Would Reducing the Price of Employing an Older Worker Improve Labor Market Outcomes by Socioeconomic Status? Evidence from Health Insurance Premium Restrictions
CRR WP No. 2016-17
44 Pages Posted: 5 Jan 2017 Last revised: 12 Apr 2017
Date Written: December 1, 2016
Delaying retirement improves retirement preparedness, but older workers cannot work longer if employers do not hire or retain them. This study examines one way in which public policy potentially makes older workers more attractive to employers: state regulatory restrictions on how much employer premiums are permitted to increase at small firms with older, unhealthier workforces. The study uses data from the Current Population Survey from 1989-2013 to compare older individuals’ overall employment, small-firm employment, and earnings in states with varying degrees of premium regulation, and among workers of different educational backgrounds. The analysis shows mixed results. Stronger premium regulations were not effective in increasing employment: employment at small firms, which are most sensitive to premium increases, saw no statistically significant increase, and overall employment for older workers at both large and small firms increased only slightly. The earnings gap between large and small firms is also smaller in states with tighter restrictions, but older workers were not helped appreciably more than younger workers. These results suggest that indirect efforts to lower the price of hiring an older worker are not likely to be effective in improving their job prospects.
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