It's COMPlicated – It's Also Relative

Have you ever thought about whether you could live on your state’s temporary total disability (TTD) benefits if you had a workers’ compensation injury?  It’s a scary thought.   

The benefits in most states have formulas that begin with an injured worker’s average weekly wage based on the prior 52 weeks’ wages and multiply it by 66 2/3%.  Then the resulting amount cannot exceed the maximum weekly wage for TTD benefits in that state.  

The Workers Compensation Research Institute (WCRI) reported in its Workers’ Compensation Laws as of January 1, 2022, that the maximum weekly benefit for injured workers had “nearly doubled” from 2000 to 2022 to a median of $1,074.  Remembering your school days math class, the “median” means that half of the benefit amounts were over $1,074 and half were less. 

State maximums may cover 66 2/3% of the full salary of many occupations, according to a BLS Report as of May 2021. For example: 

But they won’t cover the 66 2/3% of employees’ salaries who have higher salaries:  

Most states set the maximum benefit to 100% of the state average weekly wage.  Seventeen in the WCRI report listed a multiple greater than 100%; eleven states set the maximum lower.  

Pundits offer two reasons for why temporary total benefits are less than 100% of pre-injury wages.   

(1) Taxes generally are not paid on TTD benefits, which is supposed to bring the amount closer to a worker’s take home pay.  However, the taxes paid on injured workers’ wages are usually far less than 33 1/3%, so the TTD benefit is not likely to compare favorably to a worker’s take home pay.  

(2) Total wage replacement would provide a moral hazard for the injured worker if the worker could earn just as much on injured pay as when working full time.  It’s reasonable to avoid providing an incentive to stay at off work. But the double reduction from first the benefit percentage and the limitation on a weekly benefit may result in an inability to survive financially while unable to work. 

One of the central objectives of the 1972 National Commission on Workmen’s Compensation Laws was to protect injured workers from substantial loss of income.  They recommended that this protection include a maximum weekly benefit of 100% of the state’s average weekly wage in 1975 and that the maximum increase until it was 200% of the average weekly wage by 1981.  Today the highest percentage in the states is 150%.  

Workers’ compensation has been described as a fragile balance.  What is the optimal balance for temporary total disability benefits?