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The increasing use of automation, combined with changing demographics in the workforce may result in manufacturing having a very different impact on the workers' comp system.

"Manufacturing continues to be a thriving sector in the U.S.," said Harry Shuford, practice leader and chief economist for the National Council on Compensation Insurance. "The challenge from a labor market perspective -- and a workers' comp perspective because it's so linked to the labor markets -- is the fact that it doesn't take nearly as many workers to manufacture things as it used to."

Automation. Manufacturing jobs are increasingly being done by machines. For example, 3-D printers can take the place of multiple employees and do as good, if not a better job of assembling parts.

"One of the things that seems to be happening with manufacturing is that the kinds of skills required for these more labor-intensive occupations are considerably higher than five, six, seven or eight years ago," Shuford said. "Automation has removed the kinds of jobs where people were paid $25 an hour to attach tubes to the backs of refrigerators. A lot of that stuff is being done on an automated basis or with new hires who make significantly less than $25 an hour."

What's happening is what Shuford and other economists refer to as the polarization of the workforce. Manufacturing in particular is evolving to the point where the jobs available are for highly trained, highly paid designers and low-skilled low-paying workers.

"What that means for workers' comp is that manufacturing, which had been a high premium industry group, especially relative to its payroll, will continue to shrink. It has been shrinking for many years, and it will continue to shrink," Shuford said.

The high skill jobs typically result in lower frequency since there are fewer injuries. However, the higher pay associated with those jobs will likely increase indemnity costs for those workers who are injured. Among lower paid workers, the impact on costs could be just the opposite -- with higher injury rates but lower average weekly wages, translating to lower indemnity costs.

"Even though total employment will continue to grow in the U.S. in the next four or five years ... that growth is going to be split between these high income jobs and these low income jobs," Shuford said, "and it probably will mean less robust growth for workers' comp relative to the growth in the labor markets in the future, compared to what we used to see in the past."

Boomer factor. Among the challenges will be finding employees to fill the available manufacturing positions, especially the lower skilled, lower paying jobs. "They can't pass drug tests or criminal background checks," Shuford said. "So you've got folks with college degrees and the jobs they had in mind are really not out there -- the professional white collar. And the ones with fewer skills and less experience have problems getting job offers because they can't pass background checks."

The higher level positions are currently being filled by older, more experienced workers, Shuford explains. "Younger workers in general are inexperienced and don't have the technical skills, and that's a problem in terms of their attractiveness as employees."

One solution is to ensure older workers remain on the job as long as possible. Employers are undertaking a variety of actions.

"It ranges from adjusting their hours and some part-time work to [providing] access to equipment that is specifically designed to address some of the challenges of older workers, whether it's standing or eyesight magnifying glass on production lines, and also doing things that address the aches and pain that go with just being older," Shuford said.

Some employers have implemented stretching programs before and/or after workers' shifts. Others provide access to massage facilities.

Some companies are implementing more comprehensive programs. BMW, for example, retrofitted a production line in a Bavarian plant. With the input of older workers, the company made 70 workplace changes, including special shoes and wooden floors to alleviate hurting feet, and providing new computer screens with bigger type.

The company estimated the cost at $50,000, including lost time. The result was a 7 percent increase in productivity and a reduction in absenteeism below the plant's average.

"One reason they want to keep the older workers with experience active is because they need them to train and develop the younger workers," Shuford said. "They recognize older workers are not going to be able to work forever and they'll need replacements. One of the best ways to do that is team an older worker with a younger worker."

Read more at the WorkersComp Forum homepage.

July 2, 2012

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