Estimating the Relationship between Employer-Provided Health Insurance, Worker Mobility, and Wages
Two separate literatures have sought to quantify the relationship between wages and job tenure and quit decisions and employer-provided health insurance. The fundamental difficulty in both cases is the presence of unobservable person and job characteristics that are correlated with both compensation outcomes and personal mobility. This paper seeks to bring these two strands of research together by estimating a joint model of wages, hazard of a job ending, and probability of holding employer-provided health insurance and allowing for correlated person and job heterogeneity across the three equations. Using data from the 1990 and 1996 Survey of Income and Program Participation (SIPP) Panels linked to SSA administrative job histories, the model is estimable due to the presence of monthly wage, job tenure, and health insurance observations for a relatively large, nationally representative sample of people over the course of 2 1/2 and 4 years respectively. Multiple jobs per person and multiple observations per job allow the identification of the part of the variation in wages, tenure, and health insurance status due to unobservable person and job characteristics and the correlation between individual and job propensities for high wages, low mobility, and high probability of benefits. The explicit modeling of this correlation not only produces unbiased estimates of the tenure and health insurance effects, but also allows the comparison of hazard rates for high-wage jobs versus jobs with a high probability of providing health insurance. I find substantial levels of job-lock of 30%-60% and annual returns to seniority of 1.5%-2% after the first four years of a job. In addition, I find that increasing the job-specific probability of obtaining employer-provided health insurance from 60% to 73%, or increasing the job-specific hourly wage rate by $.80, are both associated with an equivalent 6% decrease in the hazard of the employer-worker match ending, although, on average, the dollar value of the wage benefit is higher.
|Date of creation:||Jan 2002|
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