Workers' compensation is one of the main forms of social insurance in the United States, establishing the extent of compensation received by the families of workers killed or injured in accidents arising from employment. The programs were established and continue to be administered by state governments. The central feature of all of the workers' compensation programs is the level of benefits legislated by each state for the various types of injuries. The benefit levels are key components in the employment conditions for workers and play a central role in determining the incentives for preventing accidents for both workers and employers. The benefit schedules are complex and at times difficult to compare across states and time; therefore, the first phase of the research is devoted to developing easily comparable measures of the benefit levels across states and over time. The second phase of the research examines the impact of changes in benefit levels on wages and earnings of workers to assess the extent to which the well-being of workers is enhanced by increases in benefit levels. In a variety of settings, it has been shown that the costs of improvements in employment benefits have often been passed on to workers in the form of lower wages. Estimates of these wage offsets will offer a more accurate picture of the changes in the standard of living for American workers over the past 60 years. The final phase of the research is devoted to analyzing the political and economic factors that influence the various state governments' choices concerning workers' compensation benefits. The goal is to document the extent to which changes in benefits are driven by economic factors like long-term increases in wage rates and cyclical changes in the economy or political factors, like the relative power of political parties, interest groups, and reform groups. The end result of the research will be a comprehensive examination of the historical path that has led to the array of workers' compensation programs that are in place in the various states today. Workers' Compensation programs play a crucial role in the United States economy by establishing the levels of benefits for families of workers injured or killed in workplace accidents. By the late 1990s, employers were spending 1.5 to 2.5 percent of their payrolls on workers' compensation insurance. Although workers' compensation was a popular program with workers and employers when it was first introduced in the early 1900s, employers and workers have expressed increasing dissatisfaction with the operation of the program over the past 50 years. Employers are troubled by the rising costs of insurance, insurers have faced increasing problems in underwriting workers' compensation risk, and workers have expressed dissatisfaction with the level of benefits they have been receiving. The benefit levels chosen by the various state governments play a central role in determining the scale of the problems in the workers' compensation system. The research program is designed to follow three phases: first, develop easily comparable measures of benefits across states and time from the complex benefit schedules in the state laws; second, establish more accurate measures of the gains workers receive when benefits are raised by documenting the extent to which wages are reduced when benefit levels increased; and third, analyze the political and economic influences that determine the various states' choices of benefit levels. This comprehensive analysis of workers' compensation benefits over the past 60 years illuminate the process that has led to workers' compensation programs that we see today. An understanding of the process should help guide policy makers in improving the systems without returning to the same problems that led to changes in the systems in the first place.
