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Decreasing Opportunities for Low-Wage Workers: The Role of the Nondiscrimination Law for Employer-Provided Health Insurance

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Author Info
A. M. Wolaver
T. D. McBride
B. L. Wolfe

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Abstract

As of 1978, the favorable tax treatment of fringe benefits, including health insurance, has been regulated via a nondiscrimination clause such that low-wage, full-time workers must be offered health insurance (and other benefits) that are offered to higher-wage workers by the firm. Part-time workers may be excluded from coverage, however, creating incentives for firms to hire some types of workers part time to deny them coverage. We hypothesize that firms will hire fewer workers whose relative costs have increased, that is, low-wage workers. These workers will be less likely to work for firms that offer coverage, and those that do will be more likely to work part time without being eligible for the firm’s health insurance benefits. We use the 1988 and 1993 Employee Benefits Supplements to the Current Population Surveys and an employer premium imputation to examine these hypotheses. Both the descriptive and multivariate analysis are consistent with our hypotheses. We predict the probability of working for a firm that offers health insurance to decrease as premiums increase for both high- and low-wage workers. An increase in the premium is also associated with a decrease in the probability of part-time work, but an even greater decrease in the joint probability of part-time work with eligibility for health insurance.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1124-97.

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Handle: RePEc:wop:wispod:1124-97

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  7. Jonathan Gruber & Alan B. Krueger, 1991. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 111-144 National Bureau of Economic Research, Inc. [Downloadable!]
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  8. Bryan E. Dowd & Roger Feldman, 1987. "Voluntary Reduction in Health Insurance Coverage: A Theoretical Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 13(3), pages 215-232, Jul-Sep. [Downloadable!]
  9. repec:fth:coluec:452 is not listed on IDEAS
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  11. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June. [Downloadable!] (restricted)
  12. Jane Sneddon Little, 1995. "The impact of employer payments for health insurance and social security on the premium for education and earnings inequality," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 25-40. [Downloadable!]
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  14. Mark Montgomery & James Cosgrove, 1993. "The effect of employee benefits on the demand for part-time workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(1), pages 87-98, October.
  15. Dickens, William T & Lundberg, Shelly J, 1993. "Hours Restrictions and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 169-92, February. [Downloadable!] (restricted)
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  16. David M. Cutler & Brigitte C. Madrian, 1996. "Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked," NBER Working Papers 5525, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  1. Daniel S. Hamermesh, 1998. "Changing Inequality in Markets for Workplace Amenities," NBER Working Papers 6515, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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