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The Effect of the Minimum Wage on Employer-Sponsored Insurance for Low-Income Workers and Dependents

Author

Listed:
  • Michael S. Dworsky
  • Christine Eibner
  • Xiaoyu Nie
  • Jeffrey B. Wenger

Abstract

Economic theory suggests that a binding minimum wage increase may reduce the generosity of employer-sponsored insurance (ESI) or other fringe benefits, yet previous empirical studies reach conflicting conclusions about the existence of a trade-off between minimum wages and ESI. We study whether recent state and federal minimum wage increases affect the level or the source of health insurance coverage for low-income families using the 2005–16 Current Population Survey. Our research design uses state and year fixed effects to isolate within-state minimum wage changes while controlling for Medicaid eligibility and other changes in health policy related to implementation of the Affordable Care Act. Because dependent coverage might also be affected by minimum wage hikes, we examine ESI coverage for both low-wage workers and their dependents. We find robust evidence that minimum wage increases lead to reductions in ESI coverage in families below 300 percent of the federal poverty level, with a nominal $1 increase in the minimum wage reducing the probability of ESI coverage by 0.99 percentage points. Reductions in coverage were observed both for workers and for their dependents.

Suggested Citation

  • Michael S. Dworsky & Christine Eibner & Xiaoyu Nie & Jeffrey B. Wenger, 2022. "The Effect of the Minimum Wage on Employer-Sponsored Insurance for Low-Income Workers and Dependents," American Journal of Health Economics, University of Chicago Press, vol. 8(1), pages 99-126.
    • Handle: RePEc:ucp:amjhec:doi:10.1086/716198
    DOI: 10.1086/716198
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    Cited by:

    1. Meiselbach, Mark K. & Abraham, Jean M., 2023. "Do minimum wage laws affect employer-sponsored insurance provision?," Journal of Health Economics, Elsevier, vol. 92(C).
    2. Jeffrey Clemens & Michael R. Strain, 2023. "How important are minimum wage increases in increasing the wages of minimum wage workers?," Contemporary Economic Policy, Western Economic Association International, vol. 41(4), pages 594-612, October.
    3. David Neumark, 2023. "The Effects of Minimum Wages on (Almost) Everything? A Review of Recent Evidence on Health and Related Behaviors," NBER Working Papers 31191, National Bureau of Economic Research, Inc.

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