The Impact of Minimum Wage Increases on the Provision of Employer-Spon

Slide Presentation from the AHRQ 2011 Annual Conference

The Impact of Minimum Wage Increases on Provision of Employer-Sponsored Insurance

Slide Presentation from the AHRQ 2011 Annual Conference

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.
• 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.

Slide 4

Offer Rates

Slide 5

Offers of Dependent Coverage

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.
• 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

• Υ_i= α+
• β₁ * X_i,st +
• β₂ * ALL_LOW_i,st +
• β₃ * MOSTLY_LOW_i,st +
• β₄ * SOME_LOW_i,st +
• β₅ * MINWAGE_i,st +
• Γ₁ * ALL_LOW_i,st * MINWAGE_st +
• Γ₂ * MOSTLY_LOW_i,st * MINWAGE_st +
• Γ₃* SOME_LOW_i,st * MINWAGE_st + ε_i

Slide 14

OLS Models of Establishment-Level Health Insurance Outcomes

Slide 15

Selected OLS Results for Plan-Level Outcomes

Slide 16

Selected OLS Results for Plan Level Outcomes (continued)

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.

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.

Current as of December 2011

Internet Citation:

The Impact of Minimum Wage Increases on Provision of Employer-Sponsored Insurance. Slide Presentation from the AHRQ 2011 Annual Conference (Text Version). December 2011. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/about/annualconf11/vistnes/vistnes.htm