Acosta could unwind regulatory tangle at the Department of Labor

One of the many ways the Obama administration assaulted liberty over the last eight years was by changing labor law to favor special interests. From mandated overtime pay to ambush labor elections, the previous administration used labor law to undermine the interests of employers and employees.

With the confirmation process of Alex Acosta as labor secretary underway and proposed budget cuts for the Department of Labor, the Trump administration seems poised to reverse direction. One place it ought to focus on is stopping the department’s recent assault on state workers’ compensation systems; in particular, its attempt to undermine the only free-market approach to helping injured workers in the country, Texas’ nonsubscription system.

{mosads}In 49 states, most employers are forced to subscribe to the state’s workers’ compensation system. In most cases, this has resulted in injured workers taking a backseat to special interests like trial lawyers and workers’ compensation insurance companies. The systems are often highly inefficient and costly, with poor outcomes for workers but high profits for special interests.

While Texas’ system is not immune to these problems, it generally fares better than other states because it is the only state in which participation – or subscription – in the workers’ compensation system is completely voluntary. This has resulted in a robust private sector alternative for helping injured workers that improves the lot of injured workers that it covers while generally keeping the state system on its toes.

The Texas Public Policy Foundation’s recently released paper, “The Lone Star State Model for Helping Injured Workers,” details how Texas’ voluntary (nonsubscription) system has benefitted employers and employees through shorter periods of disability after accidents, fewer claims disputes, lower costs, and faster claims payouts.

For instance, Stanford law professor Alison Morantz found that severe, traumatic injuries decline by about one-half under Texas’ nonsubscription system. Morantz also found that combined medical, wage-replacement, and legal costs average a total of just 8 cents per worker hour in Texas compared to 14 cents per worker hour in states where workers’ compensation is mandatory. Another analysis found that initial the return to work rate of injured workers receiving income benefits within six months is 97 percent under Texas’ voluntary system compared to 83 percent under its workers’ compensation system.

None of this appears to be good enough for the Department of Labor, whose previous secretary said that the move toward private benefits systems for injured workers is a “disturbing trend.” In response to Oklahoma passing and other states considering systems similar to what Texas has, the department last year launched an investigation of Texas companies participating in the voluntary system. 

The issue isn’t really about Texas, though, or for that matter about worker safety. In a report last year, the department took issue with the workers’ compensation systems in all the states, claiming that “working people are at great risk of falling into poverty as a result of workplace injuries and the failure of state workers’ compensation systems to provide them with adequate benefits.” The department’s solution to this problem, of course, is more power for the department to run state workers’ compensation systems.

It doesn’t seem to matter to the department that non-fatal injuries to private sector workers dropped from 6.8 million in 1994 to 3 million in 2014 or that fatal injuries have declined from 5,949 to 4,386 during the same period, or that  fewer injured workers miss work because of their injury – only 900,000 workers had to take time off in 2014 compared to 2.2 million in 1994.

Workers are not safer and more prosperous today than at any time in the past because of alphabet agencies like DOL, OSHA, or the National Labor Relations Board. They are better off because the owners and entrepreneurs recognize the value of safe, healthy, and properly-compensated employees in meeting consumer demand and turning a profit. To the extent companies need to be regulated in these areas, states have proven that they are generally much more capable of balancing all the competing interests involved and less susceptible to regulatory capture—which appears to be what is happening at the Department of Labor.

Acosta will have his hands full if he is confirmed in the next few weeks as secretary of labor. But one simple way to begin to unwind the regulatory tangle in labor markets created by the Obama administration would be to stop the department’s meritless attack on Texas and other states’ systems of helping injured workers. By doing this, workers, employers, and consumers across the country would greatly benefit, as well as the American economy.

Bill Peacock is the vice president for Research and Director for the Center for Economic Freedom at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

The views expressed by contributors are their own and are not the views of The Hill.