Talking Economics in the Land of Lincoln

06.06.2016

By Joan E. Collier

Illinois surely has had its share of troubles lately, most centering on the violence in its largest city, Chicago. The economic news, however, is equally bleak.

According to a May report by the U.S. Bureau of Labor Statistics, Illinois and Alaska were tied in April 2016 for the highest unemployment rate in the nation, at 6.6 percent.  As a point of reference, South Dakota and New Hampshire had the lowest jobless rates in April, 2.5 percent and 2.6 percent, respectively.

Republican Gov. Bruce Rauner, speaking to reporters last week in Springfield, said, “The Democrats have spent our state into the toilet for 30 years.” Umm. OK. That’s a nice sound bite, but Illinois has had Republican governors for 18 of the past 30 years—there’s enough blame to go around.

In a recent blog, Michael Lucci, vice president of policy at the Illinois Policy Institute, calls the unemployment rate “a testimony to the state’s weak economy and its poor business climate.” He further noted that “broad structural reforms are needed to bolster new opportunities and strengthen Illinois’ economy .…”

And that’s where—according to Lucci and some others—the state’s workers’ compensation system rears its ugly head.

Like practically every other state in our country, Illinois is continually either tweaking or massively reforming its workers’ compensation regulations. Illinois’ latest adjustments, in 2011, focused on medical costs (changes in fee schedules, fee caps on drug dispensing, occupational diseases, establishment of preferred provider networks), reductions in indemnity payments, and a pilot program to reduce legal costs.

These reforms have produced, by most accounts, limited successes. More of a “reform lite” than "full-bodied.” Illinois’ workers’ compensation system remains the most expensive in the Midwest.

So, in order to offset the negatives, officials in Illinois have turned to the time-honored tactic of using tax breaks to attract new business. In 2015, it was announed that Amazon will receive a $2 million per year tax break to add 2,000 full-time jobs by opening another warehouse in Joliet, Ill. Referencing that incentive, Lucci writes, “Amazon could probably have saved just as much money if Illinois had simply made necessary reforms to the state’s broken workers’ compensation system.”

“The Amazon jobs are expected to pay just under $30,000 per year. With tax breaks equal to $1,000 per job per year, taxpayers in Illinois are subsidizing 3.3 percent of Amazon’s payroll costs. … Many Illinois businesses would save significantly more than 4 percent of payroll costs in manufacturing and transportation if Illinois’ workers’ compensation costs equaled the average of surrounding states Wisconsin, Michigan, Indiana, Iowa, Missouri and Kentucky.”

And there you have it. Once again, workers’ compensation as the fall guy.

Perhaps a snapshot of Illinois’ economic barometers will provide a wider perspective (these stats are from a 2014 article in the Chicago Tribune):

Economy and jobs

So, while workers’ compensation may indeed be part of the problem, it is by no means the only piece that needs fixing.

(Read more Work Comp Nation blogs here.)

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