For our inaugural post, we thought it important to start with a discussion on the fundamental concept behind the workers’ compensation system. Every so often people – industry and politicians in particular – lose sight of why we have a workers’ compensation system to begin with. Given the events in the Illinois legislature over the past year, it seems like a good time for a reminder.
The workers’ compensation system was developed well over a hundred years ago as a means to provide for the care and needs of injured workers. Our state and nation recognized that if such a system was not available, the financial burden of disabled workers would be shifted to society and taxpayers. This wasn’t speculation, it was an actual problem observed from the effects of the industrial revolution. During that time, industry was allowed to simply discard injured workers without compensation and leave the taxpayers to care for them years into the future. It was from this burden on society that the need for a workers’ compensation system became obvious.
The preeminent authority on workers compensation, Arthur Larson, described the basic features of the workers’ compensation system as being “a mechanism for providing cash-wage benefits and medical care to victims of work-connected injuries, and for placing the cost of these injuries ultimately on the consumer, through the medium of insurance, whose premiums are passed on in the cost of the product.” Larson, Arthur: “The Law of Workmen’s Compensation“, Ch. 1, §1.00; Matthew-Bender (1995). Just as the cost of material and labor to produce a product is passed on to the consumer, so should the medical expenses and replacement of wages lost by those injured producing the product. As with all products, the consumer is then allowed to balance their “need” for a product or service with the true cost of producing it.
It certainly should come as no surprise that the purpose behind the Workers’ Compensation Act is to compensate injured workers, but for what? What people tend to lose sight of is that compensation is paid to workers for their loss of earning power. It isn’t a gift. It isn’t a bonus. It is payment, and a partial one at that, to replace their lost earnings both now and in the future.
The concept that seems to baffle most people these days is that what may appear on its face to be an insignificant injury now can have a dramatic effect on a workers’ ability to earn a living years into the future. An injury today can prevent a worker from earning the same pay they were earning before they got hurt. It can also prevent them from advancing to a higher paying job and substantially shorten their work-life expectancy by hastening the point when they become unable to work at all.
Taking a short-sighted approach may be good for business profits in the short run, but disastrous to workers and the citizens of Illinois down the road. Allowing industry to short-change injured workers will boomerang back on taxpayers in the form of higher taxes to fund social services such as Public Aid, Medicaid, Social Security, and Medicare when these workers are unable to compete in the labor market and are forced into public benefit programs in numbers far greater than anticipated and years before expected.
Understandably, industry want to keep the cost to produce their products and provide services as low as possible. But the future costs associated with work injuries is a reality. Someone has to pay the cost. If employers and the insurance industry are allowed to short-change injured workers, it does nothing more than shift the future cost back to the taxpayers. Our forefathers recognized the unfairness of doing this many years ago. That is the very reason the compensation system was developed in the first place. Industry should pay the cost of injured workers now, not pass it on for the taxpayers. We fixed this problem over a hundred years ago. Do we want to make the same mistake again?