Workplace accidents impose enormous costs on workers, employers, and governments. In the United States, disability benefit claims stemming from work injuries amount to more than $300 billion a year, equivalent to 1.3 percent of GDP.
Disabling injuries can be financially and emotionally devastating for workers. And while disability benefits can help them get by, it may be better to steer them to higher education that builds on prior work experience, suggests research by Chicago Booth’s Anders Humlum, University of Copenhagen’s Jakob R. Munch, and UCPH PhD student Pernille Plato. Doing so could enable them not only to reenter the labor force, but also to earn more than they did before they were injured, the research demonstrates.
Humlum, Munch, and Plato analyzed more than two decades of government data in Denmark, where on-the-job injuries are more prevalent than mass layoffs and cause more persistent earnings losses. The country offers generous support for displaced workers. In the years studied, 1995¬–2017, those who couldn’t work because of a workplace injury could qualify for disability payments of 19,000 Danish krone (US$2,700) a month until retirement age, which generally covered 50–80 percent of an injured worker’s prior earnings. But while that was the most popular option for those who worked in manual labor, Denmark also offered another path: workers could receive the same amount of money to enroll in a formal education course or participate in an on-site retraining program.
Just 13 percent of people displaced by an on-the-job accident enrolled in any kind of degree program in the decade following their injuries, and most opted for a four-year bachelor’s that built on industrial experience. For example, a former construction worker might enter a degree program in construction architecture.
Of the workers who chose the degree path, 80 percent found new employment within seven years of their accidents, and on average, earned 25 percent more than before their injuries.
Danish workers who learned new skills after a work injury were able to return to work, many of them earning more than before their injury, the research finds. Without reskilling, by contrast, these injured workers would have ended up entirely on disability insurance.
Higher education also helped soften the emotional hardships that come with injury and diminished ability, the researchers argue, using data on hospitalizations, doctor’s visits, and prescription drug purchases made by individuals in the Danish healthcare system from 1995 to 2017. (For privacy reasons, the researchers didn’t have access to patient names.)
The data show that workers with and without reskilling visited the doctor’s office with similar frequency. And yet, while antidepressant use remained flat among those who enrolled in higher education, it increased by 10 percentage points for workers who took only the disability payments.
Taking into account the effects on earnings, tax revenue, and disability payments, the researchers calculate that higher education for injured workers resulted in a big boost for society: a net social gain of 680 percent. “These remarkable social returns reflect that higher education moves injured workers from disability benefits (a liability to the government budget) to taxable high-income employment (an asset to the budget),” they write. The government reaped 58 percent of this social surplus, even after considering the cost of higher education, they find.
Given the outsize benefits of taking this route, the researchers estimate that the share of injured workers in Denmark who reskill through coursework should more than double to 34 percent to maximize the returns to workers and taxpayers. This applies especially to people aged 40–50, of whom only 6 percent currently reskill through higher education.
Humlum estimates a third of injured workers in this age group could benefit from retraining. The researchers calculate that the marginal middle-aged worker who doesn’t reskill leaves about $75,000 on the table.
Following the lead of Denmark, policy makers elsewhere should consider implementing or expanding access to higher education for lower-skilled workers who suffer a workplace accident, the researchers conclude. This could even help people displaced for other reasons, they say, such as automation or offshoring.
Governments that make these programs available should also do more to inform workers about the opportunities and their benefits. “If you’ve been working as a carpenter for 25 years, you may not be aware that this is an opportunity and a possibility and that you actually have the skill set that it could make you a successful construction engineer,” Humlum says.
Anders Humlum, Jakob R. Munch, and Pernille Plato, “Changing Tracks: Human Capital Investment after Loss of Ability,” Working paper, March 2023.
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