The U.S. workers' compensation system was established in the early years of the 20th century to provide for the medical care of those injured on the job. While this system is still functioning and providing needed aid to many people, there are many problems. The disadvantages of the workers' compensation system can be serious but are capable of being corrected through an intelligent reform process.
It is not uncommon for an employer to dispute the claim of a worker seeking workers' compensation. The cost of an employer's compensation insurance will increase if it has too many workers making claims on it. When this happens, the case must go through a court process involving costly legal fees and the consumption of a lot of time. Many injured workers end up waiting years until they can finally receive needed financial help.
As large of a problem as resolving disputed claims to workers' compensation can be, the problem of fraud also looms large as a disadvantage in the system. It is possible to either fabricate or exaggerate an injury to receive workers' compensation. Though it is impossible to accurately estimate the rate of fraud, it is a common complaint not only of employers but of social critics. Workers' compensation fraud imperils the system's social legitimacy.
Every employer is required under federal and state law to pay workers' compensation insurance for all of its employees. Unfortunately, many employers skirt this law and illegally hire workers they keep off their books. When these workers get injured, as they often do, they are then left without needed assistance. Some states provide special funds to assist these workers but others do not. It is difficult to enforce workers' compensation laws.
A serious disadvantage for the recipients of workers' compensation is that it may discourage them from pursuing further employment. Many may feel that to continue to receive workers' compensation payments they have to refrain from working certain jobs, to prove the severity of their injuries. They also may have less incentive to work after receiving compensation money. This can hold people back from realizing their full potential.