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Age as a Factor in Reemployment, Future Earning Capacity, & Permanent Disability Rating
by Robert Hall, PhD., CRC, CDMS

Robert B. Hall, Ph.D., is a vocational rehabilitation professional, consultant, and teacher who created the “SEDEC” method of analyzing diminished future earning capacity [DFEC].

This article will discuss issues surrounding “age” as it relates to issues of employability, future earning capacity, and the rating of permanent disability. Research was conducted into the current literature on this topic, focusing on disabled workers and their labor market experience in California.

Permanent disability rating has evolved significantly since the passage of California’s SB 899. The recent WCAB decisions on Almaraz/Guzman I & II and Ogilvie I & II have reaffirmed their view that SB 899 directs that the AMA Guides, Fifth Edition, must be the sole source of information used to determine impairment rating. Thus, with an exception for psychiatric impairments, the entirety of the medical impacts of industrial injury and illness are to be determined solely through use of the AMA Guides, leaving the other parts of the DWC’s permanent disability rating formula to transform the AMA WPI rating into a disability rating.

The other three factors that are modifiers to the WPI rating, i.e. diminished future earning capacity (DFEC), age, and occupation are all “scheduled” in the PDRS. Obviously, significant controversy still exists over DFEC, and this will continue to be debated and legally explored and defined, especially given the WCAB’s Ogilvie I and II decisions. However, little attention has been given to “age” and “occupation” as factors in permanent disability rating, which is interesting given the key role they play with regard to “disability” determination and future earning capacity.

General Issues and Trends for Older Workers
Before looking at the specific issues impacting the labor market involvement of older workers who become disabled on the job, it is important to understand the major employment and labor market trends that are impacting older workers in general. These trends can be summarized as follows:

1. The overall workforce is aging and older workers are working longer. In a recent study of the California Budget Project, dramatic shifts in the employment patterns of older workers are reported. During the period 1995-2008, an increasing percentage of the workforce was 55 and older. The proportion of persons working who are 65 and older also increased. This same study indicated the following:

  • Since 1979, the number of Californians ages 55-64 who are working has increased by 10%, the majority of this increase - 8.2% - has occurred since 1995.

  • This trend has also occurred among the 65-69 year old age group, whose employment has increased by 9.4% since 1995.

  • The increased employment rate of women aged 55-69 during the 2000-2008 time frame has increased almost twice that of men, 8.1% to 4.4%. The increase in employment rates for men reversed a declining trend that had existed into the mid-1990s.

In a separate study, industries with lower turnover rates - which are related to greater difficulty replacing skilled workers - have a higher percentage of older workers in their workforce. Industries with the highest representation of workers 65 and older were business services, eating & drinking establishments, and health services.

2. The increase in employment rates for older workers is particularly dramatic given that, overall, there is declining labor market participation (LFP) for workers of all ages. According to research conducted by the Federal Reserve Bank of Dallas, between the year 2000 and 2005, the over 55 age group had increased their labor market participation by 19%. Factors determined to be driving this change are healthier and longer life spans, decline in defined-benefit pension plans, changes in Social Security benefit rules, and the increased costs of health care. Other findings in that study included:

  • The educational level of the worker is important in determining employment, but is only one of many factors impacting older workers. Contrary to common belief, it is not just the least skilled older workers who are most vulnerable and first pushed out of the labor market. Between 1994 and 2004, the labor force participation of workers aged 25 to 64 with less than a high school education increased from 58.3% to 63.2%. Workers of all ages with college degrees actually experienced a decline in labor force participation during this same time span.

  • Employers are looking to other groups to supplement their workforce, including disabled and older workers. Fewer younger workers were entering the workforce and employers have learned that older workers bring fewer problems – less turnover, less absenteeism, more dependability, and more experience and wisdom.

3. Impact of the Current Recession: The recent economic decline and decimation of many workers' 401K and other retirement funds, including decreased home values, will logically increase the trend of workers staying in the labor market longer. According to a recent study by Watson Wyatt, a national benefits consulting firm, the recession is having broad and deep impacts on employer pay, staffing, and benefit policies.

In a recent study from the Economic Policy Institute, using Bureau of Labor Statistics data, (Gates, 2009) found the impact of the current recession on older workers (persons 55 and older), the labor force participation rate (LFP) - the share of the population working or looking for work - increased from 38.8% to 39.8% between December, 2007 and November, 2008. At the same time, the LFP rate for younger workers declined slightly. The increase in LFP by older workers in this recession, equivalent to about 1.36 million additional people, is due to more than demographic changes. In the prior year, from December 2006 to November 2007, LFP for older workers increased much less (0.4 percentage points). But for younger workers, the trend was about the same: -1.5 percentage points for 16-to-24 year olds and -0.1 percentage points for those 25 to 54. The higher LFP increases for older workers suggest that the bad economy has forced to remain employed, or return to the workforce, rather than retire. In May of 2008, LFP rates participation greatly accelerated, reaching a peak of 27.7 million in October (see Figure A below). During this same period, younger workers’ LFP began to decline rapidly, most likely due to fewer jobs being available.

Job Displacement of Older Workers: While older workers are attempting to stay in the labor force longer, they are losing their jobs at unprecedented rates. Gates reports that “the number of unemployed workers 55 and over has increased 56.8% in less than a year—from 856,000 in December 2007 (when the recession officially began) to 1,342,000 in November 2008. This compares to a 35% increase across all age groups."

Job displacement rates, reflecting those persons losing their jobs, show even greater impact on older workers. Gates states “Stakes are often higher for older workers when jobs are lost. Displacement rates—which measure job losses due to plant closures, the elimination of positions, or other shifts in labor demand—are currently at the highest level on record for older workers…These displacement rates have important implications for finding work and future pay. Only 61% of workers age 55 to 64 who lost their jobs in 2005-07 had been re-employed as of January 2008, compared to 75% of those 25 to 54. Older workers who do find jobs often must settle for less income. A 2007 Urban Institute study found that 22% of older workers who were laid off from long-term jobs between 1986 and 2004 experienced wage losses of 50% or more. Possibly more worrisome is the fact that these wage cuts were often accompanied by losses in pension and health benefits.”

Underemployment of Older Workers: Older workers who are underemployed – those persons marginally attached to the labor force, many of whom have given up finding work and those involuntarily working part-time – has increased substantially during this recession. Per Gates, underemployed older workers have increased from 6.3% at the start of the recession to 9.4%, an increase of 49%.

Older Workers with Work Disability: Impact on Reemployment & Earnings
Older workers with work disabilities generally have lower return to work and employment rates and take longer to return to work when compared to younger age groups. In addition, impact on earnings is somewhat greater for older workers:

  • In a study of workers’ compensation claims from California, Massachusetts, Pennsylvania, and Texas, researchers found that workers 55 years and older were 12 to 35 percentage points less likely to return to work following workplace injury than the 25-39 year old group. The initial severity of the worker’s injury and the effectiveness of their recovery were the most consistent predictors of return to work outcomes. In addition, the researchers found older workers are out of work 62 to 276 percent longer.

  • Older injured workers take longer to recover and return to work. Older workers in California are more likely to receive permanent disability benefits, which lengthens the time it takes to recover from their injuries. Older workers who take longer to return to work may lead to some workers to choose to retire earlier than they would have otherwise. In a separate study, workers with less than high school educations took 2 to 4.5 times longer to return to work.

  • In a national study of disability and aging, disabled persons aged 51-61 (both newly disabled persons and those with continuing disability) had decreased employment rates, but over two-thirds were still able to return to work;

  • In California, across all age groups, employment and earnings loss is higher right after injury, but then diminishes over time. Five years post-injury, there is a 9% employment difference between injured and non-injured workers. However, earnings loss remains higher, averaging 25% after 5 years;

  • According to a publication from the RAND Institute for Civil Justice on the California Permanent Disability Rating Schedule, across all age groups, earnings loss is proportional to severity of disability (as determined by disability rating) with earnings losses of over 35% for workers ages 50-65 with ratings of 36% and above. Other findings include:

    • For low severity claims (rating of 1-5%), older workers have higher earnings losses, 9.6%, compared to 3.3% for all workers. This indicates that there are likely additional factors beyond the level of disability impacting older workers;
    • However, significantly, the authors of this study find that the assumption that permanent disabilities are more disabling for older workers may not be as clear as once thought. Commenting on the age adjustment that California uses in it’s PD Rating Schedule, the authors state:

      “In general, we do not find substantial evidence of large disparities between earnings losses associated with similarly rated claims for injured workers of different ages (focusing on the ratings before adjustment for age). What evidence we do find suggests that, if anything, the youngest workers face the highest cumulative earnings losses from disability three years post-injury. This finding suggests that age adjustment does little to enhance equity, and may even detract from it”. (p.90)

  • According to a 2006 publication of the Commission on Health and Safety and Workers’ Compensation, using the above cited RAND data, noted that the relationship of age to earnings loss is different that what is assumed in the PDRS, i.e. that earnings losses increase with age. In their report, they stated “The schedule in California has always provided for upward adjustments with increasing age of the employee at the time of injury. The rationale was that it was more difficult for older workers to adapt to their disabilities and return to work. Some states use an age adjustment in the opposite direction based on the rationale that a younger worker will have more years of earnings losses than a worker nearer retirement age. As it turns out, empirical data show that proportional earnings losses are highest for workers under age 30, lowest for workers aged 40 to 49, and intermediate for workers aged 30 to 39 and for workers aged 50 to 65”.

  • The CHSWC recommended changes to the PDRS so that the RAND age data would be adopted so as to be “overall benefit-neutral (compared to the existing age adjustments) but will reflect the weighted average increase or decrease in proportional earnings losses according to age groups below 30, 30 to 39, 40 to 49, and 50 to 65….Preferably, the adjustment would be in the form of a table assigning different age-adjusted ratings to different combinations of age and disability as depicted in the RAND illustration. Unless an age adjustment can be implemented consistent with the RAND findings, CHSWC would recommend that the age adjustment be eliminated from the schedule until an empirically based age adjustment can be formulated on the basis of further research”.

  • The Ogilvie I & II decisions underscore one key point: an individualized evaluation of Diminished Future Earning Capacity (DFEC) can be utilized as part of an effort to rebut the DFEC portion of the PD rating process. What seems underappreciated by the current statute and the WCAB is that any individualized effort to determine a worker’s future earning capacity is based upon the worker’s present and/or future employment situation, i.e. their “employability” - the work they are able and qualified to perform. The job a worker performs when they return to work following injury may or may not represent their earning capacity. Where a worker has not yet returned to work or where the job they have returned to does not represent their true earning capacity, future earning capacity can be estimated.

    In order to individually estimate a worker’s future “Employability” and “Earning Capacity” consideration of a worker’s age and past occupation (which reflects their experience, skills, and education) is required. Once DFEC is determined per Ogilvie, further adjustment by age and occupation in the PR rating formula is redundant with the product of the individualized effort to determine DFEC, as these factors should have already been considered. This issue will hopefully be recognized and addressed in future statutory, regulatory, and/or case law revisions.

Prevention of Disability and Lost Earning Capacity
In a 2004 article, Higdon and Collins reported that older workers injured at work have more costly claims, including longer periods of recovery and greater numbers of lost work days. Recommendations are made for workplace safety and worker retention, including ergonomic considerations to prevent work injuries more prevalent among older workers due to decline in sensory abilities and degenerative conditions. These prevention and ergonomic strategies are summarized as follows:

Injury Prevention strategies:

    • Try to eliminate slips or falls that are more common in the older worker population. Since older workers have more brittle bone with less elasticity, falls and perhaps sudden twists are more likely to result in fractures.
    • Due to deterioration in sensory modalities, balance and reaction time, ensuring adequate lighting and controlling noise as much as possible should be beneficial. In addition, providing even flooring and eliminating objects that can contribute to falls and prompt cleaning of spills or slippery surfaces that may cause slips or falls should be considered.
    • Concern should be raised about allowing older workers to perform tasks from ladders and excessive heights.

Ergonomic principles should be implemented to try to reduce the risk of over exertion type injuries such as tendon tears, awkward postures that may cause increased stress to certain body parts, and injuries that may aggravate pre-existing or naturally deteriorating conditions such as arthritis of the knee, degenerative changes in the rotator cuff, or degenerative disc disease.

Ergonomic principles would include the following:

  • Reduce the physical requirements of work, particularly for lifting, pulling or twisting since older workers have less muscle mass, flexibility and, in many cases, degenerative conditions or cardiopulmonary limitations. This may be accomplished by using lifting devices or tools, reconfiguring work stations, changing job assignments or working with smaller amounts of material.
  • Perform work tasks between mid-thigh and mid-chest level. Working in this area allows the individual to avoid bending, which increases the stress on the lumbar spine and raising the arms. Since the individual does not need to expend as much energy supporting the upper torso and arms when in the bent position, work in this area is less fatiguing.
  • Perform job tasks, and particularly lifts, close to the body. Performing work tasks far from the body extends the reach and creates significant forces because the object’s weight and the individual’s arms are multiplied by the distance from the center of the body. Keeping work close to the body reduces the amount of force required and reduces the likelihood of over exertion.
  • Avoid above-the-shoulder work. This position places increased work and potential wear and tear on the rotator cuff because these muscles and tendons raise or elevate the arms. Above-the-shoulder work also increases the amount of energy required since the individual must raise his or her arms in addition to performing the assigned job task.
  • Due to the likelihood of degenerated meniscus and arthritis of the knees, try to eliminate squatting, stooping and kneeling as much as possible.
  • Avoid awkward positioning as this may place unusual or excessive stress on body parts and may increase the likelihood of developing carpal tunnel syndrome when the wrists are involved. Avoiding awkward postures while in the standing position may reduce the likelihood of falls.

Injury prevention and ergonomic strategies are both keys to injury prevention as well as return to work efforts that can limit the disabling impact of work injury and impairment.

The literature reviewed for this article indicates that older workers, even over age 65, are commonly and increasingly participating in the labor market and, although impacted more significantly by work injury and illness, do commonly return to work following industrial injury or illness and do recover much of their earning capacity.

In conclusion, many factors need to be considered when evaluating the future employability and earnings capacity of the older worker, including return to work and job accommodation strategies. In the shorter term, the economy has had a severe impact on employment and earnings of older workers. In addition, underemployment of older workers, including involuntary part-time work, has increased dramatically.

However, assuming that all older workers’ reemployment options are permanently curtailed or severely reduced solely because of their age is contrary to the data reviewed in this article. The type of employer and industry that an individual worker comes from, as well as their work skills and education, are all critically important to evaluate, as they can make a huge difference in their future employment options and earnings. Additionally, the general trends indicate that greater numbers of older workers are electing to stay longer in the workforce due to economic and lifestyle factors and many employers have increased their flexibility and capacity for accommodating these workers who become disabled.

Anderson, A. (2009) More Californians Are Working Later in Life. Policy Points. California Budget Project: Sacramento, CA.

Carrol, N. & Taeuber, C. (2004) A Profile of Older Workers in California. Employment Development Department, State of California and US Census Bureau, US Department of Commerce.

Opting Out of Work: What’s Behind the Decline in Labor Force Participation? Southwest Economy. Issue 6, November/December 2005. Federal Reserve Bank of Dallas.

Butler, R. (August, 2000) Productive Aging: Live Longer, Work Longer. International Longevity Center, Mount Sinai School of Medicine. Article presented at World Congress on Medicine and Health: Hannover, Germany. Watson Wyatt Insider (April, 2009). Economic Crisis Brings Job Losses, Delayed Retirement, Benefit Reductions and Stagnant Pay. Watson Wyatt Worldwide:

Garr, E. (2009) Older Americans in the recession: More are staying in the workforce, more are losing their jobs. Issue Brief #251. Economic Policy Institute: Washington, D.C.

Fox, Borba, & Te-Chun Lin. (2005) Return to Work Outcomes of Injured Workers: Evidence from California, Massachusetts, Pennsylvania, and Texas. WC-05-15. Workers Compensation Research Institute: Cambridge, MA.

Biddle, Boden, and Reville. Older Workers Face More Serious Consequences from Workplace Injuries. Health and Income Security for an Aging Workforce, No 5. (December, 2003) National Academy of Social Insurance.

Wiatrowski, W. (2005) Older Workers and Severity of Occupational Injuries & Illnesses Involving Days Away from Work. Bureau of Labor Statistics: Washington, DC.

Fox, Borba, & Te-Chun Lin. (2005) Return to Work Outcomes of Injured Workers: Evidence from California, Massachusetts, Pennsylvania, and Texas. WC-05-15. Workers Compensation Research Institute: Cambridge, MA.

Trupin, Sebesta, and Yelin (2000) Transitions in Employment and Disability Among Persons Ages 51-61. Disability Statistics Center, Institute for Health & Aging, University of California: San Francisco, CA.

Reville, R. & Schoeni, R. (May, 2001) Disability from Injuries at Work: The Effects on Earnings and Employment. DRU-2554. The RAND Corporation: Santa Monica, Ca.

Reville, Seabury, Neuhauser, Burton, and Greenberg (2005) An Evaluation of California’s permanent Disability Rating System. RAND Institute for Civil Justice: Santa Monica, CA.

Permanent Disability Rating Schedule Analysis (2006). Commission on Health and Safety and Workers’ Compensation, Department of Industrial Relations, State of California.

Higdon KM and Collins JL (2004) “A Study on Aging and the Cost of Workers Compensation” The Journal of Workers’ Compensation 61-68.

> Calculating FMT
> Defense Perspective on FMT
> Life Care Planner
> The Doughnut Hole
> Age as a Factor
> Feinberg on Almaraz-Guzman II

For Dr. Hall’s articles click on these links:

“Work Impairment and Disability: How Should Vocational Rehabilitation Providers be Utilized”

“Pain Disorders and their Impact on Employability and Future Earning Capacity"

“The New PDRS and the Determination of DFEC"

“Determining Diminished Earning Capacity in the California Workers' Compensations Program: The "SEDEC" Method"

“The "New" Role for Vocational Rehabilitation in the California Workers' Compensation System: A Comprehensive Vocational Rehabilitiation Evaluation"

“Multiple Impairments and Their Impact on the DFEC Analysis"

About the Author:

Dr. Robert Hall has worked in the vocational evaluation and
rehabilitation field since 1973 and has maintained his own consulting
practice in San Diego since 1980. Dr. Hall frequently serves as an
expert witness on personal injury, employment law, and spousal support
cases. Dr. Hall has a Ph.D. in Human Rehabilitation from the University
of Northern Colorado. Since 1994, he has been the Director of the
Work & Health Technologies Center at San Diego State University
and is an Adjunct Professor in SDSU’s graduate Rehabilitation
Counseling Program.

Robert Hall, Ph.D.
Certified Rehabilitation Counselor
Certified Disability Management Specialist
Hall Associates
7290 Navajo Rd. #105
San Diego, Ca. 92119
Phone: (619) 463-9334
Fax: (619) 463-9337

For a detailed CV, click here.