Do minimum wage increases influence worker health?

By | 26.9.2016

It is commonly accepted that a minimum wage increase has two direct effects on health. These effects result from the Grossman model, which is heavily used in economics of health. On the one hand, minimum wage increases allow individuals with low income to purchase more market goods that improve their health, for example better medical care and better food. On the other hand, it increases the opportunity cost of not working and thus makes non-market goods consumption (sport, relax) more expensive. Not surprisingly, the overall effect seems heterogeneous and differs for cohorts.

To shed more light on minimum wage effects on health, B. Horn, J. Catherine Maclean, and M. Strain analyzed data about lesser-skilled workers. As they concluded, the results fail to suggest any indisputable general improvements of the people’s health. The effect depends upon the particular group of people. While workers tend to report better health conditions after minimum wage increases, the unemployed are more likely to be negatively affected. Overall, the contribution of this study lies in providing a more comprehensive view on minimum wage policy and its consequences. Notably, the authors focused on more than just the potential decline in employment of marginal workers and recognized also additional social and medical issues.

Reference: Horn, B. P., Maclean, J. C., & Strain, M. R. (2016). Do minimum wage increases influence worker health? AEI Economics Working Paper 2016-01. Available here.

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