The Impact of Minimum Wage Increases on the Provision of Employer-Sponsored Insurance
On September 19, 2011, Jessica Vistnes made this presentation at the 2011 Annual Conference. Select to access the PowerPoint® presentation (190 KB). Plugin Software Help.
Slide 1
The Impact of Minimum Wage Increases on the Provision of Employer-Sponsored Insurance
Jessica Vistnes
(co-author: Kosali Simon, Indiana University)
Slide 2
Background
- Large changes in federal and state minimum wages from 2000-2008.
- Most studies of minimum wages have focused on employment effects:
- However, it is also important to understand how fringe benefits react:
- Particularly if unintended consequences.
- However, it is also important to understand how fringe benefits react:
- There is a small literature on the effect of minimum wages on health insurance:
- All studies use data from Current Population Survey.
- Therefore, no data on workforce characteristics:
- Important information because of group nature of employers' health insurance decisions.
Slide 3
Minimum Wage Activity 2000-2008
- Federal minimum wage changes:
- 2007 to 2009 in steps from $5.15-$7.25.
- First change in federal minimum wage in a decade (Fair Minimum Wage Act 2007).
- State activity high 2000-2008:
- 129 instances of states changing minimum wages over this time period:
- Average change: 51.6 cents.
- Range: 10 cents to $1.80.
- 129 instances of states changing minimum wages over this time period:
Slide 4
Offer Rates
Year | Firm Size | Offer Rate | Eligibility Rate |
---|---|---|---|
2000 | All | 88.97% | 78.98% |
<10 | 46.58% | 83.77% | |
10-24 | 71.51% | 78.57% | |
25-99 | 88.40% | 75.11% | |
100-999 | 96.84% | 77.93% | |
1000+ | 99.38% | 80.00% | |
2008 | All | 87.10%*** | 78.22% |
<10 | 43.66%*** | 83.25% | |
10-24 | 68.79%* | 78.56% | |
25-99 | 83.68%*** | 74.91% | |
100-999 | 95.84% | 76.38% | |
1000+ | 98.94% | 79.23% |
Slide 5
Offers of Dependent Coverage
Year | Firm Size | Offer Family Coverage | Offer Any Dependent Coverage |
---|---|---|---|
2000 | All | 98.82%*** | 98.95%*** |
<10 | 88.05%*** | 89.43%*** | |
10-24 | 96.82%*** | 97.11%*** | |
25-99 | 98.62%*** | 98.80%* | |
100-999 | 99.93%*** | 99.94%*** | |
1000+ | 99.97% | 99.97% | |
2008 | All | 97.21% | 98.09% |
<10 | 76.55% | 82.57% | |
10-24 | 89.38% | 93.25% | |
25-99 | 96.75% | 97.95% | |
100-999 | 99.38% | 99.60% | |
1000+ | 99.94% | 99.99% |
Slide 6
Prior Literature on Minimum Wages and Health Insurance
- Royalty (2000, working paper).
- Simon and Kaestner (2004).
- Marks (2011).
Slide 7
Data
- 2000-2008 MEPS-Insurance Component, private sector establishments:
- 235,000 establishments, 230,000 plans.
- Advantages:
- Many dependent variables.
- Contains wage distribution within the establishment:
- % of workers with low wage, middle and high-wages:
- Cutoff in 2008 is <$11, $11-25.50, >$25.50.
- % of workers with low wage, middle and high-wages:
- Disadvantage:
- Limited ability to examine whether plans differ by wage level.
Slide 8
Dependent Variables
- Establishment-level outcomes:
- Establishment offers health insurance.
- Eligibility rate, subset to establishments who offer.
- Offers family coverage.
- Offers any dependent coverage (either employee-plus-one or family coverage).
Slide 9
Dependent Variables (continued)
- Plan-level outcomes:
- Annual total employee contributions for single and family coverage (in dollars and in shares of total premiums).
- Single deductible levels.
- Actuarial value.
- Single premium/actuarial value.
- Plan is an health maintenance organization (HMO.
- Plan is a preferred provider organization (PPO).
Slide 10
Other Explanatory Variables
- Firm size.
- Industry.
- Age of business.
- Ownership type.
- Non-profit status.
- Whether the establishment is located in an MSA.
- The proportion female, age 50 and older, union members.
- State fixed effects, Year fixed effects.
- County unemployment rate.
Slide 11
Hypothesis and Method
- Minimum wage effects will be larger at establishments with a higher concentration of low-wage workers.
- We test our hypothesis by:
- Comparing establishments with different levels of low-wage workers to those with no low-wage workers (Difference-in-Difference).
- Identification comes from state increases above federal minimum wage levels.
Slide 12
Wage Categories
- Wage categories defined as:
- ALL_LOW (100% of workers are low-wage).
- MOSTLY_LOW (≥50% of workers are low-wage).
- SOME_LOW (>0 and <50% of workers).
- NO_LOW (no workers are low-wage).
Slide 13
Model
- Υi= α+
- β1 * Xi,st +
- β2 * ALL_LOWi,st +
- β3 * MOSTLY_LOWi,st +
- β4 * SOME_LOWi,st +
- β5 * MINWAGEi,st +
- Γ1 * ALL_LOWi,st * MINWAGEst +
- Γ2 * MOSTLY_LOWi,st * MINWAGEst +
- Γ3* SOME_LOWi,st * MINWAGEst + εi
Slide 14
OLS Models of Establishment-Level Health Insurance Outcomes
Offer | Proportion Eligible | Offered Family Coverage | Offered Any Dependent Coverage | |
---|---|---|---|---|
All_Low* Minwage | -0.016*** | 0.000 | -0.047*** | -0.038** |
Most_Low* Minwage | -0.019*** | -0.005 | 0.003 | 0.006 |
Some_Low* Minwage | -0.006 | -0.002 | 0.009* | 0.012*** |
Minwage | 0.004 | 0.002 | -0.013** | -0.018*** |
R-squared | 0.38 | 0.23 | 0.15 | 0.11 |
Slide 15
Selected OLS Results for Plan-Level Outcomes
Single Employee Contribution | Employee Share of Single Premium | Family Employee Contribution | Employee Share of Family Premium | Single Deductible | |
---|---|---|---|---|---|
All_Low* Minwage | 4.941 | -0.001 | 134.904 | 0.015 | -48.371 |
Most_Low* Minwage | -1.596 | -0.008** | 29.636 | 0.000 | -10.497 |
Some_Low* Minwage | 25.106* | 0.002 | 10.251 | -0.002 | -6.546 |
Minwage | -27.640* | -0.002 | 12.846 | 0.005 | -45.324*** |
R-squared | 0.06 | 0.09 | 0.14 | 0.12 | 0.14 |
Slide 16
Selected OLS Results for Plan Level Outcomes (continued)
Plan Actuarial Value | Total Premium/ Actuarial Value | HMO | PPO | |
---|---|---|---|---|
All_Low* Minwage | 0.005 | -194.816* | 0.018 | 0.007 |
Most_Low*Minwage | 0.003* | -40.091 | 0.004 | 0.002 |
Some_Low*Minwage | -0.001 | -11.828 | -0.004 | 0.003 |
Minwage | 0.003*** | -37.269 | 0 | -0.008 |
R-squared | 0.11 | 0.18 | 0.05 | 0.08 |
Slide 17
Sensitivity Checks
- Does Medicaid/CHIP policy confound results?
- Our results generally unchanged by inclusion of Medicaid/CHIP simulated eligibility variable.
Slide 18
Conclusions
- Minimum wage increases led to:
- Decreases in offer rates among entirely and majority low-wage employers.
- Among those who offered:
- Reductions in offers of family coverage and any dependent coverage:
- For entirely low-wage employers.
- No change in eligibility rates.
- No change or inconsistent change for plan level outcomes.
- Reductions in offers of family coverage and any dependent coverage:
Slide 19
Next Steps
- New outcomes:
- Other fringe benefits.
- Take-up rate (corresponds to CPS question).
- Whether employee premium contributions are positive or zero.
- Alternative ways to measure minimum wage:
- % increase rather than absolute increase.
- % of the real median wage in the state, from the CPS.
- Within specific industries.