Health Care Costs, Wages, and Aging

41 Pages Posted: 24 Sep 1999

See all articles by Louise Sheiner

Louise Sheiner

Board of Governors of the Federal Reserve System; National Bureau of Economic Research (NBER)

Date Written: January 14, 1999

Abstract

While economists generally agree that workers pay for their health insurance costs through reduced wages, there has been little thought devoted to the level at which these costs are passed on: Is each employee's wage reduced by the amount of his or her own health costs, by the average health costs of employees in the firm, or by some amount in between? This paper analyzes one dimension of the question of how firms pass health costs to workers. Using cross-city variation in health costs, I test whether older workers pay for their higher health costs in the form of lower wages. I find that in cities where health insurance costs are high, the age/wage profile is flatter, indicating that older workers do pay for their higher health costs in the form of reduced wages. This finding is robust to the inclusion of several other city-specific variables that might also affect age/wage profiles and that could be correlated with health insurance costs. I also find that workers who choose family health insurance coverage pay for the added employer costs through reduced wages.

JEL Classification: I1, J1, J3

Suggested Citation

Sheiner, Louise, Health Care Costs, Wages, and Aging (January 14, 1999). Available at SSRN: https://ssrn.com/abstract=165530. or http://dx.doi.org/10.2139/ssrn.165530

Louise Sheiner (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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