Health and Labor Markets: Volume 47

In this chapter, we investigate two-way causality between health and the hourly wage. We employ insights from the human capital and compensating wage differential models, a panel formed from the National Longitudinal Survey of Youth 1997, and dynamic panel estimation methods in this investigation. We adopt plausible specifications in which a change in health induces a change in the wage with a lag and a change in the wage induces a change in health, also with a lag. We uncover a causal relationship between two of the five measures of health and the wage in which a reduction in health leads to an increase in the wage rate in a panel of US young adults who had completed their formal schooling by 2006 and were continuously employed from that year through 2011. There is no evidence of a causal relationship running from the wage rate to health in this panel. The former result highlights the multidimensional nature of health. It is consistent with an extension of the compensating wage differential model in which a large amount of effort in one period is required to obtain promotions and the wage increases that accompany them in subsequent periods. That effort may cause reductions in health and to a negative effect of health in the previous period on the current period wage. In this framework, employees have imperfect information about the effort requirements of a particular job when they are hired, and employers have imperfect information about the amount of effort new hirers are willing to exert. The result is also consistent with a model in which investments in career advancement compete with investments in health for time – the ultimate scarce resource. The lack of a causal effect of the wage on health may suggest that forces that go in opposite directions in the human capital and compensating wage differential models offset each other.

An adverse health event can affect women’s work capacity as they need time to recover. The institutional framework in the Netherlands provides employment protection during the first two years after the diagnosis. In this study, we have assessed the extent to which women’s employment is affected in the short- and long term by an adverse health event. We have used administrative Dutch data which follow women aged 25 to 55 years for four years after a medical diagnosis. We found that diagnosed women start leaving employment during the protection period and four years later they were about one percentage point less likely to be employed. Women in permanent employment did not reduce their employment during the protection period and reduced their employment with less than 0.5 percentage points thereafter. Furthermore, we found minor adjustments in the working hours in the short term and no adjustments in the long term. Lastly, we found that for wages, and not for employment and hours, adjustments could be related to the severity of the health condition: women diagnosed with temporary health conditions experienced a short-term wage penalty of about 0.5–1.7 percent and those diagnosed with chronic and incapacitating conditions experienced a long-term wage penalty of about 0.5 percent, while women diagnosed with some chronic and nonincapacitating conditions, such as respiratory conditions, experienced no wage changes in the short or long term.

We estimate the effects of job insecurity on the mental health of older workers in the United States. To address endogeneity problems, we exploit panel data and plausibly exogenous changes in job loss expectations following eliminations of similar positions and other types of jobs at the worker’s employer, as well as changes in employment at the industry–state level. We provide evidence that job insecurity, as measured by the self-reported probability of job loss, increases stress at work and the risk of clinical depression. We also find that the use of instrumental variables increases the size of the estimated effects. We interpret this as evidence that job insecurity which is outside the control of workers may have much larger effects on mental health. Our findings suggest that employers should worry about the mental health of workers in periods of downsizing, periods which are crucial for the recovery of firms in financial difficulties and which may depend particularly on the productivity of its workers.

We investigate how career disruptions in terms of job loss may impact morbidity for individuals diagnosed with type 2 diabetes (T2D). Combining unique, high-quality longitudinal data from the Swedish National Diabetes Register (NDR) with matched employer–employee data, we focus on individuals diagnosed with T2D, who are established on the labor market and who lose their job in a mass layoff. Using a conditional difference-in-differences evaluation approach, our results give limited support for job loss having an impact on health behavior, diabetes progression, and cardiovascular risk factors.

This study examines the effect of a Medicaid disenrollment on employment, sources of health insurance coverage, and health and health care utilization of childless adults using longitudinal data from the 2004 Panel of the Survey of Income and Program Participation. From July to September 2005, TennCare, the Tennessee Medicaid program, disenrolled approximately 170,000 adults following a change in eligibility rules. Following this eligibility change, the fraction of adults in Tennessee covered by Medicaid fell by over 5 percentage points while uninsured rates increased by almost 5 percentage points relative to adults in other Southern states. There is no evidence of an increase in employment rates in Tennessee following the disenrollment. Self-reported health and access to medical care worsened as hospitalization rates, doctor visits, and dentist visits all declined while the use of free or public clinics increased. The Tennessee experience suggests that undoing the expansion of Medicaid eligibility to adults that occurred under the Affordable Care Act likely would reduce health insurance coverage, reduce health care access, and worsen health but would not lead to increases in employment.

This chapter examines the evolution of the number of days spent on sick leave following the 2011 reform which halved the maximum sick benefit provided by statutory health insurance in Hungary. This policy change sharply decreased benefits for a large group of high earners, while leaving the incentive to claim sickness benefits unchanged for lower earners, providing us with a “quasi-experimental” setup to identify the incentives effect of sickness benefits. We use a difference-in-differences type methodology to evaluate the short-term effect of the reform. We rely on high-quality administrative data and analyze a sample comprised of prime-age male employees with high earnings and stable employment. Our results show that the number of days spent on sick leave fell substantially for those experiencing the full halving of benefits. Estimating the response of the number of sick days with respect to the fall in potential sickness benefits, we find a significant elasticity of −0.45.

Higher replacement rates often imply higher levels of absenteeism, yet even in generous welfare economies, employers provide sick pay in addition to the public sick pay. Using comparative population-representative workplace data for Britain and Norway, we show that close to 50% of private sector employers in both countries provide sick pay in excess of statutory sick pay. However, the level of statutory sick pay is also much higher in Norway than in Britain. In both countries, private sick pay as well as other benefits provided by employers are chosen by employers in a way that maximizes profits having accounted for different dimensions of labor costs. Several health-related privately provided benefits are often bundled. In both countries easy-to-train workers, high turnover and risky work are linked to less extensive employer provision of extended sick leave and sick pay in excess of statutory sick pay. In contrast, the presence of a trade union agreement is strongly correlated with both the provision of private sick pay and extended sick leave in Britain but not in Norway. We show that the sickness absence rate is much higher in Norway than in Britain. However, the higher level of absenteeism in Norway compared to Britain relates to the threshold for statutory sick pay in the Norwegian public sick pay legislation. When we take this difference into account, no significant difference remains.

This chapter uses quarterly county-level data from 2006 to 2014 to examine the direction of causality in the relationship between per capita opioid prescription rates and employment-to-population ratios. We first estimate models of the effect of per capita opioid prescription rates on employment-to-population ratios, instrumenting opioid prescriptions for younger ages using opioid prescriptions to the elderly. We find that the estimated effect of opioids on employment-to-population ratios is positive but small for women, while there is no relationship for men. We then estimate models of the effect of employment-to-population ratios on opioid prescription rates using a shift-share instrument and find ambiguous results. Overall, our findings suggest that there is no simple causal relationship between economic conditions and the abuse of opioids. Therefore, while improving economic conditions in depressed areas is desirable for many reasons, it is unlikely on its own to curb the opioid epidemic.

This study uses migrant household survey data from 2008 to 2009 to examine how parental migration decisions are associated with the nutritional status of children in rural and urban China. Results from instrumental variables regressions show a substantial adverse effect of children’s exposure to parental migration on height-for-age Z scores of left-behind children relative to children who migrate with their parents. Additional results from a standard Blinder–Oaxaca decomposition, a quantile decomposition, and a counterfactual distribution analysis all confirm that children who are left behind in rural villages – usually because of the oppressive hukou system – have poorer nutritional status than children who migrate with their parents, and the gaps are biggest at lower portions of the distribution.