Compensating wage differentials and the impact of health insurance in the public sector on wages and hours

Source: Paige Qin, Michael Chernew, Journal of Health Economics, Volume 38, December 2014
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From the abstract:
This paper examines the trade-off between wages and employer spending on health insurance for public sector workers, and the relationship between coverage and hours worked. Our primary approach compares trends in wages and hours for public employees with and without state/local government provided health insurance using individual-level micro-data from the 1992–2011 CPS. To adjust for differences between insured and uninsured public sector employees, we create a matched sample based on an employee’s propensity to receive health insurance. We assess the relationship between state contribution to the health plan premium, state-level healthcare spending, and the wages and hours of state and local government employees. We find modest reductions in wages are associated with having employer-sponsored health insurance (ESHI), although this effect is not precisely measured. The reduction in wages associated with having ESHI is larger among non-unionized workers. Further, we find little evidence that provision of health insurance increases hours worked.

Highlights
• We examine the trade-off between wages and health care benefits for public sector workers and the relationship between coverage and hours worked.
• We also assess the relationship between state contribution to the health plan premium, as well as state level health care spending, and the wages and hours of state and local government employees.
• There is weak evidence suggesting that the increased employer costs for health insurance have been shifted back to workers through reductions in wages.