Summary: The COVID-19 pandemic altered peoples’ lives across the globe, which ultimately led to demographic changes in the workplace. This article looks at these worker demographics shifts and their impact on workers’ compensation. The Impact of COVID-19 on the Workers’ Comp Industry
Changes in worker demographics inevitably impact workers’ compensation. Young, inexperienced workers entering the workforce, the aging population getting ready to retire, and a greater number of people working from home are all factors that can affect the workers’ comp system.
The COVID-19 pandemic brought dramatic changes to all aspects of our lives, including shifts in employment and workplace demographics. Many younger workers were laid off early in the pandemic, while older workers found themselves facing an unexpected early retirement. Companies had to adjust quickly to a remote workforce as office buildings across the country shut down. Many women often played dual roles, juggling their
job duties from home while helping kids with online schooling and childcare.
Since workers’ compensation is directly affected by employment swings, reviewing how those factors will affect businesses is important to understand what’s to come as the world starts to return to a sense of normalcy.
What Factors Changed in the Workplace throughout the Pandemic?
The factors below have all impacted the workers’ compensation system. Matt Zender, SVP of Workers’ Compensation Strategy at AmTrust, says, “Some have ultimately been positive changes, while some have placed or will continue to place stress on the system. Without question, however, the system that is emerging will remain indelibly marked by this pandemic.” Let’s take a closer look at these factors.
A Return of Jobs in Some Industries, with a Slowdown in Others
The construction, manufacturing and clerical sections such as financial services have seen a strong return in jobs. Unemployment rates rose from a level of roughly “full employment” (which the federal government considers to be 4.1%) in March 2020 to 14.7% just a month later. The rate in April 2021 was 6.1%. However, many jobs are still lagging in returning in the hospitality and leisure industries.
Increased Wages
The NCCI reported that
wages increased by 7% in 2020. The majority of this increase was due to changes in the demographics, as referenced above. After adjusting the wages, it was found they only rose 3% among those who remained employed. Additionally, the average hourly wage was $30.17 in April 2021, up 5.8% from February 2020.
Disproportionately Affected Women
Certain employment sectors, such as hospitality, retail, and non-emergency healthcare, were hit harder by the pandemic, resulting in many women leaving the workforce, especially in the first six months. From October 2020 through March of 2021, unemployment numbers for women decreased compared to those of men, but this varied with married women with a spouse present. Many of these women may not have had the opportunity to work from home full-time, so they shifted gears to stay home and care for their children. Additionally, some women transferred to careers in the gig economy during the past year.
Without question, however, the system that is emerging will remain indelibly marked by this pandemic.
~Matt Zender, SVP of Workers' Compensation Strategy at AmTrust
Fewer Workers Returning to Work
It’s becoming increasingly difficult to entice workers in some industries to return to the job site. A report from McKinsey states that COVID forced
25% of U.S. workers to change their occupations. This situation can lead to greater risk in the workplace and have a major impact on workers’ compensation because some employers may lower their hiring standards, training or onboarding procedures in an attempt to keep regular working hours and productivity up. On the positive side, wages may also continue to increase in an attempt to attract more well-trained, experienced employees.
A Transition to a Remote Workforce
At the beginning of the pandemic, many businesses shifted to remote work – for some, this happened practically overnight. Companies found themselves scrambling to create
work from home policies and explain the basics of the safety risks of working remotely, such as
cybersecurity issues,
non-ergonomically friendly workspaces and
mental health concerns. However, NCCI reports that offsetting benefits, such as the lack of a stressful commute and not being exposed to other workplace hazards, make up for these risks. The McKinsey report also states that office space could be reduced by as much as 30% following the pandemic.
Changes in Both the Younger and Aging Workforces
A recent
article from Risk and Insurance states that many
retirement-age workers moved up their retirement during the pandemic, as this age group is more at risk for serious COVID-19 illnesses and side effects. Many baby boomers choose retirement over going to work and risking their health. Meanwhile, younger workers between the ages of 16-24 experienced a 30% decline in employment.
The Highest Level of Average Weekly Hours in 15 Years
The average weekly hours worked has hit 35.0 hours, the highest level we’ve seen in 15 years. When it comes to workers’ compensation, longer hours lead to
workplace fatigue and increases the likelihood of an injury on the job.
An Increase in New Businesses
As mentioned previously, 25% of workers switched occupations throughout the pandemic. These workers may have been discouraged about their careers even before COVID-19 hit and used the crisis as a means of hitting the reset button on their career options.
Data from Oberlo shows a 26.9% increase in the number of small business applications submitted in 2020 as opposed to 2019 – the biggest increase of the past decade. While this is positive news, when it comes to workers’ compensation, newer businesses tend to have more training and onboarding issues with new employees that can lead to an increase in claims.
Workers’ Compensation Coverage for Small Businesses from AmTrust Financial
AmTrust Financial is a leader in
workers’ compensation coverage for small to mid-sized businesses. Our appointed agents can work with you to create customized insurance packages to fit your specific needs.
Contact us today to learn more about our small business insurance solutions.
This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.