Post-injury work outcomes revisited.

• Author: Baldwin, Marjorie L.

1. Introduction

   Workers' compensation claims data have provided a rich resource for studies of post-injury returns to work and durations of work absence. Most existing studies use information current to the time of injury to construct explanatory variables for the models. One would like to include information from the post-injury job as well, but data on the nature of post-injury employment, including wages, employers, and job accommodations, are not typically available. Even when the data are available, taking advantage of the data in empirical analyses is less than straightforward because of the natural data truncation, such that post-injury job information is observable only for those who return to work. More generally, a worker's post-injury work experience is probably best viewed as a bundle of attributes, including wages, job accommodations, and durations of work absence, theoretically determined through a search process that incorporates incentives and preferences of both the injured worker and potential employers.

   In this study we use a unique data set for injured workers from Ontario to provide more comprehensive evidence regarding the relationships among key post-injury work outcomes, including durations of work absence, job accommodations, post-injury wages, and whether or not the worker is able to return to the pre-injury employer. We view these post-injury job characteristics as jointly determined, and our models explore the extent of empirical difficulties this presents, beginning with descriptive analyses to explore associations among the post-injury work outcomes and moving to a more structural duration model with controls for endogeneity. In so doing, we show robust patterns of the post-injury work outcomes, yet uncover some of the pitfalls associated with estimating the relationships separately.

   One key finding is the significant difference in post-injury work experiences of workers who return to the same or different employers. Others have noted an advantage for workers who return to their pre-injury employers (Galizzi and Boden 2003), but the extent of differences between "stayers" and "changers" has not been explored before. Workers who return to the same employer are not only more likely to receive accommodations, but those accommodations have different effects on post-injury wages and durations of work absence for stayers and changers. Workers who return to the pre-injury employer earn higher post-injury wages, all else equal, as others have shown, but we also find that associations between pre- and post-injury wages and between disability benefits and durations of work absence are significantly different for stayers and changers.

   Our results demonstrate the importance of controlling for endogenous job accommodations in duration models. Treating accommodations as exogenous often yields the counterintuitive result that accommodations lengthen spells of work absence. In models that control for endogeneity, the variables are more likely to have a negative effect, as expected if job accommodations mitigate the effects of functional impairments resulting from work-related injuries. While we do not claim to have solved definitively the econometric problem of endogeneity in a work absence duration model, the results reveal important relationships that are obscured in more naive models.

2. Background

   According to standard search theory, durations of work absence are determined by an injured worker's reservation wage and the distribution of wage offers she receives. The typical empirical approach is to use the pre-injury wage as a proxy for the post-injury wage offer, and workers' compensation temporary disability benefits as a proxy for the reservation wage (e.g., Butler and Worrall 1985; Johnson and Ondrich 1990). This practice has the advantage of using predetermined variables defined for all injured workers, whether or not they have returned to work, but it also has several shortcomings. First, pre-injury wages do not reflect the impact of the injury on worker productivity and, therefore, are likely to be a poor proxy of post-injury wage offers for workers with more severe injuries. Second, the strong correlation between workers' compensation temporary disability benefits and pre-injury wages makes it difficult to separate the effects of the two (Meyer, Viscusi, and Durbin 1995). Perhaps more significantly, the practice of estimating duration models with data from the time of injury ignores other key factors that may influence both the reservation wage and the distribution of post-injury wage offers, such as whether an injured worker is offered job accommodations or whether he is able to return to his time-of-injury employer.

   Three recent studies incorporate post-injury job information into a model of work absence and in so doing demonstrate some of the empirical difficulties of using these data to estimate causal relationships. Hyatt (1996) uses data from the Ontario Survey of Workers with Permanent Impairments to estimate the effects of permanent partial disability benefits on probabilities of return to work, incorporating information on post-injury wages in the model. He imputes post-injury wages for workers who have not returned to work from a selection-corrected wage equation. Results indicate the generosity of permanent partial disability benefits is negatively associated with the probability of return to work, while higher post-injury wages increase the likelihood of a return.

   Galizzi and Boden (2003) examine how returning to the time-of-injury employer affects post-injury work experiences. They construct a database that includes post-injury job information by merging Wisconsin workers' compensation claims files with earnings histories from the state unemployment compensation system. The authors treat post-injury wages and returns to the time-of-injury employer as endogenous, computing predicted values of the post-injury wage and probability of changing employers that are then incorporated in the duration models. The main finding is that durations of work absence are significantly shorter for injured workers who return to the same employer. Without controls for endogeneity, however, returning to the time-of-injury employer is associated with longer spells of work absence.

   Most recently Campolieti (2005) uses the Ontario data to examine the effects of job accommodations on durations of post-injury employment. He estimates hazard models that control for worker characteristics, expected permanent disability benefits, and job accommodations on the first post-injury job, restricting the sample to injured workers who have returned to work. The results suggest that accommodations have a smaller effect on post-injury work outcomes than previous studies would suggest, and that type of accommodation matters (flexible schedules and modified equipment are the only types of accommodation associated with significantly longer durations of post-injury employment).

   Previous studies demonstrate the challenging data and modeling issues involved in incorporating post-injury job information into a duration model and strongly suggest that the different post-injury employment outcomes are interrelated. Other studies, although not focused specifically on durations of work absence, also hint at the complex relationships between job accommodations, post-injury wages, and whether the worker returns to his time-of-injury employer (Gunderson and Hyatt 1996; Campolieti 2004). To date, however, no study has investigated the post-injury work experience collectively, including durations of work absence, job accommodations, post-injury wages, and returning to the same or different employers, in models that begin to address the difficult econometric issues this presents. In this article we report a number of key findings from a more comprehensive model of post-injury work experience than has been estimated before. In so doing, we hope to encourage others to refine the duration model further, looking at the entire bundle of attributes of post-injury work experience, rather than studying individual variables in isolation.

3. Data and Descriptive Statistics

   Ontario Survey Data

   We use data from the Ontario Survey of Workers with Permanent Impairments, conducted by the Workers' Compensation Board of Ontario (WCB) in 1989-1990. The survey population includes all workers who were examined for permanent partial disability assessment by WCB physicians between June 1989 and June 1990. (1) This data set is used by four of the five previous studies that examine post-injury job information (Gunderson and Hyatt 1996; Hyatt 1996; Campolieti 2004, 2005).

   The Ontario workers' compensation system, like its counterparts in the United States, is designed to provide financial assistance to workers who are injured on the job and are temporarily or permanently unable to work. Workers' compensation disability benefits are paid by the WCB (now renamed the Workplace Safety and Insurance Board) and funded through employer assessments based on total payrolls and risk experience. (2)

   Injured workers who are absent from work longer than four days receive temporary total disability (TD) benefits while they recover from their injury. The weekly benefit rate is a fixed percentage of the worker's average pre-injury wage, subject to statutory minimum and maximum benefit rates. TD benefits are paid until a worker is reemployed or until it is determined that the worker has a permanent residual disability, and he or she receives a permanent partial disability (PPD) award. (3)

   Most studies of post-injury work absence focus on workers who receive temporary disability benefits only because these represent the majority of indemnity claims. The larger portion of costs, however, is incurred from compensation to workers with permanent impairments. Webster and Snook (1994), for example, analyze costs of cumulative trauma upper extremity claims filed...