Effects of City Living Wage Ordinances on Sources of Employee Health Insurance Coverage

• In Event: Effects of policies to promote economic and social well-being

Abstract

Since 1995, 80 cities across the U.S. have implemented living wage ordinances with the goal of improving the quality of jobs supported by city funds. Of these, 60 include a provision which sets a lower wage level for employees receiving a minimum standard of health insurance from their employer. Low-wage workers have generally lower levels of access to employer-provided benefits such as health insurance, and employers tend to roll back benefits as wage floors rise. This feature of living wage laws has the possibility of improving total compensation for workers and mitigating decreases in employer provision of benefits, as well as reducing demands on social services. I use Current Population Survey Annual Social and Economic Supplement (CPS ASEC) data from 1996 to 2014 and data on city living wage levels compiled from previous datasets and city websites in a triple-difference design to identify effects among low-wage workers. I account for within-city economic changes using a comparison group of slightly higher-wage workers, and control for minimum wage changes over the period. The share of low-wage workers reporting that they receive health insurance from their own employer increases relative to workers in non-living wage cities by 0.31 percentage points with a 10 percent increase in the living wage (an elasticity of 0.13). The share of low-wage workers reporting that they receive health insurance requiring no premium contribution from the employee also increases in subsidy cities. Noninsurance rates fall in subsidy cities, with half of the decline coming from increases in employer-provided insurance, and Medicaid rates rise less in subsidy cities than in non-subsidy cities, suggesting that the policy reduces public costs of providing health insurance and health care to low-wage workers. Low-wage workers in subsidy cities also see wages rise as the living wage level increases. This study presents the first cross-city analysis of the effect of living wages and health insurance “subsidies” on sources of health insurance for low-wage workers I find evidence that introducing a living wage law which encourages employers to provide health insurance through allowing for a lower wage floor is a useful policy tool to improve access to and quality of health insurance for low-wage workers and reduce public health costs

Author

• Emma Rose Wohl, University of California, Irvine
  Presenting Author