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Open Access Publications from the University of California

Assessing California's workers' compensation policy : welfare implications for injured workers

  • Author(s): Canaday, Kylie
  • et al.

This paper examines the reforms made to California's Workers' Compensation (WC) law between 2002 and 2004. During the pre-reform period employers in California faced the largest average WC premiums in the nation, whereas the post-reform period saw decreases in injuries, cost per claim and premiums. We assess the impact of the reforms on employees by examining the propensity to seek care for minor injuries before and after the reforms and reveal who bore the incidence of reforms. We test for a change in propensity to seek care via the ̀M̀onday effect" often documented in the literature and examine if the prevalence of Monday claims changed after the reform years. We also examine the incidence of the reforms by revealing if reductions in Workers' Compensation insurance premiums were passed-through to the worker in the form of higher real wages. We use a control state and apply the difference-in-differences method to measure the effects in California relative to the counter-factual. We control for occupational risk by creating an index of relative risk by occupation for each state and find that wages in California increased during the post-reform period relative to our control group. In our intra-state comparison, we find that relative to low-risk industries, workers in high risk industries experienced decreases in their wages despite a decrease in the average WC premium

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