The Political Economy of Workers' Compensation Benefit Levels, 1910-1930

Most members of the key economic interest groups with a stake in workers' compensation anticipated gains. Despite their general agreement on the superiority of a no-fault system of accident compensation, the various interest groups fought over the level of accident benefits the new law would provide. These legislated benefit levels were important because they determined each group's share of the rents that workers' compensation created. The disputes were ultimately settled by state legislators who responded to pressures from both employer and worker groups. An empirical analysis of the workers' compensation benefit parameters that emerged from the political process shows that employers in high-accident risk industries succeeded in securing relatively lower benefits, while those in high-wage industries succeeded in keeping benefit levels in check. Employers' successes in lobbying for their optimal benefits were tempered in states where organized labor was strong, where political reform movements led to political shifts in the state legislature, and where bureaucratic agencies administered the workers' compensation system.