Using linked federal and state data to study the adequacy of workers' compensation benefits.

BACKGROUND: We combined federal and state administrative data to study the long-term earnings losses associated with occupational injuries and assess the adequacy of workers' compensation benefits.

METHODS: We linked state data on workers' compensation claims from New Mexico for claimants injured from 1994 to 2000 to federal earnings records from 1987 to 2007. We estimated earnings losses up to 10 years after injury and computed the fraction of losses replaced by benefits.

RESULTS: Workers with lost-time injuries lost an average of 15% of their earnings over the 10 years after injury. On average, workers' compensation income benefits replaced 16% of these losses. Men and women had similar losses and replacement rates. Workers with minor injuries had lower losses but also had lower replacement rates.

CONCLUSION: Earnings losses after an injury are highly persistent, even for comparatively minor injuries. Income benefits replace a smaller fraction of those losses than previously believed.