Incentivizing Safety and Discrimination: Employment Risks under Workmen’s Compensation in the Early Twentieth Century United States

Abstract

This article takes criticisms of employment discrimination in the aftermath of the creation of workmen’s compensation legislation as a point of entry for arguing that compensation laws created new incentives for employment discrimination. Compensation laws turned the costs of employees’ workplace accidents into a risk that many employers sought to manage by screening job applicants in a manner analogous to how insurance companies screened policy applicants. While numerous critics blamed insurers for discrimination, I argue that the problem was lack of insurance. The less that companies pooled their compensation risks via insurance, the greater the incentives for employers to stop employing people they would have previously been willing to hire.