Do Minimum Wage Increases Influence Worker Health?

By Horn, Brady P.; Maclean, Johanna Catherine et al. | Economic Inquiry, October 2017 | Go to article overview

Do Minimum Wage Increases Influence Worker Health?


Horn, Brady P., Maclean, Johanna Catherine, Strain, Michael R., Economic Inquiry


I. INTRODUCTION

Economists have devoted considerable effort to studying the effects of minimum wage increases on the level of employment (Neumark, Salas, and Wascher 2014), poverty (Burkhauser and Sabia 2007), and other social outcomes (Page, Spetz, and Millar 2005). We contribute to this literature by examining the impact of minimum wage increases on worker health. While health is a complex and multifaceted object, we focus on self-reports of general health status and days in poor physical and mental health. Thus, our findings reflect the impact of minimum wage increases on workers' perception of their own health. To the best of our knowledge, this article is the first to study this important issue using data on the U.S. labor market.

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 the usual object of interest, employment? Understanding the full impact of minimum wage increases on workers is important for determining how well predictions from standard economic models can inform us about real-world outcomes. It is also important to better understand the broad range of minimum wage effects, in particular, vis-a-vis other potential public policies such as the earned income tax credit (EITC), so that economics can more accurately inform public policy.

In the United States, the federal government and state governments have long used minimum wage increases with the goal of improving the welfare of low-wage workers. This is increasingly true of local governments as well. For example, some political leaders are currently calling for a $15 per hour minimum wage in their jurisdictions, and several local jurisdictions have already approved $15 per hour minimum wages. (1) In addition, there is support among some federal elected leaders for increasing the federal minimum wage to $12 per hour.

Relative to the current federal minimum wage of $7.25 per hour, $15 represents a 107% increase and $12 represents a 66% increase. (2) Considerations of the welfare effects of policy changes of this magnitude should include, but not be limited to, employment effects. Specifically, if minimum wage increases improve overall outcomes for low-wage workers, then it is possible that the increase will still prove to be, on balance, welfare improving for low-wage workers--even if employment losses occur. However, if instead such increases lead to unintended consequences such as diminished health outcomes in addition to employment losses, then policymakers may wish to consider using a different set of policy tools to improve outcomes for low-wage workers.

Standard economic models of the demand for health--for example, 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 increase experience income gains, all else equal, whereas workers whose employment opportunities are diminished will likely experience income losses. Ultimately, an empirical analysis is required to determine the direction and magnitude of the impact of minimum wage increases on worker health. Our objective is to provide new evidence on this question.

To study this question, we use data on a sample of lesser-skilled workers (those without a college degree) who are likely to have their wages impacted by minimum wage increases drawn from the 1993 to 2014 Behavioral Risk Factor Surveillance Survey (BRFSS). …

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