Time to take action on Illinois’ manufacturing meltdown

More than 6,000 Illinois manufacturing jobs disappeared in 2015.

Al Popovich is a maker.

He’s been in the manufacturing business since he was an 18-year-old trying to earn a living Chicago. He raised four kids with his work. But he wasn’t his own boss until four years ago.

Popovich has been running a small “job shop” near his home in Will County since 2012. That means he works for manufacturers, making prototypes, custom parts and parts that are hard to find. He has two full-time employees earning between $20 and $30 an hour.

But it hasn’t been easy. Popovich isn’t hiring, and he’s had to let go of part-time help because of high costs. Chief among them is workers’ compensation insurance – a cost burden lawmakers on both sides of the aisle can agree is too high. However, action in the General Assembly has been lacking.

“I almost couldn’t start this business because of insurance costs,” Popovich said. “You look at your bank account one day and say ‘OK I’m doing pretty good.’ The next day you’re wondering if you’re going to be able to eat.”

Illinoisans have been told to wait until after the election to expect reforms on this front. Nov. 8 has come and gone – it’s time to get moving.

Workers’ compensation costs in Illinois are the highest in the Midwest, according to the state of Oregon’s 2016 study of systems across the country. It’s common for Illinois manufacturing businesses to see workers’ compensation alone eat up more than 10 percent of payroll. That can be double or triple the rate of surrounding states.

Unsurprisingly, the manufacturers that bear the brunt of that burden are bleeding.

More than 6,000 Illinois manufacturing jobs disappeared in 2015, according to Bureau of Labor Statistics data. And all signs point to things getting worse.

The most recent data from September show Illinois has lost 8,500 manufacturing jobs so far this year. In October, four Illinois manufacturers announced plans to shut down and move operations to another state.

Of course, the global economy has transformed the American manufacturing landscape. And the mix of Illinois industry is unique. But that doesn’t make Illinois manufacturers escaping to other states any less concerning.

“We’re lucky our little shop has found a niche,” Popovich said. “To be honest, if you’re making standard parts you can’t compete with guys in Wisconsin and Indiana, let alone China.”

Efforts to bring workers’ compensation costs in line with surrounding states – all of which have seen stronger manufacturing comebacks in the wake of the Great Recession than Illinois – have been stymied in the General Assembly. Trial lawyers like the system the way it is, and have spent millions over the years to ensure it doesn’t change much.

Politicians have kowtowed to special interests. That hasn’t just hurt businesses – it has also crushed job prospects. And it’s worked to harm workers in other, more sinister ways.

For example, Illinois is one of a few states that allow doctors in the workers’ compensation system to sell painkillers directly to patients. Research has proven this practice, called “physician dispensing,” leads to higher rates of opioid usage and workers being off the job longer than in states where this practice is restricted. It’s dangerous for workers, costly to businesses and needs to change.

Many position workers’ compensation as a partisan issue. That also needs to change.

Oregon, a deep blue state, used to be just as bad on workers’ compensation as Illinois is now. It ranked as one of the most costly systems in the nation before it started releasing a study comparing costs across states in 1986.

But some reforms that stark reality brought have made Oregon among the most competitive states in the nation when it comes to workers’ compensation.

One reform sorely needed in Illinois relates to what’s called the “causation standard.” Currently, an Illinois employer can be on the hook for millions of dollars if its workplace contributes to 1 percent of a worker’s injury. That used to be the case in Oregon, too. But Oregon’s lawmakers acted in 1990, and wrote a law saying a workplace must be at least 51 percent responsible for the problem. This commonsense standard helped to lower costs for employers.

In part due to its competitiveness on workers’ compensation, Oregon has become a national leader in high-tech manufacturing.

Illinois has some good reasons for manufacturers to locate here: a great workforce, location and low energy costs, to name a few. But Illinois needs to make the whole picture more attractive to manufacturers, and that requires reform to the workers’ compensation system.

“I don’t mind paying for things,” Popovich said. “It’s the cost of doing business. But it has to be a fair product for a fair price.”