The illusion of efficiency in workers' compensation "reform"

In this article, Professor Martha T. McCluskey challenges the major reforms in workers' compensation that have developed in the past decade, as well as the economic theory underpinning those theories. In response to widespread perceptions that rising workers' compensation insurance costs had reached crisis levels by the late 1980s and early 1990s, most states have enacted substantial restrictions on benefits for injured workers. Professor McCluskey analyzes these benefit cutbacks as part of a broader pattern of retrenchment of social welfare programs, and criticizes the predominant economic efficiency rationale for this retrenchment. Professor McCluskey argues that the distinction central to much of contemporary law and policy - the opposition between efficiency and redistribution - is illusory. She maintains that, although efficiency principles are commonly used to explain recent benefit cutbacks as neutral economic measures aimed at maximizing resources for the good of all, these efficiency principles inevitably incorporate political and moral judgments about the proper redistribution of resources. According to Professor McCluskey, the rhetoric about restoring an "efficient" balance between workers and employers through workers' compensation reforms instead masks the fact that those reforms serve to redistribute resources away from workers toward employers and insurers. Professor McCluskey next challenges the conventional assumption that high costs of workers' compensation are a problem of uncertainty caused by four types of workplace injuries considered difficult to fit within the workers' compensation paradigm: occupational disease, cumulative trauma injuries, soft-tissue injuries, and mental stress claims. Professor McCluskey argues that the uncertainty typically associated with these injuries does not arise because these injuries are more "subjective" than the paradigmatic industrial machine accident, but because of the inherent subjectivity of the principles of the workers' compensation "bargain" itself. Accordingly, she argues that restrictions on certain "subjective" injuries will not promote efficiency by reducing uncertainty, but will redistribute that uncertainty and its costs. Surveying the major legislative reform measures containing workers' compensation costs, Professor McCluskey shows how each reform fails to provide an "efficient" resolution to the distributive conflicts inherent in workers' compensation. In her conclusion, Professor McCluskey explains that, although economic analysis claims to make tough choices among competing needs (benefits versus jobs) based on rigorous cost-benefit calculations, instead it tends to beg the tougher question of why such hard choices are necessary, and for whom. She then examines some approaches that attempt to shift the focus of efficiency analysis from maximizing scarce resources to removing the constraints which make those resouces scarce. Using the example of loss prevention strategies in workers' compensation, Professor McCluskey asserts that such a shift in focus fails to escape the underlying distributive questions of who should bear the costs of work accidents. Finally, Professor McCluskey considers the value judgments obscured by the predominant focus on the supposedly neutral workers' compensation "bargain" and the economic efficiency principles it represents, concluding that the debate over workers' compensation costs should instead focus on these moral and political questions about the proper distribution of power between workers, employers, and others.