Workers' compensation in the United States: high costs, low benefits

Studies suggest that income replacement is low for many workers with serious occupational injuries and illnesses. This review discusses three areas that hold promise for raising benefits to workers while reducing workers' compensation costs to employers: improving safety, containing medical costs, and reducing litigation. In theory, workers' compensation increases the costs to employers of injuries and so provides incentives to improve safety. Yet, taken as a whole, research does not provide convincing evidence that workers' compensation reduces injury rates. Moreover, unlike safety and health regulation, workers' compensation focuses the attention of employers on individual workers. High costs may lead employers to discourage claims and litigate when claims are filed. Controlling medical costs can reduce workers' compensation costs. Most studies, however, have focused on costs and have not addressed the effectiveness of medical care or patient satisfaction. Research also has shown that workers' compensation systems can reduce the need for litigation. Without litigation, benefits can be delivered more quickly and at lower costs.

Shifting the Burden of HIV/AIDS

As the economic burden of HIV/AIDS increases in sub-Saharan Africa, the allocation of the burden among levels and sectors of societies is changing. The private sector has greater scope than government, households, or NGOs to avoid the economic burden of AIDS, and a systematic shifting of the burden away from the private sector is underway. Common practices that shift the AIDS burden from businesses to households and government include pre-employment screening, reduced employee benefits, restructured employment contracts, outsourcing of less skilled jobs, selective retrenchments, and changes in production technologies. In South Africa, more than two thirds of large employers have reduced health care benefits or required larger contributions by employees. Most firms have replaced defined benefit retirement funds, which expose the firm to large annual costs but provide long-term support for families, with defined contribution funds, which eliminate firm risk but provide little to families of younger workers who die of AIDS. Contracting out of previously permanent jobs also shields firms from costs while leaving households and government to care for affected workers and their families. Many of these changes are responses to globalization and would have occurred in the absence of AIDS, but they are devastating for employees with HIV/AIDS. This paper argues that the shifting of the economic burden of AIDS is a predictable response by business to which a thoughtful public policy response is needed. Countries should make explicit decisions about each sector’s responsibilities if a socially desirable allocation is to be achieved.