The way the workers’ compensation system works now, employees permanently injured on the job receive a payment of $X each year, whether they work or not. Suppose the government were to implement a new program in which those who did not work at all got $0.5X, but those who did work got $0.5X plus workers’ compensation of 50 cents for every hour worked (of course, this subsidy would be in addition to the wages paid by their employers).

What would be the change in work incentives associated with this change in the way workers’ compensation payments were calculated?