Workers' Comp Costs Are Forcing Businesses To Abandon California

INVESTOR'S BUSINESS DAILY ^ | Tuesday, August 5, 2003 | GLORIA LAU

[Isara]

When, oh when will they learn?

High costs => less businesses => less state revenue

[.cnI redruM]

Hey, just the raise the taxes. Never mind the fact that all the taxpayers have moved.

[Texas_Dawg]

California is wasting its money and as a Texan, I love to see this, as long as we remain such a pro-business, free trade state. I support the U.S. free trade stance over China's for this exact same reason.

[capt. norm]

I think Nevada is very well positioned to continue its growth, especially with California virtually running off businesses with high taxes and regulations.

[Joe Brower]

Two words:

ATLAS SHRUGGED.

Will the last American to leave California please turn out the lights?

[theDentist]

Thanks Gray!!! {/sarcasm}

[RayChuang88]

I think at the rate things are going, you're going to see a huge number of companies now based in California move to more business-friendly states like Texas. Given that Texas is the largest state in the Lower 48 states, it has plentiful room to grow.

I wouldn't be surprised that by 2010 the state with the largest GDP on a per-state basis is Texas. For example, a lot of high-tech companies have major operations in Texas (Intel, AMD, HP, and several others). They could easily move their headquarter operations to Texas, and likely prosper strongly there.

[You Dirty Rats]

Lawyers getting rich while companies move -- what a surprise.

High workers comp costs killed a lot of businesses in Ohio, too. Workers' comp, a critically needed benefit for maimed workers in the past, has evolved into an organized looting of companies for the benefit of lawyers and unions -- in other words, two major 'Rat constituencies. Meanwhile, the "working man" who was maimed in the past and needed this system is now losing his job. But why would lawyers, union bosses or 'Rats in general care about that?

[DeFault User]

A WC setup like this is a recipe for disaster. Evidently the California system has crappy benefits, so everybody sues and gets the moon/wins the lottery. This has happened in other states and the remedy is simple if you can get past the trial lawyers: provide fair benefits, reduce attorney involvement to all but the most egregious cases and get tough on fraud.

[KarlInOhio]

The article covers a lot of the sources of worker's comp expenses, but never really goes into the reasons why California's are higher than other states. Insurance costs are just the claims costs + claims overhead + insurance company profit. I expect the profit is low or else companies would be entering the market instead of leaving it. Claims overhead probably isn't high enough to account for much of the difference between states. That leaves claims cost as the primary difference.

Are the workers clumsier? Are doctors more expensive? Are the lawyers' fees higher? Is fraud higher? Is the state skimming off money from premiums to put in the general fund? Is the definition of injury much laxer?

[Texas_Dawg]

I wouldn't be surprised that by 2010 the state with the largest GDP on a per-state basis is Texas. For example, a lot of high-tech companies have major operations in Texas (Intel, AMD, HP, and several others). They could easily move their headquarter operations to Texas, and likely prosper strongly there.

Texas's major metropolitan areas (Houston, Austin, Dallas, Fort Worth, and San Antonion) have hardly slowed down at all in growth and other numbers (unemployment, home values, etc.) throughout the economic slowdown. If they continue to grow and improve their infrastructures and other amenities as well, they will only bridge the perceived gaps that companies in the major cities in the U.S. might see in relocating to Texas.

[Axenolith]

One of my drillers is close to relocating to Reno. His WC costs have gone from 30K to 120K in ~4 years. He calculates he'll be competitive against SF Bay area firms even WITH the added cost of travelling to the Bay area and possibly an overnight stay on individual jobs.

[Grampa Dave]

Here is a thread that I just posted re Costco getting hammered in the stock market due to California's workman comp costs.

http://www.freerepublic.com/focus/news/958464/posts

[Tai_Chung]

How is Nevada's workers' comp program different than California's?

Is Nevada's workers' comp costs at risk of increasing 50% per year?

[Alberta's Child]

This article is one large argument against hiring any employees in the first place. I can truly envision a scenario in which every non-government worker in the U.S. is a self-employed contractor who pays all his own bills and hires subcontractors to get all the work done.

[Texas_Dawg]

I can truly envision a scenario in which every non-government worker in the U.S. is a self-employed contractor who pays all his own bills and hires subcontractors to get all the work done.

Homer Simpson: "Hmm. Your ideas are intriguing to me and I wish to subscribe to your newsletter."

[aardvark1]

Just don't move to VT. That would be jumping from the frying pan into the fire.

[Lancey Howard]

He employs just 150 workers, and in recent years rising workers' comp premiums have driven his profits down. In 2001, he paid $225,000. That rose to $330,000 in 2002. This year, he's paying $570,000; if he stays in L.A., his rate would be $700,000 next year.

Let's do the math, shall we?

If fully 10% of this company's work force got injured and could not work for a full year, the company could hand each one of them $45,000 cash and end up spending less than it would on the annual workman's comp premium. (Rubbing eyes) do I have that right?

[Lancey Howard]

ping

[ServesURight]