the workplace is apparent beyond the OAK departure lounge.  Deloitte Insights noted the results of its  Global Human Capital Trends survey of 11,000 human resource and business leaders [Dimple Agarwal, Josh Bersin, Gaurav Lahiri, Jeff Schwartz, Erica Volini “The workforce ecosystem: Managing beyond the enterprise”, Deloitte Insights, March 28, 2018]:

• 50 percent of the year’s respondents reported a significant number of contractors in their workforces;
• 23 percent reported a significant number of freelancers, and
• 13 percent reported a significant number of gig workers.

The survey asked participants to forecast how their workforce composition would change by 2020 relative to the present (presumably 2017/18). 

“… 37 percent of this year’s survey respondents expected growth in the use of contractors, 33 percent in the use of freelancers, and 28 percent in the use of gig workers”.

Those contractors, freelancers and gig workers have different characteristics that traditional employees.  Their work is more contingent with a strong likelihood of having multiple employers either sequentially or even concurrently. 

Multi-job Holding

While survey data like the Deloitte Insights study and observations in airport holding rooms might suggest a growing issue,  hard data on the actual numbers of gig workers or those who are multi-job holding are hard to come by.  Part of this difficulty comes from definitions of key terms like multi-job holding.   

Defining multi-job holding alone is not as straightforward as you might think.   There are many possible patterns that may be classified as multi-job holding.  Most studies rely on self-reports of individuals, which makes sense; workers know they are working multiple jobs.  Employers generally are not aware if their employees have additional work arrangements.  Administrative data such as tax filings and even employment insurance (unemployment insurance) data typically do not look at the possible work arrangements, only the report of income or insurability of work in the qualifying period regardless of the number of employers.

While most workers in the economy have one employer and work full or part-time for one employer, there are three patterns of multi-job holding and workers may change patterns as personal, health, social or economic demands or opportunities dictate. 

The simplest and most common is a worker who has two or more continuing employee/employer relationships at the same time.  In this form of multi-job holding, there may be a primary job with one employer and a part-time job with another.  The clerk who works days in an office and tends bar in the evenings and weekends, for example. 

Another common pattern involves working for multiple employers consecutively.  This form of multi-job holding is common in some trades and among workers with precarious employment situations.  Commonality in title or occupation may or may not be present; most commonly, this pattern tends to be in the same industry. A framing carpenter who works for consecutive but often different employers would be one example;  a farm worker who is a ski instructor in the off season would be another. 

Is it a gig or continuing self-employment?

A growing number of workers have no primary job and instead rely on a series of “gigs” as independent contractors or under project-specific terms of employment with many different (but sometimes repeating) employers.  Although the term “gig” comes from the entertainment industry, computer programmers, graphic designers, and business consultants [and even conference speakers]  may well use the term to describe their work engagements. 

The key elements of gig employment were concisely stated in a recent presentation:

a “gig” refers to a job with no long‐term connection to a particular business.  Workers are employed on a particular task or for a defined time

[see Katharine Abraham, John C. Haltiwanger, Kristin Sandusky, and James R. Spletzer, “Measuring. the ‘Gig’ Economy,” U. of Maryland, October 2015; http://www.sole-jole.org/16375.pdf.]


Aside from the task or role and time specificity, this definition implies another distinguishing feature of gig employment from the gig workers’ perspective: gaps and overlaps in the employee/employer relationships (and often the lack of a primary, continuing employment arrangement).  Gigs can be in the same line of work or different ones, each with a unique employer … as well as varying risks and workers’ compensation coverage.

[Note, although I have used the term “employer”,  the term includes self-employment.  A farmer may work daily on the farm (self-employed in a primary, continuing form of self-employment) but work off-farm in one or more jobs for an employer.  A self-employed tradesperson may wok for multiple customers but the self-employment is the continuing employment.] 

The graphic in this post delineates these alternatives in their simplest forms.  In reality, some multi-job holders may have three or more distinct employer-employee relationships simultaneously. 

Why multi-job holding and gig employment exist

It is important to emphasize that multi-employment may be a necessity or a choice.  Workers may need multiple jobs to support themselves and their families, to put food on the table, pay the rent, or put the kids through college.  For others, gig work may be a function of the labour market, a consequence of episodic disability, or family demands.  There are some who may chose multi-job holding for other reasons including mental health or lifestyle.  

Multi-job holding can provide a variety of experiences, a way to develop new skills, or increase social contact.  Reasons other than financial can drive multi-job holding.  The architect or teacher with a passion for music may play in a band or teach out of a creative rather than financial need.  I’ve spoken to a number of gig workers who love the flexibility and variety multiple-job holding offers them.  For others, however, working multiple jobs is often a consequence of labour market factors (including the lack of available, continuing, full time employment opportunities) and financial realities (including the high cost of housing, food, transportation and childcare or education).   

From the employer perspective, contingent and casual labour is often needed to augment staffing during peak (often seasonal) demand.  As firms hone in on their core products and services, the cost of retaining talent or skills of those not so closely aligned with that core becomes debatable.  Does a school board need to have carpenters, flooring specialists or grounds keepers on staff?  Many did and some still do but others have contracted these services out.  Traditionally, those awarded contracts would seek out, screen, hire and supply labour for these tasks but platform-based services are disrupting that model, at least in larger centres where the density of potential gig workers is greater.  With a database of screened and skilled labour willing to take on task-specific and time-limited assignments, even subcontractors are using platform matching services to fill their own peak demands.

Gigs and gig “workers”[?]

There are no hard and fast definitions in available labour force survey data for gigs or gig workers and this leads to some confusion.  Our economy is built on the concept of capital and labour; capital engages labour most typically through employment.  Most employment is in the form of a continuing full or part-time relationship between the worker and the employer.  Traditionally, employers deal with peak need and project requirements through temporary, part time and other direct but “contingent” employment.

The employed labour force is mostly comprised of full and part-time workers engaged with a single employer.  These engagements are not typically called gigs.  Self-employed workers and contractors are also a traditional part of the labour force.  Independent plumbers, electricians and other trades may be self-employed but provide labour in the economy.  Most studies I’ve read differentiate continuing trades work from gig jobs but the distinction is not always well defined.

Most sources have solid definitions for full time work but may have less well-defined terms for other categories.  Consider these terms used to describe and categorize workers outside the traditional full and part-time roles:

• Contractor
• Freelancer
• Consultant
• Gig worker
• Crowd (and Cloud) labour

Each term carries connotations about skill, employment status, and work pattern but most would not be considered “employees” in the same way a full-time employee is understood to have an employment relationship with a specific employer.

The more traditional terms of “freelancer” and “consultant” may now be lumped in with the category of gig workers.  The terms associated with gig workers are not definitive of legal status under workers’ compensation law or other statute.  They may be considered self-employed contractors but may also be employed workers of a labour supplier, sub-contractor or consulting firm.  

A gig opportunity may be with a specific employer but the relationship may be harder to define; the employer engages a freelancer or a sub-contractor who may engage a gig worker.  An intermediary platform may match a task with an individual.  This arrangement is the one most closely associated with the current use of “gigs”.   In some cases, the gig worker is an employee of an intermediary firm.  The “labour contractor” model applies but the labourer or professional is engaged for a specific task or project and for a specific time:  the task-time-location parameters define the gig; the platform provides the gig worker (Dasher, Tasker, Uber Driver, etc.).

Multi-job holding:  Stable rate but of greater concern for women, youth, and service sector workers

The lack of universal definitions for gig and gig workers means that data on their numbers is far from precise.  Ask a musician about work.  They may call their profession “musician” or “entertainer”, and likely tell you about their performances.  Each venue/event may be referred to as a gig.  The are also likely to tell you about the other jobs they do to put food on the table.

The perception that gig employment is growing is not easily tested against existing data sources.  Given the characteristics of gig employment noted above, one indicator of the size and grown of gig employment would be in the statistics regarding multiple job holding. 

The most recent data appear to show current levels of multiple job holding are relatively low and stable.  Recent data posted by the US Bureau of Labor Statistics (BLS) uses data from the Current Population Survey [see table at https://www.bls.gov/cps/cpsaat36.htm ]  to show about 5% of all employed persons  age 16 and over are working multiple jobs.  The rate is higher for single, divorced/separated, and widowed women generally (above 6%). Women in the 20-24 age range report the highest level of multiple job holding (6.8% in 2017, 6.6% in 2018). 

The data in Canada are similar.  Using Statistics Canada December 2018 employment data and Table: 14-10-0044-01,  the rate of multiple job holding is about 5.7%.  Perhaps not surprisingly, the service sector accounts for 90% of workers holding multiple or concurrent jobs.  Western Canada has a much higher rate of multiple job holding at 7.5% for Saskatchewan and Manitoba and about 6.3% for British Columbia and Alberta. About 57% of multiple job holders in Canada are women. 

Australian data suggests an even greater degree of multiple job holding in their labour force.  According to the Australian Bureau of Statistics [ABS], approximately 15% of employed persons were multiple job holders—a level that has been consistent since 2011/12.  According to a recent ABS analysis, “The highest proportion of multiple job holders worked their highest earning concurrent job in the Health care and social assistance industry.” [ see ABS 6160.0 - Jobs in Australia, 2011-12 to 2015-16 issued 19 September 2018] It should be noted, however, that data for self-employed persons with other employment may not be fully reflected in their data. 

Multi-job holding:  Health and Safety Concerns?

There is not a lot of research into the health and safety impacts of multiple-job holding.  Some studies have noted positive mental health outcomes particularly in the absence of financial stress.  Other studies lower hours of sleep and higher injury rates among multiple-job holders.  [see Marucci-Wellman HR, Willetts JL, Lin T, Brennan MJ, Verma SK. Work in multiple jobs and the risk of injury in the US working population, Am J Public Health. 2014;104(1):134–142 ; Marucci-Wellman HR, Lombardi DA, Willetts,  Working multiple jobs over a day or a week: Short-term effects on sleep duration. JL Chronobiol Int. 2016; 33(6):630-49.]

A recent study of Dutch workers (age 45 and older) lead researchers to develop four themes to classify experiences with multi-job holding:

• work characteristics influence respondents’ experiences
• personal context affects how work characteristics influence experiences
• negative experiences with work characteristics often coincide with problems in personal context
• experiences with MJH can change as part of a dynamic process.

The study found three main subgroups of responses among multi job holders:  those for whom the positive consequences outweigh the negative, where the consequences are neither positive nor negative and those who experiences mainly negative health consequences including health impacts [ see  Bouwhuis, S., De Wind, A., De Kruif, A., Geuskens, G. A., Van der Beek, A. J., Bongers, P. M., & Boot, C. (2018). Experiences with multiple job holding: a qualitative study among Dutch older workers. BMC public health, 18(1), 1054].

The challenge for the prevention mandate may be one of awareness.  Multi-job holders may not be fully aware of their risks and their risks may be dependent on that is significantly unique to the individual.  Research on occupational health and safety and the impact of sleep patterns on health and alertness tend to focus on workers in single-job, not multi-job holders. 

Workers with multiple jobs may also face unknown risks in each new job site.  Research tells us that “newness” to a venue or task is a risk factor for work-related injury.  Newness of venue and often specific tasks epitomize many gig jobs; the particular workplace, tools, or agents (and the risks they pose) in the job site may be familiar to the regular workers but obscure to a gig worker.  Workers who are frequently changing job sites may also face different safety cultures with varying degrees of openness about hazards, risks, safe working procedures… and reporting safety concerns.  Where the jobs are precarious but recalls are important, workers may also be reticent to “rock the boat” for fear of losing a future (or continuing) opportunity. 

Multi-job holding and gig jobs:  Are they covered by workers’ compensation?

Traditional jobs and multi-job holding are typically covered by workers’ compensation, at least in principle and individually.  As I discussed in my post “Will workers’ compensation cover income lost from my second job?”[  https://workerscompperspectives.blogspot.com/2015/06/will-workers-compensation-cover-income.html   or https://wordpress.com/post/workerscompperspectives.wordpress.com/630 ],

multi-job holding workers are covered wages lost in the accident employment but losses in their second or other job may not be covered.  The gig economy complicates matters further.  Is a tasker, driver, or dasher an employee or a self-employed worker?  Who, exactly is the employer?  If the worker is considered and independent operator, do they have access to optional workers’ compensation coverage?   At what point does my hiring a childcare provider through an app make me the employer?  There are no consistent answers for either the workers providing these services or the consumers of them.

Alternative insurance arrangements may provide some coverage for drivers working for Uber or Lyft but those cannot offer the same protections as workers’ compensation provide.  Traditionally, workers hired by an employer have the guaranteed protections of workers’ compensation:  compensation for lost wages and permanent disability, medical costs, and rehabilitation services.  The employer has protections, too.  The workers’ compensation coverage protects the employer from suit in the case of work-related injury and limits the direct cost of rare, catastrophic events.   The exclusive remedy of workers’ compensation that protects employers and co-workers from tort may not extend to gig workers.   

A recent  CBC marketpace  episode [CBC, Marketplace Episode 46, November 16, 2018] reported on issues in the food delivery sector.  The episode web page posts accompanying documents with these specific responses from Uber Eats and Skip the Dishes regarding workers’ compensation coverage:

Skip the Dishes:
In Canada, each province has its own unique worker compensation framework. We are currently registered with workers' compensation boards in Manitoba, British Columbia, Saskatchewan and Alberta, and continue to engage with these boards while maintaining the flexibility, benefit, and independence our couriers enjoy thanks to being their own bosses.

Uber Eats:
Uber Canada’s office and customer-support staff is registered in provinces where that type of work requires registration. That registration is not specific to Uber Eats. Delivery partners are independent contractors and this type of work does not require registration by Uber Canada.

More questions than answers

Official data suggest that multi-job holding is lower now than in the past and relatively stable;  anecdotal commentary and observation particularly regarding gig jobs appear to contradict the official data.  It may be that the same number of workers holding are holding more jobs or that individual gigs are being grouped and considered as one job.   It may be that the reported data don’t capture the nuance of workplace realities.  It is possible, for example, that a worker working sequentially for 5 employers in the year and one who works two full-time jobs and three part-time jobs are counted the same way in some surveys and differently in others. 

Insurance including workers’ compensation coverage is complex and most people can’t imagine all the possible hazards, risks and potential loss.  No worker goes to work contemplating being injured that day but injuries occur; gig workers or multi-job holders may find they do not have the coverage they need.  If the gig is covered by workers’ compensation, there is no guarantee earnings lost from other jobs will be covered and compensated and vice versa. I doubt most gig workers and multi-job holders are aware of these potential gaps.   

Consumers are also in a bind.  In some cases, gig workers are employees of a service; in others, they are independent operators--- and independent operators may or may not be covered by workers’ compensation… and that changes the liability profile the consumer faces.  Consumers cannot be expected to get a Clearance Letter or Certificate of Insurance for each gig service they engage. 

If the projections are accurate and the trend towards more contract work, freelance, and gig employment continues, employers will face an increasingly complex workers’ compensation and occupational safety environment.  When everyone who worked for an employer was covered by the same workers’ compensation policy and occupational safety and health rules, managing risk and benefits may not have been simple, but it was manageable.  In a world with shifting employment patterns, multi-job holding and gig employment, managing risk and benefits is going to get even more complex. 

It is clear that the labour market is changing and that research into the changes is lagging.  While gig employment is still a minor segment of labour spectrum, it is likely to grow.  Existing definitions and data may not adequately describe work and quantify the risks or costs to workers, employer, consumers and society in general. 

Technology enables the expansion of the gig economy.  The disruption of traditional labour market dynamics means traditional definitions and methods may not adequately address this changing reality.  For occupational safety and health regulators, these changes alter workplace risks for traditional workers, gig workers and other persons in the workplace.  For workers’ compensation insurers, gig employment may be increasing wage compensation liability for insured employers.  For legislators and policy makers, there are fundamental questions about who should be covered and how much of the cost of work-related injuries should be contained by workers’ compensation or externalized to others, including tax payers.    

There are no simple ways to address these issues.  Research can help define our terms and develop methods to analyze data or more accurately describe and categorize work.  Traditional administrative and operational data may mask the changes in the workplace leading to inaction or missed opportunities to protect workers from injury. 

Is workers’ compensation spending on healthcare significant?...Would a "single-payer" system make a difference?

I’ve received a lot of questions recently on workers’ compensation healthcare spending in Canada, the US and other countries.  These questions appear have arisen as several US states and political analysts have proposed consideration of “single payer” healthcare systems for their jurisdictions. 

Questions include:

• Is healthcare spending similar across nations? 
• Is the workers’ compensation part of that spending similar across nations? 
• Does it matter to workers’ compensation if there is a single payer system in place?   

At the California state Department of Workers’ Compensation (DWC) Educational Conference, my presentation highlighted workers’ compensation healthcare spending.  Time and format restricted the depth of that presentation.  Hopefully the following background will answer in greater depth some the many questions on this topic and help policy makers better understand the scope and context for their deliberations.

Healthcare spending is a big part of the economy

National spending on healthcare is difficult to compare across economies but may be expressed relative to Gross Domestic Product (GDP) or as an average cost per person (see https://www.cihi.ca/en/how-does-canadas-health-spending-compare-internationally

for comparisons based on 2015 data).  

The Organization for Economic Cooperation and Development (OECD) estimates average healthcare spending at about 9% of GDP with the US the top spender at about 17%; Canada, Australia and New Zealand are all slightly above the OECD average with national healthcare expenditures between 9 and 11% of GDP.

Healthcare spending comes from two general sources:  public funds and private sources.  Private funding includes out-of-pocket healthcare spending by individuals on medical supplies and services, co-pays or deductibles.  Spending by your privately-purchased extended health or dental plan is also considered private.  Public spending refers to spending from governments and public agencies.  The healthcare of military vets, grants for medical research and public medical insurance typically fall into the public spending category.  Workers’ compensation spending on healthcare may be in either category or both depending on the jurisdiction.  A state fund or provincial workers’ compensation board would have its healthcare spending grouped in the public category (often under the category of “social insurance” healthcare spending) while healthcare spending by private workers’ compensation insurers would generally be reflected in the private category. 

One might expect more spending will result in better health outcomes for the population.  There are many metrics on health outcome:  life expectancy, child mortality, disability-adjusted years of life, etc.  Many of these show some correlation with national health spending but there are exceptions.  Spending more does not always result in better health outcomes.  This chart compares life expectancy at birth and national healthcare spending [US in blue, Canada in Orange and Australia in white compared with all other OECD countries].

What portion of National Healthcare Expenditures are related to Workers’ Compensation?

Regardless of the workers’ compensation insurance arrangement (private insurer, exclusive public state or provincial workers’ compensation board) the healthcare expenditures by workers’ compensation systems are relatively small compared to the total national spending on healthcare.  Using data from a number of sources, workers’ compensation spending on healthcare accounts for approximately 1% to 2% of total national healthcare spending in the US, Canada and Australia.  [See figure at top of this post.]  The ranges for US and Canadian estimates are primarily related to the apportionment of administration costs.

In jurisdictions where hard currency amounts are actually expended by workers’ compensation systems, tracking and summation by reporting authorities is complex but relatively transparent.  Not all workers’ compensation systems (or other mandated employer liability arrangements covering occupational injury and disease) in the world cover medical costs; instead, healthcare spending arising from work-related injury and disease may be paid by the individual, included in mandated public or private health insurance coverage, or covered by a universal health plan.   

Where there is no hard currency audit trail for work-related healthcare spending, jurisdictions have to estimate the proportion of healthcare spending for work-related injuries and disease by other means.  The estimate of total healthcare spending related to work injury and disease in different jurisdictions will depend on what you include or exclude from the calculation but should be approximately equivalent to workers’ compensation spending on healthcare reported in jurisdictions where that model applies (and most workers are covered).

In the UK, the National Health Service (NHS) provides universal healthcare coverage for all injuries including work-related injuries, illness and disease.  The Health and Safety Executive (HSE) in the UK attributes the following health spending amounts [based on self-report]  to work-related injury, illness and disease:

• Individual: 
• Out of pocket health and rehabilitation expenses (including prescription charges, travel expenses, home expenses and funeral expenses      £ 83 Million
• Proportion of individual private health insurance premiums attributable to work related illness/injury  £ 21 Million
• Employer:  Proportion of corporate private health insurance premiums attributable to work related illness/injury  £ 97 Million
• Government/Taxpayer:  NHS treatment and rehabilitation costs (short and long term) £738 Million 

[from Costs to Britain of workplace fatalities and self-reported injuries and ill health, 2016/17,  Annex 2: Detailed breakdown of costs by cost bearer in 2016/17 (2016 prices), [Health and Rehabilitation category] Published 31 October 2018.
http://www.hse.gov.uk/statistics/pdf/cost-to-britain.pdf ]

Total current healthcare expenditure for the UK in 2016 was £191.7 billion, so these amounts represent about 0.5%-- a little less than the proportion estimated above for Canada, the US and Australia.  The difference is likely related to the set of spending amounts included as work-related. 

How significant is the healthcare expenditure component of workers’ compensation costs?

It may be tempting to dismiss workers’ compensation healthcare spending as a rounding error in terms of the national healthcare spending.  In my view, this would be a mistake.  Those of us who study or work in workers’ compensation systems recognize the cost of healthcare for injured workers as a big part of the total cost of workers’ compensation claims.  

Healthcare or medical aid spending accounts for more than half the current year claims expenditures by workers’ compensation insurers in the US.  In some states, the proportion is even greater.  In Canada, the data suggest a lower proportion, from about a quarter to a third of current year benefit expenditures paid in the year for claims from all years (for most jurisdictions).  It should be noted, however, that Canadian workers’ compensation benefits tend to be greater than those provided in the US (typically 85-90% of Net or spendable average earnings vs. the typical 66 2/3rds % of gross, generally higher maximum insurable limits, cost-of-living adjustments, etc. ); Canadian healthcare costs (including for many hospital services and prescriptions) also tend to be lower cost than those in the US thus making the healthcare component of current benefits paid appear somewhat lower.   

Why is this important?

Many jurisdictions are looking at their healthcare expenditures.  Proposals in the US include reforms from single-payer systems, 24-hour coverage, and other arrangements.  Proponents of one position or another may draw on Canada, the UK, Australia, or other national system as examples of what to do or not to do in any reform.  While there is no question that comparisons can highlight important differences and may even suggest opportunities, there are challenges in understanding other systems and the context in which they arise. 

One key point to remember is the relationship between claim cost and premium for workers’ compensation insurance. Under the insurance model used in the US, Canada and Australia, workers’ compensation premiums are designed to reflect indemnity payments for lost wages, other benefits (such as rehabilitation), and the costs of medical care that may be needed for a lifetime.  This structure is based on the premise that the industry (or enterprise) that gives rise to a work-related injury or disease ought to cover the associated diagnostic, treatment and medical/rehabilitation costs. Self-insurance provisions seek to confine costs to the insured entity and experience modification to premiums (x-mod, experience rated assessment, etc.) are intended to distribute costs more directly to the entity giving rise to them.  The workers’ compensation insurance cost (including the medical cost) reflected in the premium forms part of the incentive for increased prevention and improved return-to-work outcomes.  Failure to confine and fund the medical cost to the workers’ compensation system by definition will externalize those costs to someone else (often the tax payer or premium payers for other health insurance programs, the worker, worker’s family or community, other employers, or other employees of group insurance plans). 

Is the healthcare spending by workers’ compensation insurers handled similarly in the US, Australia, and Canada,?

A worker gets injured, goes to the doctor or hospital and gets treatment.  In the US, Canada and Australia, if the injury is work-related, payment for the fee for service by the attending physician or hospital service will usually be made by the workers’ compensation insurer, typically as a direct bill by the provider to the insurer. Identifying that insurer can be complicated by the number of factors.  There are often several potential insurers in most states and the responsible insurer depends on which policy was in force on the date of the injury (not necessarily the date of treatment). 

In states with exclusive state funds or provincial workers’ compensation insurers, the responsible insurer is obvious and clear.  There is one insurer, on question of policy year or other coverage.  In jurisdictions where the definition of worker is independent of the coverage status of the employer, the worker’s medical expenses will be paid by the insurer even if the employer was uninsured by omission or fraud. 

The situation may be more complicated in states with employer “deductibles” or other arrangements.  In the Australian state of Victoria, workers’ compensation is payable but only after the employer has paid for the first 10 days of incapacity and $707 (2019, indexed yearly) of medical costs.  [see,  http://www1.worksafe.vic.gov.au/vwa/claimsmanual/Content/4EmployerObligations/2%204%201%20Employers%20liability.htm ].

Many people assume Canada, with universal health insurance has one big insurance plan that covers everyone for every health concern.  That assumption contains many misconceptions.  Saskatchewan adopted the first “Medicare” plan under then premier, “Tommy” Douglas [trivia: Kiefer Sutherland’s grandfather].  A federal Royal Commission on Health Services in Canada under Chief Justice, Emmett Hall, recommended Canada adopted universal healthcare in the mid-1960s but universal does not mean one plan.  Every province and territory has its own medical services plan—a single payer healthcare insurance plan in each province or territory that covers all necessary insured health services… except workers’ compensation for reasons noted below. 

Why are workers’ compensation medical payments not covered by provincial health plans?

Canada does not have a national, single payer healthcare plan; each province and territory does. The background is rooted in the constitution and in the evolution of healthcare in Canada.  The distribution of powers in the Canada Constitution Act, 1867, defines a relatively narrow set of federal powers [section 91] and gives provinces law-making power [sections 92, 92A) over a broader area including “hospitals”, “property and civil rights”,  and “generally all matters of merely local or private nature in the province”, (making workers’ compensation, occupational safety and health regulation healthcare, labour law clearly in the provincial domain for matters not specifically in the federal powers). [Note:  The Canadian federal government has occupational safety and health authority over industry under its constitutional powers (including inter-provincial transportation, communications, for example, as well as for its own government services and military).  It also has authority over workers' compensation for its own employees but contracts with the provincial workers' compensation boards to administer that for them.  See the Government Employees Compensation Act].  

The federal government has greater taxation authority under the constitution so it had the wherewithal to partially fund provincial healthcare system, if the provinces agreed to develop them in a specific way.  Under what is now known as the Canada Health Act, [CHA] the provinces agreed to set up health plans that adhered to five principles:

(a) public administration [single payer, not for profit, public authority];
(b) comprehensiveness [all necessary health services];
(c) universality [everyone entitled to same level of care];
(d) portability [coverage maintained even if in another province]; and
(e) accessibility [reasonable access to care and reasonable compensation to hospitals and providers for services].

Both the original Saskatchewan medical insurance plan and Hall’s recommended legislation excluded workers’ compensation.  The current CHA defines “insured health service” as follows:

insured health services means hospital services, physician services and surgical-dental services provided to insured persons, but does not include any health services that a person is entitled to and eligible for under any other Act of Parliament or under any Act of the legislature of a province that relates to workers’ or workmen’s compensation; [emphasis and underlining added]

The reasoning was clear:  workers were already insured for work injuries. 

Under the CHA and provincial medical services plans, extra billing or co-pays are not permitted.  In most cases, how a medical service is paid and who pays it happens behind the scenes with the physician or hospital billing the single payer provincial health insurance plan or workers’ compensation (sometimes using the same electronic platform).  Note that there is strong similarity of what is covered and not covered among provincial medial services plans but there are differences.

Healthcare spending is only one dimension

Work-related injury, illness and disease has a huge cost.  The human cost is not reflected in the healthcare or compensation dollars expended by workers’ compensation systems. 

It is clear that healthcare expenditures are a significant, growing and even predominant portion of workers’ compensation costs.  At the same time, workers’ compensation costs barely register as a percentage or two of overall national healthcare spending in many developed countries, regardless of the healthcare funding model. 

This analysis does not include any discussion of offsets.  Healthcare is a big segment of the economy; it employs many people and generates significant economic activity.  Workers’ compensation administration, rehabilitation and many other services are part of that activity.  The human and financial cost of work-related injury can never be justified by these activities but few studies quantify them. 

Does universal, single-payer system have advantages for workers’ compensation?

The universal, single-payer healthcare systems in each Canadian jurisdiction offer certain economies of scale and scope to the populace.  With everyone covered, there is no incentive to make claims against workers’ compensation just to ensure an injury gets necessary medical care.  A population where everyone has health insurance (universal coverage) is generally healthier than a population without such coverage, based on many health metrics (like life expectancy, infant mortality, etc.); a healthier population means fewer work-related injuries that do occur will carry with them to their workers’ compensation claims additional healthcare burdens.   Single-payer systems (that include or exclude workers’ compensation) offer efficiencies that lower costs, reduce duplication and provide rich data for further improvements to population health.   As in the Canadian example, the single-payer system can exclude workers’ compensation yet provide lower cost, higher efficiency benefits to the workers’ compensation system (shared systems, data, fee schedules, etc.).

Work-related injuries are almost entirely preventable.  In the ideal world, their contribution to national healthcare spending should be vanishingly small.  The world, however, is far from ideal.  Regardless of workers’ compensation model, the cost of work-related injury, illness and disease is significant.  Under private, competitive models and exclusive state fund or provincial workers’ compensation, those significant healthcare expenditures are a big part of the premium cost and provide further incentive toward prevention.  Keeping the healthcare cost of work-related injury, illness and disease a direct part of the workers’ compensation premium may hasten progress toward that ideal world.

Safe or Unsafe: a binary choice?

Commuting between two worksites,  I  crested an overpass, entered a construction "cone zone",  and noticed the caution signs.   Signs like these are intended for the safety of drivers, cyclists, pedestrians and workers in the construction zone.  One might assume that there is a simple choice to make:  Signs or No Signs-- Safe or Unsafe. Safety, however, is rarely a binary choice. 

In the first iteration [1] the signs were placed in my bike lane.  This placement made them highly visible, narrowed the available road surface to vehicles and clearly warned of the hazards ahead.  What could be safer than that?

For cyclists (and the occasional pedestrian), their lane was blocked by these signs, forcing them to ride in the vehicle lane.  Worse yet, any cyclist who drove in the bike lane between the signs would become invisible to drivers coming from behind when the signs were deployed facing oncoming traffic. 

The next morning, on the same stretch of road, the crew was not working and the signs were turned sideways, parallel to the traffic but still in the cycle lane [2].  The result was to make the signs essentially invisible to drivers.  As the day progressed, high winds (or drivers) caused the warning stations to be knocked down and blown to the road side further decreasing the visibility of these safety signs.  Cyclists, traveling at lower speeds than car traffic, would see the grey stands in time to avoid hitting them but still be forced to share the vehicle traffic lane.   

The next time I passed this way (this time as a passenger in a car), I noticed the signs had been relocated, clamped to the concrete traffic barriers adjacent to the road edge [3].  This arrangement provided similar safety warnings for vehicular traffic but left the cycle lane relatively free of obstruction. 

Acting in the name of safety

Clearly, warning signs are intended to increase safety but exactly how they are deployed can have an impact on safety itself.   It is not a question of Safe or Unsafe; rather, the choices we make in the name of safety have relative impacts on overall safety. 

Acting in the name of safety simply to comply with a rule, standard, or guideline does not make a worksite safe.  As with the sign example, doing something in the name of safety is not an end in itself.  Slapping the dust from your hands and ticking off the “safety-signs in place” item on your general checklist misses the point.  Perfunctory compliance with a safety standard (regulation, law) may provide a false sense of safety and actually increase the risk of injury.

As with the sign case, acting in the name of safety may have unintended consequences.  The initial method of deploying the safety signage for motor vehicle safety had unintended consequences for pedestrians and cyclists, increasing their risk of injury.  The engineered safety measure of separating cyclists and pedestrians from motor traffic was clearly defeated by the placement of warning signs. 

Safety:  A dynamic, multi-dimensional construct

While some actions and omissions are clearly unsafe, there are almost always more options to improve safety.  Actions taken in the name of safety are taken in a multi-dimensional context. Mindful safety implementation is preferable to blind compliance.  Rather than thinking Safe/Unsafe or even considering a continuum (with points like Unsafe/Safer/Safest), think in broader terms and be willing to consider alternatives.  It is more work but that keeps safety top of mind rather than letting it fade into the background of the worksite. 

Even with safety signs or other safety measures in place, hazards are still present.  Safety measures typically address known and likely hazards to reduce the risk of those hazards harming workers or other persons in the workplace.  Workplaces, however, are not static.  The activities of those present in the workplace, lighting, weather conditions, and many other factors continually alter hazards and risks even with safety measures in place.  The dynamic nature or risk means safety is rarely a “one and done” consideration.

Safety-mindedness

Next time you consider an action in the name of safety, be mindful about your options and choices.  Include multiple perspectives and be willing to change your implementation for options that improve safety overall.

Are Workers’ Compensation benefits protected against the rising cost of living?

The cost of living (almost always) goes up year over year.  If your earnings aren’t keeping pace, something has to give.  In the short run, you might be able to carpool more, eat out less, switch to generic products, and maybe repair your old car rather than buy that new SUV.  In the long run, if the cost of living continues to outpace your earnings, you might have to take on a second (or third) job, downsize your home, move to a lower cost city, or go back to school so you can pursue a career with higher wages.   Those are some of the options… if you are able to earn an income.   

Workers with permanent disabilities often don’t have those options.  The monthly workers’ compensation amount they receive may have sustained them initially but unless it is adjusted for the cost of living, permanently disabled workers will see the buying power of their workers’ compensation income decline with each passing year.  Over time, savings may be depleted, debts incurred, and their health and welfare diminished—furthering the burden of their original work-related injuries. 

To forestall this eventuality, the majority of North American workers’ compensation jurisdictions adjust periodic payments (sometimes called workers’ compensation pensions or permanent disability payments) to account for increases in the cost of living.  This policy, however, is far from universal among US workers’ compensation systems.  A recent WCRI/IAIABC survey of Workers’ Compensation Laws (2016) recorded 27 US states with no cost-of-living escalator for permanent total disability cases. 

Consumer Price Index:  A common reference with many versions and unique calculation characteristics

The most common approach used by North American workers’ compensation jurisdictions that do adjust their payments for increases in the cost of living is to mirror the increases to federal entitlement plans such as US Social Security (USSS) and Canada Pensions Plan (CPP and parallel Quebec Pension Plan, QPP).   These near universal social insurance plans for retirement and disability benefits for working citizens provide a convenient standard for workers’ compensation policy makers designing cost-of-living adjustments (often abbreviated COLA).   

Both USSS and CPP increase benefits annually based on changes the Consumer Price Index (CPI) for their respective countries.  The method of calculation and exactly which components of the CPI are used differ.  There are technical manuals on CPI calculations; however, for workers’ compensation policy makers there are a couple of general comments that may provide insight into the use of CPI as an adjustment factor.

First, CPI is not one universal thing.  The standard definition of CPI refers to the change over time in the cost of a selected (but arbitrary) “basket of goods” in a base year.  The simple concept is more complicated than it sounds; a lot of detail goes into selecting and weighting items for that “basket of goods”.  Most versions include goods and services such as transportation, education, recreation, communications, and medical care.  Other real expenses that are excluded from the “basket of goods” [in Canada, at last] are real estate and life insurance.  And exactly whose basket we are considering can make a big difference.  What a young, urban couple with two kids in school has in their typical basket probably differs from a rural farm family or retired manager might consider typical.   The definition of what is in that basket and what proportion or weight goes to each category are also subject to change over time.  Think about communications, for example; with internet services and mobile data becoming essential utilities, it makes sense that they be included and their weight increased. 

The second point to remember about CPI is that there are often multiple versions of the CPI even within one country.  Variations include geographic subsets [regions, states, provinces, cities], versions that include all or just core items, and even versions that designed to reflect cost of living impacts on specific populations. In the US, for example, two main indexes are often cited for specific populations:  urban consumers [CPI-U] and urban clerical and wage earners [CPI-W].  Note that CPI-U covers most people including the unemployed and retired whereas the CPI-W is intended to reflect the impact of price changes on those working at least 37 weeks per year.  Both exclude rural consumers.    There are other CPI series including CPI-E for elderly.  Each has its uses and merits (as well as limitations and drawbacks).  Each series will produce different results.

Finally, the monthly CPI change is measured against a base year.  The base year for some CPI series or specific line items may differ from others or be changed over the time series in question.  Specifying which CPI, components, geographic location, and base year may be important to interpreting what a particular CPI value means.  Policy makers should be aware of the potential for such changes when designing a COLA based on CPI.

The following table provides how the selected CPI can yield different results based on geography:

Note that increases in each CPI series vary.  Over time, the differential can become significant.

The following US BLS table illustrates CPI All Items data, not seasonally adjusted

The base period is 1982-1984 so each table entry indicates a value relative to that base. Note that the values monthly almost always increase.  Whether comparing month over month values in a  row,  year over year values for months (quarters, half years or other ranges) in a column, you are likely to find examples where the CPI value declines. 

Using the CPI to adjust social insurance payments may be a common approach but it is far from perfect.  It applies defensible average weights to a range of items to derive an adjustment that may fall short of actual individual need or experience.  The converse may also be true; individuals may actually use a different basket of goods and experience less of an impact than the CPI would suggest. 

The selection of a particular CPI series should be intentional and explicitly justified.  For example, if the data show that virtually all recipients of benefits reside in a particular region, then that may become the policy justification for selecting a regional CPI.

Despite the imperfections and caveats, changes in CPI provide a strong indicator of cost pressure experienced by consumers in the real economy.  From a public policy perspective, CPI provides a useful reference against which to assess how well a social insurance program like workers’ compensation addresses the reality of the (almost always) increasing costs of living. 

CPI and Social Insurance:  How US Social Security and Canada Pension use CPI

For US Social security, the following summarizes how CPI increases are applied to the amount sent to beneficiaries:

Social Security COLAs are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Department of Labor’s Bureau of Labor Statistics (BLS). The COLA equals the growth, if any, in the index from the highest third calendar quarter [July, August, September] average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. The COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect the benefits due for the preceding month.)

If there is no percentage increase in the CPI-W between the measuring periods, no COLA is payable. No COLA was payable in January 2010, January 2011, or in January 2016.

- Social Security: Cost-of-Living Adjustments, Congressional Research Service, Updated November 19, 2018.

Note the actual application of USSS COLA evaluates changes in the CPI-W for the most recent third quarter and the previous highest third quarter.

Canada Pension Plan uses CPI data supplied by Statistics Canada to adjust CPP amounts once a year in January; rather than a single quarter of data, the calculation takes into account all monthly increases from the past year compared to the increases from the equivalent period the year prior.   The following chart shows the calculation method (see Government of Canada,  Canada Pension Plan Amounts and the Consumer Price Index):

The CPP increase is the percentage change from one 12-month period (November to October) to the previous 12-month period (November to October).  To calculate the 2019 CPP rates increase, a formula based on the average national CPI for all items for November 2017 to October 2018 is divided by the average CPI for November 2016 to October 2017 yields a 2.68 percent increase effective January 2019. 

Beyond the importance of understanding USSS and CPP use of CPI to develop their respective COLA for their plans, any statute that relies on the USSS or CPP COLA automatically rely on their respective calculation methods.  Workers’ compensation policy makers, for example, need to examine if the underlying assumptions and calculations of these social insurance plans make sense for the population of disabled workers receiving monthly compensation payments.

Workers’ Compensation jurisdictions:  Examples of policy implementations of COLA

Where workers’ compensation cases receive COLA adjustments, policy makers have had to make choices about how payment values should be adjusted.  The following are examples of how some jurisdictions have implemented their COLAs.

The Rhode Island workers’ compensation statute embodies the key elements in a COLA statute reliant on CPI by defining which CPI will be used, what time period will be referenced, the category of cases eligible and when the benefit will be applied:

RI Gen L § 28-33-17 (2017)  (f)(1) Where any employee's incapacity is total and has extended beyond fifty-two (52) weeks, regardless of the date of injury, payments made to all totally incapacitated employees shall be increased as of May 10, 1991, and annually on the tenth of May after that as long as the employee remains totally incapacitated. The increase shall be by an amount equal to the total percentage increase in annual Consumer Price Index, United States City Average for Urban Wage Earners and Clerical Workers, as formulated and computed by the Bureau of Labor Statistics of the United States Department of Labor for the period of March 1 to February 28 each year.

Virginia’s COLA escalator is based on the all items CPI each October 1 but because of the way Social Security disability payments are handled, the impact may be lower than the full CPI. In Virginia, the combined weekly compensation rate and weekly Social Security disability benefit cannot exceed 80% of claimant’s established pre-injury average weekly wage. Consequently, the application of the COLA is not automatic; it is subject to individual application and decision-making annually. 

Ontario’s workers’ compensation system, WSIB, recently improved its cost of living formula to fully reflect the Canadian CPI increase.   In January 2019, people receiving WSIB benefits will receive a cost-of-living adjustment of 2.3 per cent beginning on January 1.  The COLA escalator is automatic but wage loss benefits are offset by disability benefits a worker receives from CPP and QPP at a rate of 50%.  This partial integration or offset is common in workers’ compensation and disability insurance, although the degree of integration (and which benefit is reduced) varies.

British Columbia workers’ compensation pension recipients see indexation of their disability awards based on the following formula outlined in the Workers Compensation Act:

25   (1)For the purposes of this section, the Board must, as of January 1 of each year,

(a)determine the percentage change in the consumer price index for Canada, for all items, for the 12 month period ending on October 31 of the previous year, as published by Statistics Canada, and

(b)subtract 1% from the percentage change determined under paragraph (a).

(2) The percentage resulting from calculations made under subsection (1) must not be greater than 4% or less than 0%.

In practical terms, CPI change of 2.444614% less 1% results in a 1.444614% increase for most compensation recipients effective January 1, 2019. 

From a policy planning perspective, it is important to consider the longer-term impact of reduction policies.  For a 40 year old injured worker with a permanent total disability, the cumulative impact of the “less 1%” obviously increases over time.  Assuming just 2% CPI each year, the 1% reduction means that the purchasing power of each $100 awarded in 2002 will have grown after 10 years to $110.46 far short of the $121.90 necessary to meet the full increase in cost of living.  The difference increases with every passing year.  After 20 applications in this example, the adjusted value will have increased to $122.02 while full CPI would have increased that original $100 to $148.59. 

The geographic qualification to the definition of the CPI is fairly common.  Alberta’s WCB uses the change in the Alberta Consumer Price Index (ACPI) for 12 months, ending September 30   and applies the result in January of the following year.  Until a recent policy change to full ACPI, the ACPI amount was reduced by 0.5%.

While the trend is towards applying a full CPI increase to adjust for the cost-of-living adjustment, limits are often set in legislation.  The Yukon Territory uses the percentage change in the CPI for the geographic location of its capital, Whitehorse, calculated by comparing the 12-month period ending October 31st of the previous year with one year earlier, capped at a maximum of 4% and a minimum of 0%.

Which CPI to use is often an important determinant of the actual cost-of-living increase in other jurisdictions as well.  In Massachusetts, the increase is based on the CPI increase for the Northeast urban region.  In Saskatchewan, it is the percentage change in CPI for Regina and Saskatoon for the 12 months ending on November 30 of the previous year that determines the increase to be applied.  

Prince Edward Island combines a restricted formula that yields less than full CPI, a CPI geographic reference and a cap such that  extended wage loss benefits will be adjusted on July 1 each year by an  amount equal to the lesser of: 80% of the percentage change in the CPI [less than full CPI restriction] for Charlottetown and Summerside for all items [geographic reference] for December of the previous year and December of one year earlier and 4% [cap]. (see WCA s. 49.1(1.1)) 

One challenge with geographic or regional CPI considerations is that it may well under-reflect costs associated with individuals who relocate.  One can imagine a totally disabled worker in a rural setting wanting to relocate to a more urban centre where medical and support services are more appropriate and available to his or her need.  The relevance of a COLA based on a CPI indicator from where the injury occurred may be lost. 

Florida has a unique cost-of-living adjustment method.  According to the Social Security Administration:

Florida Workers’ Compensation does not provide for a traditional cost of living increase. However, individuals that are permanently and totally disabled are potentially eligible for a supplemental yearly increase of 3 percent. The increase is only payable for individuals under age 62 that are not subject to offset due to receipt of Social Security benefits. When the individual attains age 62, if they are eligible for Social Security benefits they lose entitlement to the supplemental benefits if the date of injury is on or after July 1, 1990. For injuries prior to July 1, 1990, the supplemental payments continue.

Not all jurisdictions use a version of CPI to adjust compensation payments.   Washington State’s Department of Labor and Industries uses a different method to calculate the cost of living increase.  In that state, most workers injured on or before July 1, 2017 will see time-loss and pension benefit payments increase by 5 percent based on the change in the state's average wage.  That increase was effective July 1, 2018.

Some jurisdictions apply the indexation to very restricted categories.  For example, in Connecticut, only permanently and totally disabled workers or those who have been totally disabled for a period of 5 years or more are eligible for a cost of living adjustment to their compensation. 

Reference frames, Application dates, Caps and floors

You may have noticed the reference range for calculating and applying a COLA varies.  BC and the Yukon use the year ending October 31, Alberta uses September 30, and PEI uses December 31.  The date of application also varies by jurisdiction:  July 1 in Washington state, and May 10 for Rhode Island.  While a period of time between the COLA reference period and its application is reasonable, the rationale for a lengthy delay should be explained.  When calculations were done by hand, a lengthy lag time was justifiable.  If systems are designed with COLA in mind, their routine application should allow a short period between the reference period for calculation and actual application of the COLA.

Most of the policies outlined in this paper use full year CPI data as the basis for their COLA.  This tends to smooth out seasonal variations.  Transportation costs tend to peak in the summer, fresh vegetable costs are lower in the harvest season.  Some CPI series are smoothed or seasonally adjusted; use of seasonally adjusted data should be justified and specified in a policy relying on such data.

Regardless of the CPI or other standard measure used to adjust workers’ compensation payments, policy makers may include limitations on the extent to which the indexation may be applied.  As noted above, several provinces including BC and Alberta cap the possible increase to a maximum 4%; many policies contain a floor of zero percent to prevent a negative percentage being applied should the COLA formula generate such a result.  Although rare, zero results have occurred. 

Accounting for the cost of living

Workers’ compensation legislators and policy makers have long acknowledged that “protection against the value-eroding power of inflation is necessary” [Burton, John F. Jr. [Chairman], Report of the National Commission on State Workmen’s Compensation Laws, US Government July 1972 chapter 3 page 71] for at least some categories of recipients.  In protracted recoveries, permanent disabilities, and compensation for survivors and dependents, that erosion can be substantial. Consider a disabled worker injured in 2002 and permanently disabled; using the “All Items CPI”, that worker will have seen an increase of more than 40% in costs of goods and services in the US or about 32% in Canada.   In most jurisdictions in North America, this worker will have received some cost-of-living adjustments.  In many jurisdictions, however, workers’ compensation payments will not have kept pace with the full increase in the cost of living.

To the best of my knowledge, there is no detailed study of the cost-of-living-adjustment mechanisms in workers’ compensation.  Aside from the WCRI/IAIABC survey, there are no studies that reflect current or at least recent policies in a comparative way.  Few jurisdictions post historical tables of past COLA increases in a convenient way (although WorkSafeBC and Rhode Island data tables were readily available on line).  

The indexation of workers’ compensation payments particularly for permanent total disability cases adds a significant value to the incurred cost of an injury.  That cost is reflected in premium values.  Workers’ compensation analysis that fail to account for compensation parameters such as COLA provisions may mislead readers. Many existing comparative studies of workers’ compensation premiums and claim costs exclude detailed information and cost implications of “system features” such as compensation rate, maximum insurable earnings, and COLA provisions from their analysis. Policy makers need to understand the cost implications of system features in interpreting comparative results and designing improvements to (or the addition of) their cost-of-living provisions.

Failure to include protection against the rising cost of living under-value the human and financial loss of work-related injury, diminish the value and adequacy of compensation as the years go by, and often externalizing costs to family, community and taxpayers through additional welfare and health costs.  

Work-related injury and death have real human and financial costs.  Workers and their families bear their share of both.  Permanent disability, survivor and dependent compensation payments offset some of the financial costs. To be clear, adding or improving inflation protection or cost-of-living adjustments may increase premiums—costs to employers; failing to do so, however, is an intentional policy choice to place an increasing share of the cost to workers, families and taxpayers.  That policy choice should be acknowledged, explicitly stated and justified… or abandoned.