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Workplace Injuries and Job Flows (PDF)
There is compelling evidence for the growth rate of the workplace injury and illness incidence rate to drop during recessions and rise during economic recoveries (see for instance, U.S. Department of Labor, Report on the American Workforce, 1994)
At the same time, there is a widely held belief that layoffs (the magnitudes and rate of occurrence of which tend to peak in recessions) lead to spikes in workers compensation claims. This analysis attempts to reconcile these two opposing perceptions of the effect of an economic downturn on the growth rate of the reported workplace injury and illness incidence rate by studying how it is affected by changes in the rates of job creation and job destruction.
This research report shows that both job creation and job destruction contribute to reported workplace injury and illness incidence rates. Job creation is related to an increase in the proportion of workers who are inexperienced in their current job and, hence, more likely to sustain a workplace injury. Further, it is argued that the effect of job destruction originates in opportunistic behavior as employees affected by layoffs look to workers compensation for wage continuation.
In recessions, job creation plummets while job destruction soars; the former effect contributes to a decrease in the growth rate of workplace injury and illness incidence rates, whereas the latter works in the opposite direction. On net, the effect of job creation dominates quantitatively, thus generating the observed pro cyclical behavior in the growth rate of workplace injury and illness incidence rates. Further, it is shown that the growth rate of frequency tends to overshoot during economic recoveries, although this effect is not common to all recessions.