Minimum Wages, Sickness Absenteeism, and Non-Sickness Absenteeism

Abstract

Absenteeism is a nonwage component of compensation valued by workers and costly for employers to provide. Higher minimum wages may cause employers to try to reduce worker absenteeism to reduce costs, but, from a labor supply perspective, higher minimum wages exert a substitution effect against absenteeism and an income effect towards it. This paper presents new evidence on the relationship between absenteeism and minimum wages using the limited panel aspect of data from the 1979-2007 Merged Outgoing Rotation Groups of the Current Population Survey. We estimate that higher minimum wages reduce overall absenteeism among young men and women, but not other demographic groups. We find that higher minimum wages are generally associated with lower rates of non-sickness absenteeism but higher rates of sickness absenteeism. The shift towards sickness absenteeism is notable in light of recent work showing that employers punish biologically based absenteeism differently than other types of absenteeism.

Keywords: minimum wages, absenteeism

JEL Classification: J22, J32, J38