Staff Reports
Increasing the federal minimum wage likely wouldn’t much affect the premiums employers pay for workers’ compensation insurance, according to an analysis by the organization that proposes rates for Florida and other states.
“A minimum wage change would increase wages and wage-replacement benefits for injured minimum-wage workers,” the analysis by the National Council on Compensation Insurance, or NCCI, finds.
“Employers of minimum wage workers would incur increased labor costs and WC premiums, unless they adapt by reducing staffing levels. Insurers would see higher benefit costs with offsetting impacts on the bottom line due to higher premiums,” it continues.
“On a statewide level and even for the job classes with the highest shares of minimum wage workers, the impacts on WC would be minimal due to the relatively low share of minimum wage workers to all workers.”
The Florida Office of Insurance Regulation has the final word on premium levels, but the trend has been toward lower rates. NCCI last month recommended a 13.4 percent reduction, to become effective Jan. 1.
As of last year, 2.3 percent of hourly workers earned the federal minimum wage or less (often supplemented by tips.) Some 58 percent of all workers over age 16 were paid hourly.
That leaves fewer than 2 percent of all workers collecting the minimum wage. Food preparation or service jobs comprised the largest cohort of those workers, at 13.5 percent. Next comes personal care, at 3.6 percent; sales, at 2.5 percent; and maintenance, at 2 percent.
The report notes that 18 states and some cities have increased their minimum wages, and that 29 now require wages above the federal minimum, ranging from $7.50 to $12.50. The federal minimum is $7.25. Florida’s is $8.25.
The evidence is mixed as to whether minimum wage increases depress the job market. But, since wage levels factor into workers’ compensation premiums, an increase could inflate premiums, unless employers cut back on their workforces or hours worked, or charge more to customers.
As for the insurance industry: “Apart from those insurers focused on industries with high concentrations of minimum wage workers, it is likely that most insurers would not necessarily notice the impacts, since the share of minimum wage workers is low overall,” the report suggests.
It has this to say about the broader ramifications for states like Florida:
“Historically, NCCI has not explicitly adjusted loss costs or rates after changes to a state or federal minimum wage. Since the share of payroll and benefits from minimum wage employees is low, the impact of small changes in the minimum wage is generally expected to be low on a statewide level.”
NCCI would collect fresh data following any minimum wage increase for use when calculating future premium levels, the report says.
