When injuries disrupt workers’ careers, how can government policy encourage those individuals to find their way back into the labor market? Chicago Booth’s Anders Humlum looked at outcomes in Denmark, where some injured workers receive government support for re-skilling through higher education. He finds that those workers who choose to re-skill end up in new, better-paying jobs, and that those positive outcomes mean the government's financial investment in tuition and income support is repaid several times over. The findings suggest that certain groups of workers, particularly middle-aged workers, would benefit from an expansion of re-skilling opportunities.
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Workplace accidents are very costly for both the individual worker and for society. So for the individual worker, they lose persistent earnings in the labor market, and many injured workers end up taking antidepressants. For society, work accidents are very costly. Many injured workers end up on costly disability insurance, and it’s been estimated that work accidents in total cost 2 percent of the gross domestic product in the US. So we were trying to understand whether re-skilling can help injured workers get back on track in the labor market.
So we collected very detailed information on the health, the human-capital investment, and the labor-market outcomes of injured workers in Denmark. So this data set really provides a unique opportunity to study the re-skilling of injured workers. We have detailed information about the health—so the type of accident that these workers have suffered from; the human-capital investments—so we see the very detailed types of degree or nondegree programs that these workers are enrolling in; and then we also have detailed information about the labor-market outcomes—so we can see specifically what are the types of occupations that injured workers who re-skill end up being employed in.
So we compare injured workers who differ in the access to re-skilling through higher education. So by comparing two injured workers who differ in the access to higher education, we can assess whether these training programs help injured workers find jobs in the labor market. So we find that re-skilling is really a game changer for injured workers. Re-skilled workers end up completing the programs and once they complete the programs—and these are four-year bachelor’s degree—they also end up finding full-time employment. Strikingly, these re-skilled workers end up earning 25 percent more than what they did before the injuries.
We find that these injured workers who do not have access to re-skilling end up almost entirely on disability insurance, and many of them end up resorting to taking antidepressants. So the re-skilled workers end up earning substantially more than the transfer they would have gotten under disability insurance. So that means that for the individual, there’s really large income gains to be won by re-skilling, but it also means that for the government, this is a really good investment, because these workers would otherwise have ended up on disability insurance. So re-skilling really takes some workers who would end up on costly disability insurance, taking them through higher education, placing them into taxable jobs. So taken together, these programs is a really good investment for the government. In particular, we find that every dollar that the government is spending on tuition and income support for re-skilling of injured workers pays itself over four times.
So these findings back the question whether we should expand re-skilling programs to more injured workers. And here we find that it’s particularly the middle-aged workers who are underinvesting in re-skilling. There’s a group of workers between the age 40 to 50, only 5 percent of these workers re-skill after injuries, whereas we find that more than a third of these workers could re-skill, and it would pay off not only for the individual, but also for the government. I think this is an important study because it showed that there is a pathway back for injured workers back into the labor market, that they’re not destined to be stuck on costly disability insurance. (playful music)
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