Do Minimum Wage Increases Influence Worker Health?

By Horn, Brady P.; Maclean, Johanna Catherine et al. | AEI Paper & Studies, January 2016 | Go to article overview

Do Minimum Wage Increases Influence Worker Health?


Horn, Brady P., Maclean, Johanna Catherine, Strain, Michael R., AEI Paper & Studies


Abstract

While the employment effects of minimum wage increases have been heavily studied, the impact of minimum wage increases on non-labor market outcomes has received less attention. This study is the first to investigate whether minimum wage increases in the U.S. affect an important non-market outcome: worker health. Economic models of the demand for health suggest a link between minimum wage increases and worker health, but the direction and magnitude of the impact is ultimately an empirical question. To study this question, we use data on lesser-skilled workers from the 1993-2014 Behavioral Risk Factor Surveillance Surveys coupled with differences-in-differences and triple-difference models. We find little evidence that minimum wage increases lead to improvements in overall worker health. In fact, we find some evidence that minimum wage increases may decrease some aspects of health, especially among unemployed male workers. We also find some evidence that increases reduce mental strain among employed workers.

Keywords: Minimum wage, self-reported health, differences-in-differences.

JEL classification: I1; I11; I18

(a) Assistant Professor, Department of Economics, University of New Mexico, Econ 2023B, Albuquerque, NM 87131, Telephone: 505-277-1960, Email: bhorn@unm.edu.

(b) Associate Professor, Department of Economics, Temple University, 1301 Cecil B. Moore Avenue, Ritter Annex 869, Philadelphia, PA 19122, Telephone: 215-204-0560, E-mail: catherine.maclean@temple.edu.

(c) Resident Scholar, Economic Studies, American Enterprise Institute for Public Policy Research, 1150 Seventeenth Street, N.W., Washington DC, 20036. Telephone: 202-862-4884, Email: michael.strain@aei.org.

([dagger]) Authors listed in alphabetical order.

(*) Corresponding author.

Acknowledgements: We thank Paige Giafortune, Wendy Morrison, and Frank Spano for excellent research assistance. All errors are our own.

1. Introduction

Over the last several decades, economists have devoted considerable effort to studying the effects of minimum wage increases on the level of employment. More recently, economists have examined the effects of minimum wage increases on other social and economic outcomes. In this study, we contribute to this growing literature by examining the impact of minimum wage increases on workers' self-reported health. To the best of our knowledge, this paper is the first to study this important issue using data on the United States labor market. We find little evidence that minimum wage increases lead to improvements in overall worker health. In fact, we find some evidence that minimum wage increases may decrease some aspects of health, especially among male workers who are unemployed. We also find some evidence that increases reduce mental strain among employed workers.

Standard economic models of the demand for health--e.g., Grossman (1972)--suggest a link between minimum wage increases and health, as minimum wage increases theoretically affect both income levels and time costs. However, economic theory does not provide an unambiguous prediction of the relationship between minimum wage increases and worker health, as income and time cost effects may offset each other. Any impact of minimum wages on health is likely heterogeneous due to differential effects across the population of affected individuals--for example, workers who remain employed following a minimum wage hike experience income gains, all else equal, whereas workers whose employment opportunities are diminished will likely experience income losses. Ultimately, a rigorous empirical analysis is required to determine the direction and magnitude of the impact of minimum wage increases on health. Our objective is to provide such estimates.

Estimating the relationship between minimum wage increases and worker health is a timely endeavor and provides new information for an important public policy question: How do minimum wage increases impact workers holistically, across dimensions including but not limited to employment? …

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