Friday, November 18, 2011

Workers' Comp Unappreciated Ties to Housing

Workers Compensation Research Institute's (WCRI) executive director, Richard Victor, correctly analyzed the single biggest issue facing the workers' compensation insurance industry in his closing remarks at the Institute's conference yesterday.


More accurately, the country's persistent unemployment has destroyed not only the premium base for carriers, thus decreasing cash flow and creating more risk in the pricing of coverage, but with 25 million U.S. workers now chasing 3.5 million job openings, injured workers are in an increasingly precarious position, Victor said.

But that's not the whole story. Much of this economy and its malaise is tied to the housing market and all of that market's tentacles, from construction to lending to furnishing - without robust housing numbers many people will just not have jobs available.

And Victor doesn't think that this will be corrected for another 10 years.

“I think we’re now pushing on a string,” Victor said. “Nothing good will happen until the housing market is stabilized.”

The one element of the housing market that is generally ignored is the fact that there is much less of a market to sell to than when my generation, the Baby Boomers, so eagerly bought and sold property and created fancy financial contraptions to exploit the trend.

Overall the United States birth rate though the Baby Boomer generation has only been 2.3 babies per couple. Modern economics suggest that is a "break even" birth rate - meaning that there is no room for growth in the economy.

This is basic supply and demand theory in action. In order for an economy to grow there always needs to be more demand than supply - albeit the percent need only be negligible on an annual basis otherwise bubbles are created.

Part of the Baby Boomer generation's housing growth was supported by immigration. At 2.3 births per couple there should not have been much demand for new housing, but immigration bolstered those numbers and helped build the market.

Not only did the financial meltdown created by bogus mortgage selling, backing and packaging practices crimp the ability to finance a purchase, thus damping the housing market, but immigration policies have kept out qualified buyers that would otherwise have been able to take up the supply slack.

And there are far fewer Generation X, Y and Z people than in any previous generation, which means there is even less demand than ever before.

In the present though workers' compensation as a national system needs to face some very serious economic issues that will weigh on legislatures if systems are to be functional.

With a national unemployment rate of 9%, many workers find their skills, education, location and pay scales don’t line up with available opportunities.

“How will I support my family? How quickly can I find a new job? Can I hang on to my workers' comp benefits? Should I take a lower-paying job? Should I take a lump sum?”

I constantly blog about the need for those injured at work to get back to work - but what if there isn't work to get back to?workers compensation, work comp, injured worker 

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