Sunday, July 26, 2020

Workers’ Compensation, Air-Bags, and the Great Reconfiguring

I recently saw a short piece on workers’ compensation. Essentially the piece contended that there will be few COVID workers’ compensation claims, the claims are not expensive, and the impact of presumptions has been minimal. Workers’ compensation premiums have not dropped, so workers’ compensation insurers are making large profits (actually claims may be going down because workers are often afraid to file claims in a bad economy for fear of job loss—a point that Emily Spieler and John Burton have been making for years). Furthermore, due to a lack of medical inflation and a drop in drug prescription costs overall medical costs are going down. The upshot is that it is unseemly for insurers to be profiting so much in a time of pain.

Maybe. This is all microanalysis, and it is interesting, but it is not the kind of detail I focus on. First of all, we have not even gotten to the real pressure COVID-19 will be putting on workers’ compensation. That pressure will come now as the economy continues to reopen and workers (disproportionately Black, Brown, and poor, by the way) are forced into an insanely dangerous workplace where they will face, among other things, irate customers who do not want to wear masks. Workers may fear filing claims but in the end have no choice but to file as they are overcome with illness. Second, even if workers’ compensation insurers are making large profits in their primary business, their “air bags” (institutional reserves) may not be sufficient (regardless the unerring and elegant mathematical models insisting otherwise) for the scope of the collision that is coming. Only certain quarters of the popular press, well compensated for not seeing the obvious, fail to see what is about to happen with evictions, mass unemployment, and, yes, the securities markets (which will soon learn what we all know – except perhaps Robinhood traders – even under the MMT schools there is some limit to what private debt the Fed will be willing to take onto its balance sheets).

About five years ago or so the press asked me what I thought the chance of federalization of workers’ compensation might be in light of the punishing inadequacy and unfairness of workers’ compensation benefits (which has continued unabated under any fair view of a tort quid pro quo). I said that given the current political environment federalization was almost impossible to conceive. It is a gross understatement to say that we are no longer in that political environment. Fifty million workers have lost their jobs in roughly one fiscal quarter and forty percent of the jobs lost may never return. The national government dithers while millions of additional people—again, disproportionately Black and Brown—are on the precipice of home loss. In this political environment what I expect is reconfiguring of the entire sociopolitical, legal, and economic landscape—though I suspect there will be preliminary Hooveresque fits and starts. I have no idea what it will look like. But those of you who have read my writing over the last few years know that I have felt for quite some time that the social compact has been unraveling. And the period of renegotiation has arrived. As Thomas Frank noted in his recent book, The People, NO, A Brief History of Anti-Populism, respectable quarters have long scorned populist “Calamityites,” but in 1929 you did not need to be such a person to know that things would never be the same.

Perhaps the current social configuration will survive, but as a member of the National Academy of Social Insurance I can report that many new “air bag” (social insurance) ideas are afoot. It is about time.  

Michael C. Duff

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