Returning to Work from Injury: Longitudinal Evidence on Employment and Earnings

Produced as the LEED Research Report for Statistics New Zealand in Wellington

New Zealand has a comprehensive accident insurance system that pays much of the direct cost of accidental injuries, and compensates workers 80 percent of their earnings for any time post-injury that they are unable to work.

Statistics New Zealand"s Linked Employer-Employee Database (LEED) contains monthly information on benefit receipts, earnings, and accident earnings-related compensation for all New Zealanders over a five-year period. Using time receiving earnings compensation as a proxy for injury severity, we estimate the effect of injuries on employment and benefit rates, and total income, by comparing the observed changes in outcomes for the injured population with a matched "control" group of non-injured individuals who have similar observed characteristics. We allow the magnitude of these effects to differ by key characteristics, including age, sex, industry, and prior earnings.

We find that injuries that result in more than two months of earnings-related compensation have negative effects on future labour market outcomes. For example, individuals who receive four months compensation have 2 percent lower employment rates and $140-$200 lower monthly incomes 18 months after compensation ends, compared with a matched sample of comparable non-injured workers. The magnitude of these effects increases with injury duration; individuals who receive 10-12 months of compensation have 10-15 percent lower employment rates, 3-4 percent higher benefit receipt rates, and $345-$540 lower monthly incomes.

We also find evidence that longer-duration injuries have a greater impact on women, older workers, and workers with lower earnings or with less stable employment histories.