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Employer Health Insurance Mandates and the Risk of Unemployment

Author

Listed:
  • Katherine Baicker
  • Helen Levy

Abstract

Employer health insurance mandates form the basis of many health care reform proposals. Proponents make the case that they will increase insurance, while opponents raise the concern that low-wage workers will see offsetting reductions in their wages and that in the presence of minimum wage laws some of the lowest wage workers will become unemployed. We construct an estimate of the number of workers whose wages are so close to the minimum wage that they cannot be lowered to absorb the cost of health insurance, using detailed data on wages, health insurance, and demographics from the Current Population Survey. We find that 33 percent of uninsured workers earn within $3 of the minimum wage, putting them at risk of unemployment if their employers were required to offer insurance. Assuming an elasticity of employment with respect to minimum wage increase of -0.10, we estimate that 0.2 percent of all full-time workers and 1.4 percent of uninsured full-time workers would lose their jobs because of a health insurance mandate. Workers who would lose their jobs are disproportionately likely to be high school dropouts, minority, and female. This risk of unemployment should be a crucial component in the evaluation of both the effectiveness and distributional implications of these policies relative to alternatives such as tax credits, Medicaid expansions, and individual mandates, and their broader effects on the well-being of low-wage workers.
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Suggested Citation

  • Katherine Baicker & Helen Levy, 2008. "Employer Health Insurance Mandates and the Risk of Unemployment," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 109-132, March.
  • Handle: RePEc:bla:rmgtin:v:11:y:2008:i:1:p:109-132
    DOI: j.1540-6296.2008.00133.x
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    References listed on IDEAS

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    1. Katherine Baicker & Amitabh Chandra, 2006. "The Labor Market Effects of Rising Health Insurance Premiums," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 609-634, July.
    2. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier.
    3. Jonathan Gruber & Ebonya Washington, 2003. "Subsidies to Employee Health Insurance Premiums and the Health Insurance Market," NBER Working Papers 9567, National Bureau of Economic Research, Inc.
    4. Andrew Dyke & Carolyn J. Heinrich & Peter R. Mueser & Kenneth R. Troske & Kyung-Seong Jeon, 2006. "The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 567-608, July.
    5. 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.
    6. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
    7. Price V. Fishback & Shawn Everett Kantor, 1995. "Did Workers Pay for the Passage of Workers' Compensation Laws?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 713-742.
    8. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
    9. Norman K. Thurston, 1997. "Labor Market Effects of Hawaii'S Mandatory Employer-Provided Health Insurance," ILR Review, Cornell University, ILR School, vol. 51(1), pages 117-135, October.
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    Cited by:

    1. Casey B. Mulligan, 2015. "The New Full-Time Employment Taxes," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 89-132.
    2. Nan L. Maxwell, 2013. "The ACA, Health Care Costs, and Disparities in Employer-Sponsored Health Insurance," Mathematica Policy Research Reports cbf89dba1f494bfbb654acde7, Mathematica Policy Research.
    3. Richard V. Burkhauser & Kosali I. Simon, 2008. "Who Gets What From Employer Pay or Play Mandates?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 75-102, March.
    4. Thomas C. Buchmueller & John DiNardo & Robert G. Valletta, 2011. "The Effect of an Employer Health Insurance Mandate on Health Insurance Coverage and the Demand for Labor: Evidence from Hawaii," American Economic Journal: Economic Policy, American Economic Association, vol. 3(4), pages 25-51, November.
    5. repec:mpr:mprres:7683 is not listed on IDEAS
    6. Ellen Meara & Meredith Rosenthal & Anna Sinaiko & Katherine Baicker, 2008. "State and Federal Approaches to Health Reform: What Works for the Working Poor?," NBER Working Papers 14125, National Bureau of Economic Research, Inc.
    7. Thomas C. Buchmueller & Alan C. Monheit, 2009. "Employer-Sponsored Health Insurance and the Promise of Health Insurance Reform," NBER Working Papers 14839, National Bureau of Economic Research, Inc.
    8. Aparna Mathur, 2010. "Health insurance and job creation by the self-employed," Small Business Economics, Springer, vol. 35(3), pages 299-317, October.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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