Ever Wonder Where 4.6% Comes From?

Even with the recent Baker v. WCAB decision settling when the increase in state average weekly wage (SAWW) is applied, litigation continues over the precise future SAWW percentage to use in a commutation of life pension benefits. The DEU is currently using an assumed annual SAWW increase of 4.6% “based on a 50 year average.”  ((Andrea Marutti via Compfight))

Before we consider how the DEU calculates future SAWW increases, it is necessary to look back to past SAWW changes.  In the last 50 years there have been only two instances where the SAWW has decreased from the prior year.  Since Labor Code Sections 4659(c) and 4453(a)(10) only apply increases in the SAWW to life pensions and permanent total disability benefits, there is no effect on the benefit rates for those two years.

When the DEU indicates a historical 50-year average of SAWW increases, they mean exactly that.  Thus, instead of averaging the decreases in the SAWW with the increases, the DEU averages only the increases of the historical SAWW data.  (I’ll save you the trouble of looking it up – 2004 and 2011 are the only instances in the last 50 years of any reduction in the state average weekly wage).  An average of just the SAWW increases over the last 50 years does come to 4.6%.

If you’re interested in verifying this information for yourself, I’ve prepared a list of the data used by the DEU in computing the 50-year average of SAWW increases.