With great fanfare (including breathless tweets) the WSIB announced it has eliminated its unfunded liability, ten years ahead of schedule.
But the fanfare didn’t end there. We also learned who would enjoy the dividend of full funding: employers, who received a massive reduction in premiums: 29.8% on average, amounting to almost $1.5 billion per year.
Our new Minister of Labour celebrated this cut as “just one part of our plan to lower taxes, reduce the regulatory burden, protect and grow jobs, and send a message to the world that Ontario is open for business.” For workers, she had nothing to offer but an anodyne assurance that “workers and their families” can now have “peace of mind” the WSIB will pay them the benefits they’re entitled to under the law.
That the Minister could so openly disregard workers and celebrate giving the entire dividend of full funding to employers is testament to the way employers have captured the narrative about the unfunded liability (UFL).
The employers’ story is straightforward. The UFL first became a problem in the mid-1980s, when the WSIB started charging employers additional premiums to eliminate it (the “past claims cost” or PCC). But the WSIB lost control of benefit costs and the UFL continued to grow until, by 2009, it had reached a crisis level and was called out by the Auditor General. Since then, employers have paid out even more until they finally eliminated the UFL completely.
This story has a logical conclusion: employers paid off the UFL, so of course they should pay lower premiums now that it’s done. Just as they bore the entire cost of the UFL, so they should receive the whole dividend. (You can find examples of this story here (PDF) and here (last few paragraphs of the article).
The problem with the employer’s story is that it leaves out two crucial elements of the UFL’s history: (1) the employer premium reductions that contributed to the growth of the UFL, and (2) the huge contribution that injured workers made to eliminating the UFL, in the form of reduced benefits.
So, for the record, here are the two major reductions in employer premium reductions that contributed to the UFL (as documented Professor Harry Arthurs’ Funding Fairness (PDF), a study commissioned by WSIB itself):
- From 1996 to 2001, the government first froze average premium rates and then oversaw their reduction by almost 30%
- From 1995 to 2009, the WSIB’s employer experience rating programs (NEER, CAD-7 and MAP) resulted a cumulative “off-balance” — an excess of premium rebates over surcharges — of $2.5 billion (which, as Harry Arthurs observes, was “a substantial contribution to the WSIB’s UFL”).
And here’s a list of the benefit cuts. The first three were the result of legislative changes in the Workplace Safety and Insurance Act, 1997:
- Wage loss benefits were cut by 5%, from 90% of net average earnings to 85%
- The WSIB’s contribution to permanently disabled workers’ retirement pensions was halved, and
- Cost-of-living increases for permanently partially disabled workers were deliberately set below the rate of inflation (for a more detailed explanation of this, read my blog post from 2015)
Other cuts are a result of changes the WSIB made to its adjudicative practices after the Auditor General called out the UFL in 2009:
- In the five years after 2009, the WSIB cut spending on drug benefits by one third (for a detailed analysis of this issue, based on the WSIB’s own data, see IAVGO’s report Bad Medicine).
- In 2011, the WSIB began rigidly implementing its “Better at Work” initiative, causing consternation among treating physicians that workers were being forced back to work before they were ready–and resulting in large body of case law at the WSIAT granting benefits to injured workers who were prematurely cut off by the WSIB for following their doctors’ advice: e.g., Decisions Nos 2525/16, 524/16, 63/16, 888/16, 1889/15, 1069/16, 1133/16, 1437/16, 1062/16, 1436/16, 1479/16, 989/16, 1886/16, 2949/16.
- For workers unable to return to their injury employer, the WSIB reduced the amount of time it allowed for job search training in its labour market re-entry / work transition programs.
- In 2012, the WSIB began routinely using asymptomatic pre-existing conditions as grounds to reduce, or terminate, workers’ LOE and NEL benefits.
- In 2014, the WSIB imposed, through an updated policy, new restrictions on entitlement to LOE benefits for recurrences.
If the government allocated the dividend fairly, it would have used some of the $1.5 billion dollars per year to reverse these austerity measures, restoring the benefits that it and the WSIB reduced.
But, of course, it did not.
Instead, the dramatic reduction in employer premiums will result in a state of permanent austerity for injured workers. The WSIB will be operating with greatly reduced annual revenues for the foreseeable future, with no room to relent on its current harsh adjudicative practices. And it’s hard to imagine any government (even an NDP one) having the political will to increase premiums again, which is now what’s required for workers to have their benefits restored.
And what will happen the next time there’s a recession? The WSIB’s revenues will decrease, along with the return on its investments, and the UFL will creep up again. That will result in pressure for even more cuts to benefits.
It’s all straight from the neo-liberal playbook, brought to you by a “Government for the People.”