WCRI Prior Recession Report – The COVID-19 Economic Recovery

WCRI Prior Recession Report Shadows The COVID Economic Situation

WCRI Prior Recession Report and COVID comparison 

Public Use License – See prior graphic

Dr. Savych has published many reports on the post-return-to-work attitudes of injured employees. 

I received this email yesterday from WCRI. The report may be worth a look. WCRI also offers a free medical pricing report that will pop up when you go to their website. 

At the same time, these measures are expected to be of limited duration and the economy may rebound quickly after the restrictions are lifted. Longer-term unemployment may be limited due to the possible quick turnaround, though this observation is tempered by the possibility that the temporary closures will remain permanent for some businesses. So, the results of the WCRI study summarized below, while instructive, hopefully, will have limited applicability to the current situation.

Recession, Fear of Job Loss, and Return to Work – The study is located here. 

The study identifies two different channels of the impact of a recession on return to work of those injured at work:
• Direct effect: Workers seeking to return to work might find that job opportunities are scarcer and that return to work is delayed.
• Indirect effect: Workers may fear job loss if they do not return to work, so they may try to hasten that return to work.

The study used WCRI’s Worker Outcomes Surveys prior to the Great Recession to evaluate how variations in the local unemployment rate affect return to work of those injured at work through the two channels identified above. The workers in these surveys were out of work due to injury for more than 7 days, a group more likely to feel the impact of a recession on return to work. The study asked what would be the impact on longer-term unemployment of doubling the unemployment rate from 5 to 10 percent. Longer-term unemployment is defined as not returning to work within 2.5 years after injury.

The study showed:

• Direct effect: Doubling the unemployment rate increases the percentage of injured workers experiencing longer-term unemployment from 14.7 percent to 18.7 percent due to lack of available job opportunities.

• Indirect effect: At the same time, doubling the unemployment rate increased the percentage of workers fearing job loss when injured from 35.5 percent to 51.3 percent. This increased fear of job loss resulted in an increase in the percentage of injured workers avoiding long-term job loss of 1.6 percentage points. This offsets the direct effect of the unemployment rate increase.

The net effect of an increase in the unemployment rate from 5 to 10 percent is to increase longer-term unemployment from 14.7 percent to 17.1 percent, or 16 percent.

The study also considers other scenarios where the impact of a recession on the fear of job loss and resulting worker response is even greater than measured in the data (perhaps because the data were collected prior to the Great Recession). In these scenarios, the probability of longer-term unemployment increases to a lesser extent than the net effect described above.

Usefulness

The report may be useful to those who are trying to predict the impact of the current recession on return-to-work interventions and outcomes, as well as on workers’ compensation claims and costs—especially for income benefits. It may also be relevant for predicting the impact of an economic recovery. As the economy strengthens and the unemployment rate falls, there will be more job opportunities, less fear of job loss, and perhaps less aggressive efforts by injured workers to seek reemployment.

Key findings:

Workers who are afraid of being fired are less likely to become longer-term unemployed after an injury. These workers may be more aggressive in seeking return-to-work opportunities, making an extra effort to return to work earlier or to take steps to increase their chances that their job will exist after return to work. Injured workers in areas with unemployment rates that are rising or that are higher than normal for the area are more likely to fear losing their jobs. The greater the fear, the more likely it is that workers will more actively pursue returning to work, thus reducing the number of workers that experience longer-term unemployment.

Recession, Fear of Job Loss, and Return to Work. Richard A. Victor, Bogdan Savych. April 2010. WC-10-03.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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