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Do Minimum Wage Increases Lower the Probability that Low-Skilled Workers Will Receive Fringe Benefits?

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  • Anne Beeson Royalty

Abstract

This paper investigates the effect of minimum wages on the probability that low-skilled workers in the U.S. receive employer health insurance, retirement benefits, and sick leave. Using cross-state variation in state minimum wages to identify minimum wage effects, the paper finds that increases in minimum wages are associated with decreases in the probability that low-skilled workers are eligible for pensions and health insurance, at least at higher levels of the minimum wage. For example, a $0.50 increase in the minimum wage from its 1999 level is estimated to decrease pension eligibility of less educated workers by 6.8 points and their health insurance eligibility by 3.9 points. No effect or small increases in pension and health insurance eligibility are found when the real minimum wage is very low. The reductions in total compensation that occur with large increases in the minimum wage, or even with smaller increases at higher levels of the minimum wage, lower the size of the employment response that would be expected in response to a given increase in the minimum wage. Such reductions clearly also have an impact on worker well-being that offsets, at least to some extent, the gains that individual workers may realize as a result of an increase in the minimum wage.

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Bibliographic Info

Paper provided by Northwestern University/University of Chicago Joint Center for Poverty Research in its series JCPR Working Papers with number 222.

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Date of creation: 10 Apr 2001
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Handle: RePEc:wop:jopovw:222

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  1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  2. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 391-430, May.
  3. Abowd, John M & Kramarz, Francis & Margolis, David N, 1999. "Minimum Wages and Employment in France and the United States," CEPR Discussion Papers 2159, C.E.P.R. Discussion Papers.
  4. Janet Currie & Aaron S. Yelowitz, 1999. "Health Insurance and Less Skilled Workers," JCPR Working Papers 63, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  6. Lara D. Shore-Sheppard, 2005. "Stemming the Tide? The Effect of Expanding Medicaid Eligibility on Health Insurance," Department of Economics Working Papers 2005-06, Department of Economics, Williams College.
  7. Shore-Sheppard, Lara & Buchmueller, Thomas C. & Jensen, Gail A., 2000. "Medicaid and crowding out of private insurance: a re-examination using firm level data," Journal of Health Economics, Elsevier, vol. 19(1), pages 61-91, January.
  8. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-69, June.
  9. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  10. Holzer, Harry J & Katz, Lawrence F & Krueger, Alan B, 1991. "Job Queues and Wages," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 739-68, August.
  11. Henry S. Farber & Helen Levy, 1998. "Recent Trends in Employer-Sponsored Health Insurance Coverage: Are Bad Jobs Getting Worse?," Working Papers 781, Princeton University, Department of Economics, Industrial Relations Section..
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Cited by:
  1. Christina Gibson, 2001. "Privileging the Participant: The Importance of Take-Up Rates In Social Welfare Evaluations," Working Papers 968, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  2. Laura Bucila, 2008. "Employment-Based Health Insurance and the Minimum Wage," Working Papers 0812, College of the Holy Cross, Department of Economics.
  3. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
  4. Kosali Ilayperuma Simon & Robert Kaestner, 2003. "Do Minimum Wages Affect Non-wage Job Attributes? Evidence on Fringe Benefits and Working Conditions," NBER Working Papers 9688, National Bureau of Economic Research, Inc.

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