EMPLOYMENT EFFECTS OF HEALTH SHOCKS: THE ROLE OF FRINGE BENEFITS

This paper examines whether health shocks influence labour supply. Estimates rely on detailed health measures that not only are more homogeneous than commonly‐used self‐reported health measures, but they also can be interpreted as plausibly exogenous with respect to labour supply. Further, this paper investigates the unique role that certain fringe benefits, namely health insurance and paid sick leave, play in the link between health shocks and subsequent employment activity. Results show that, compared to commonly‐used self‐reported measures of health, health problems defined by the US government as ‘priority’ conditions correlate with smaller labour supply shifts, but non‐work‐related injuries lead to larger shifts. Second, the arrival of a health shock appears to reduce the probability of remaining employed full time, while also increasing the likelihood of quitting work. Relatively few full‐time workers who acquire health problems switch to part‐time employment. Third, in the event of a health shock, sick leave appears to facilitate reductions in employment activities, while employer‐provided insurance appears to hinder such adjustments.     

Work-limiting health,earnings, and employment: an analysis with SIPP data

ABSTRACT

This study examines the role of work-limiting health conditions on employed people’s earnings, employment status, and working hours, and distinguishes between the different degree and severity of predictable shocks. Using data from the 2004 Survey of Income and Program Participation (SIPP), we evaluate the impact of any work-limiting health condition as well as a subset of health conditions that appear to arrive largely exogenously on post-onset earnings, employment, and working hours. We find that people who report being employed and later experience the onset of any work-limiting health condition tend to have lower subsequent earnings, a reduced probability of being employed, and fewer working hours per month compared to those who remain healthy. The adverse impact is even greater for people with health conditions that arrive less predictably. We use a difference-in-differences regression model with person and year fixed effects as the primary estimation method.     

Analysis on demand‐ and supply‐side responses during the expansion of health insurance coverage in Vietnam: Challenges and policy implications toward universal health coverage

This study examines how the demand and supply of healthcare services have responded to the expansion of health insurance coverage in Vietnam by using biyearly provincial panel data from 2006 to 2014. The results of our analysis indicate significant progress towards universal health coverage (UHC) in Vietnam, with the expansion of health insurance coverage being accompanied by increases in admissions and inpatient days. However, some concerns remain. Our findings show a positive response of supply capacity only in terms of doctors and nurses at higher‐level hospitals (provincial hospitals), and none in other relevant aspects. Moreover, we find no positive response of the number of outpatient visits. Another concern is the issue of financial protection. The decline in out‐of‐pocket payments is not significant throughout our observation period, suggesting that lowering the cost of healthcare is not straightforward and that the expansion of health insurance coverage alone cannot achieve this. We believe that the Vietnamese experience has valuable implications for other emerging and developing countries, considering that the expansion of health insurance coverage is likely to increase utilization of healthcare services significantly and that the supply side needs to be prepared for the increase.     

Employment security and the demand for labour in Europe

This paper analyses the impact of employment security on labour demand. The approach taken is to estimate a dynamic labour demand function that allows for the effect of changes in a measure of employment security derived from surveys of employers. The estimation uses panel data on employment (both in terms of the total number of employees and total hours worked) for seven European countries for the period 1981–1994. The results suggest that employment security can have significant effects in slowing down the dynamic adjustment of labour demand. The paper also finds some (less robust) evidence that employment security can increase the long run level of labour demand in terms of total hours, but not the number of persons employed.     

Expanding New York State's Earned Income Tax Credit Programme: the effect on work,income and poverty

Given its favourable employment incentives and ability to target the working poor, the Earned Income Tax Credit (EITC) has become the primary antipoverty programme at both the federal and state levels. However, when evaluating the effect of EITC programmes on income and poverty, governments generally calculate the effect using simple accounting, where the value of the state or federal EITC benefit is added to a person's income. These calculations omit the behavioural incentives created by the existence of these programmes, the corresponding effect on labour supply and hours worked, and therefore the actual effect on income and poverty. This article simulates the full effect of an expansion of the New York State EITC benefit on employment, hours worked, income, poverty and programme expenditures. These results are then compared to those omitting labour supply effects. Relative to estimates excluding labour supply effects, the preferred behavioural results show that an expansion of the New York State EITC increases employment by an additional 14?244 persons, labour earnings by an additional $95.8 million, family income by an additional $84.5 million, decreases poverty by an additional 56?576 persons and increases costs to the State by $29.7 million.     

The effect of universal child benefits on labour supply

Using a difference‐in‐differences estimator, I find the Canadian Universal Child Care Benefit has significant negative income effects on the labour supply of married individuals. The likelihood of lower‐educated mothers to participate in the labour force is reduced 3.2 percentage points when receiving the benefit. Median hours worked per week among lower‐educated mothers is reduced by 1.9 hours. The effects on higher‐educated mothers are substantial, with median hours worked among higher‐educated mothers reduced by nearly one hour per week. For men, the evidence suggests small but significant income effects on labour supply, consistent with the literature on labour supply elasticities.     

Health insurance and labor market outcomes: Joint decision-making within households

Most Americans obtain access to health insurance through an employer. In this paper, we ask how the link between health insurance and employment affects labor market choices such as whether to work full-time. To understand the effect of the incentives embedded in the employer-based insurance system, we study the joint decision-making of husbands and wives that determines the household's access to health insurance. We estimate the effect on a wife's (husband's) labor market outcomes of husband's (wife's) health insurance, allowing the health insurance of both spouses to be endogenous. Obtaining unbiased estimates of such effects is complicated by the likelihood that positive assortative mating creates correlations between a couple's characteristics and the possibility that there are important unobservable household income effects. Our innovation is to measure these biases by examining a second fringe benefit, paid sick leave, in addition to health insurance. We find that, as predicted, spouse's insurance has statistically significant negative effects on being offered own employer insurance as well as on the probability of working full-time with health insurance.     

On selecting a measure of labour activity: evidence from registered nurses, 1981 and 1989

The purpose of this paper is to demonstrate the effects of the selection of measures of labour activity on the conclusions that are derived from the analysis of individual labour supply. The results of the analysis using three commonly specified single measures (Annual Hours Worked, Hours Worked per Week, and Weeks Worked per Year) as the dependent variable in TOBIT equations are compared with those obtained using a PROBIT-2SLS in which the individual labour supply is measured by Hours Worked per Week and Weeks Worked per Year. The RHS variables are those that are used in earlier individual labour supply studies and are the same in all of the models analysed. Among the findings are (1) wage rate effects that are quite strong in single equation models and disappear when a multi-equation approach is used, (2) the effects of children on labour supply is more complex than in indicated in single equation results and (3) duration dependence is much stronger than indicated results using a single measure of individual labour supply. These results suggest that using a single measure of labour supply will lead to inappropriate conclusions as to the effects of such variables as wage rates, number and ages of children, spouse's employment state, and income from other sources on individual labour supply.     

Public financing of health expenditures,insurance, and health outcomes

The effects of public financing of health expenditures, insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960–1992 data across 20 OECD countries. Mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage. Increases in the publicly financed share of health expenditures are associated with increases in mortality rates. Increases in inpatient and ambulatory insurance coverage are associated with reduced mortality. The effects of GDP, health expenditures and age structure on mortality are similar to those in previous studies. Tobacco use, alcohol use, fat consumption, female labour force participation, and education levels are also significantly related to overall mortality rates. Increases in income inequality are associated with lower mortality rates, suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain when a more complete model is estimated. The result that increases in public financing increase mortality rates is robust to a number of changes in specifications and samples. Thus, as countries increase the level of their health expenditures, they may want to avoid increasing the proportion of their expenditures that are publicly financed.     

The effect of non-employment-based health insurance program on firm's offering of health insurance: Evidence from the social health insurance system in China

To achieve universal health insurance coverage, many developing countries have established a segmented health insurance system, which contains separate programs for workers with formal employment and residents without formal employment. A potential concern with such a segmented system is that the establishment of a non-employment-based insurance program may generate a disincentive for firms to provide health insurance benefits to workers. In this study, we empirically examine this crowd-out effect of a non-employment-based insurance program, the Urban Residents Basic Medical Insurance (URBMI), in China. Exploiting city-by-year variations in the roll-out process of the program and utilizing a unique administrative dataset on Chinese firms, we find that the enactment of URBMI reduced a firm's offering of an employment-based health insurance program by a statistically significant 0.94-1.29 percentage point. This crowd-out effect was stronger among domestic private firms, new firms, and firms that are individual-owned.     

The impact of recent mental health changes on employment: new evidence from longitudinal data

This study uses longitudinal data and four different measures of mental health to tease out the impact of psychiatric disorder onsets and recoveries on employment outcomes. Results suggest that developing a mental health problem leads to a significant increase in the probability of transitioning to non-employment, while a recovery increases the probability of return to work among the not employed with a mental health problem. No consistent effect was found on hours worked and earnings. Research and policy attention is needed with respect to early interventions such as job retention programmes to help workers with mental health problems remain employed as well as interventions that may lead to recovery and return to work. More research is needed especially with data and models that can differentiate between the effects of mental health onsets and recoveries on employment exit and return to work transitions.     

Remittances and labour allocation decisions at communities of origin: the case of rural Mexico

From a theoretical perspective, the effect that remittances have on the labour decisions of those that receive them is ambiguous; the empirical evidence reported in the literature is mixed and shows, unsurprisingly, that the net effect of remittances on labour supply is context-dependent. We contribute to this literature by using a detailed data set for rural Mexico that allows us to understand how remittances reshape rural livelihoods by modifying labour allocation decisions. Following previous evidence, we analyse female and male responses separately. Our results show that the income effect of remittances dominates male labour allocation decisions: the probability of participating in the labour market and the total number of hours worked decrease with remittances. We find no effect for female labour allocation decisions. The effects are not uniform across the different productive activities and remittances seem to be contributing to a trend in which Mexican rural inhabitants increasingly move away from agriculture- or nature-based activities. This reinforces the direct effect that emigration has in terms of a reduction in total supply of local labour.     

MEDICAID AND THE LABOR SUPPLY OF SINGLE MOTHERS: IMPLICATIONS FOR HEALTH CARE REFORM

The Medicaid expansions and health insurance subsidies of the Affordable Care Act (ACA) change work incentives for single mothers. To evaluate the employment effects of these policies ex ante, I estimate a model of labor supply and health insurance choice exploiting variation in pre‐ACA Medicaid policies. Simulations show that single mothers increase their labor supply at the extensive and intensive margin by 12% and 7%, respectively, uninsurance rates decline by up to 40%, and an average family's welfare improves by 1,600 dollars per year. Health insurance subsidies and not Medicaid expansions mostly drive these effects.     

The Macroeconomic Consequences of Financing Health Insurance

Employer-financed health insurance systems like those used in the United States distort firms’ labor demand and adversely affect the economy. Since such costs vary with employment rather than hours worked, firms have an incentive to increase output by increasing worker hours rather than employment. Given that the returns to employment exceed the returns to hours worked, this results in lower levels of employment and output. In this paper, we construct a heterogeneous agent general equilibrium model where individuals differ with respect to their productivity and employment opportunities. Calibrating the model to the U.S. economy, we generate steady state results for several alternative models for financing health insurance: one in which health insurance is financed primarily through employer contributions that vary with employment, a second where insurance is funded through a non-distortionary, lump-sum tax, and a third where insurance is funded by a payroll tax. We measure the effects of each of the alternatives on output, employment, hours worked, and wages.     

Part-time work and health among older workers in Ireland and Britain

Part-Time (PT) work is viewed as a viable option for people who wish to have a gradual transition to retirement. From a policy viewpoint, this may help to alleviate some labour supply shortages and fiscal pressures, especially in the context of the ageing population. Factors such as health or pension provision may influence a person's decision to work PT. This article considers the impact of health on the work decision of people aged 50 and over in the UK and Ireland. Methodological issues are discussed and the impact of unobserved individual effects is estimated using the Mundlak (1978) estimator applied to the multinomial probit model. We find that health problems increase the probability of retirement for this age group in both countries. In Britain, those with health problems are less likely to work full time and more likely to work PT, however in Ireland, health problems appear to have no effect on the probability of PT work. This article discusses the potential reasons for these impacts and current policies on PT work.     

THE IMPACT OF INSURANCE SUBSIDIES ON SELF‐EMPLOYMENT: DO STATE NON‐GROUP HEALTH INSURANCE REGULATIONS MATTER?

This paper tests whether the effect of tax‐based subsidies for self‐employed health insurance on the level of self‐employment differs with the type of non‐group insurance regulatory regime at the state level. Using a panel of tax returns from 1999 to 2004, we estimate fixed effects instrumental variable regressions for the probability of being self‐employed, allowing the effect of the after‐tax price of self‐employed health insurance to differ by regulatory regime. Our results suggest that states with community rating and guaranteed issue regulations had significantly smaller increases in the fraction of taxpayers reporting some amount of self‐employment income as a result of a decrease in the after‐tax price of self‐employed health insurance. However, there is suggestive evidence that heavily regulated states experienced a larger increase in exclusive self‐employment, particularly among older taxpayers. (JEL J24, H24, I18)     

Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion

This paper exploits a major mid-1990s expansion in the U.S. Department of Veterans Affairs health care system to provide evidence on the labor market effects of expanding health insurance availability. Using data from the Current Population Survey, we employ a difference-in-differences strategy to compare the labor market behavior of older veterans and non-veterans before and after the VA health benefits expansion to test the impact of public health insurance on labor supply. We find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non-employer based insurance. Workers with some college education or a college degree are more likely to transition into self-employment, a result consistent with “job-lock” effects. However, less-educated workers are more likely to leave self-employment, a result suggesting that the positive income effect from receiving public insurance dominates the “job-lock” effect for these workers. Some relatively disadvantaged sub-populations may also increase their labor supply after gaining greater access to public insurance, consistent with complementary positive health effects of health care access or decreased work disincentives for these groups. We conclude that this reform has affected employment and retirement decisions, and suggest that future moves toward universal coverage or expansions of Medicare are likely to have significant labor market effects.     

Did Vietnam veterans get sicker in the 1990s? The complicated effects of military service on self-reported health

The veterans disability compensation (VDC) program, which provides a monthly stipend to disabled veterans, is the third largest American disability insurance program. Since the late 1990s, VDC growth has been driven primarily by an increase in claims from Vietnam veterans, raising concerns about costs as well as health. We use the draft lottery to study the long-term effects of Vietnam-era military service on health and work in the 2000 Census. We find no evidence that military service affected overall employment rates or overall work-limiting disability rates (that is, health conditions that make work difficult). At the same time, military service sharply increased federal transfer income, especially for lower skilled white men, among whom there was also a large negative impact on employment and a marked increase in disability rates. The differential impact of Vietnam-era service on low-skilled men cannot be explained by more combat or war-theatre exposure for the least educated, because high school graduates were at least as likely to be exposed to combat or war theatre as the less-educated. This leaves the relative attractiveness of VDC for less-skilled men and the work disincentives embedded in the VDC system as a likely explanation for our findings.     

LABOUR MARKET ACTIVITY OF FOREIGN SPOUSES IN TAIWAN: EMPLOYMENT STATUS AND CHOICE OF EMPLOYMENT SECTOR

The present study examines the employment status and choice of employment sector of female foreign spouses from Southeast Asia and Mainland China in Taiwan. The conceptual framework is based on the family labour supply model, human and social capital theory, and immigrant assimilation theory. Our findings indicate that in regard to employment status, family background variables, including the presence of small children and husbands' characteristics, play a more significant role in determining the employment probability for these foreign spouses than do human capital variables. In particular, for spouses from Southeast Asia, each additional child is correlated with a decrease in working probability of 11.3%, whereas college education has an insignificant effect on their employment probability. Employment assimilation for these marriage immigrants may be confirmed by the finding that the employment probability of foreign spouses rises rapidly with the number of years that have elapsed since migration. As for the choice of employment sector, a strong linkage between the employment sector of the foreign spouses and their husbands' employment sector is found in this study.     

The Effects of Disability on Labour Force Status in Australia

Using the Australian Bureau of Statistics 1998 Survey of Disability, Ageing and Carers, this study examines the effects of disability on four labour market outcomes: not in the labour force, unemployed, part‐time employed and full‐time employed. The detailed information on health available in the dataset also facilitates investigation of the dependence of effects on the characteristics of the disability, including severity, impairment type and age of onset. Disability is found to have substantial effects on labour force status, on average acting to decrease the probability of labour force participation by one‐quarter for males and one‐fifth for females. For males, the decrease in fulltime employment accounts for almost all of the decrease in labour force participation associated with disability; for females, disability has negative effects on both full‐time and part‐time employment. Analysis of disability characteristics shows that adverse effects on labour force status are increasing in the severity of the disability and are also worse for those with more than one type of impairment and for those who experience disability onset at older ages. There is evidence that the adverse effects of disability are lower for males who completed their education after the onset of the disability.