Injured workers and their return to work: Beyond individual disability and economic incentives

The purpose of this paper is to study the factors affecting the return to work (RTW) of injured workers in an institutional setting where workers’ earnings are fully compensated during the disability period.

The authors use a unique data set matching employer-employee panel data with Italian workers’ compensation records. The authors estimate survival models accounting for workers’ unobserved heterogeneity.

Workers with higher wage growth, higher relative wages and from firms with better histories of stable employment, RTW sooner. More vulnerable workers – immigrants, females, members of smaller firms – also tend to return sooner. But even when we control for such measures of commitment, status, and job security, high-wage workers RTW sooner.

The authors use proxies as measures of commitment and status. The authors study blue-collar workers without finer job qualifications. The authors estimate a reduced form model.

In an institutional environment where the immediate cost of workers’ compensation benefits falls largely on firms, employers seem to pressure those workers whose time off is more costly, i.e., high-wage workers. The lack of evidence of ex post moral hazard behavior also demands for a better understanding of the relationship between benefits and RTW.

Workers who are induced to RTW before full recovery jeopardize their long- term health and employability. Firms that put such pressure on employees might generate social costs that can be particularity high in the case of high productivity workers.

The paper offers the first quantitative analysis of an institutional setting where injured workers face 100 percent benefits replacement rate and have job security. This allows focus on other workers’ or employers’ reasons to speed RTW. It is one of very few economics studies on this topic in the European context, providing implications for human resource managers, state regulators, and unions.