Worker Health and Minimum Wage Increases

Can Increasing the Minimum Wage Make You Healthier?

It’s a complex question. First, we have to determine how to measure health. Then, we need to compare the health of a lot of folks who got minimum wage increases against the health of a lot of folks who did not. And finally, we have to weed out a variety of personal, social and even political issues that also affect people’s health to make sure we isolate the true impact of minimum wage increases.

That’s exactly what Brady Horn, Joanna Maclean, and Michael Strain attempted to do in their research working paper published by the National Bureau of Economic Research in August 2016.

Using data from 1993 to 2014 including 347,421 men and 377,520 women from ages 21 – 54, the researchers studied the health impacts of minimum wage increases on workers whose highest level of education is a high school degree.

But what is “health” and how do you measure it? Think of your health like a car. When people are born, you are a certain kind of car – some people are born as Fiat’s, Jeep’s or Mitsubishi’s (not great health), some are born as Ford’s, Buick’s and Chevy’s (decent health), and some are born as Lexus, Audi’s and Porsche’s (you get the idea). But no matter what, all cars get older. And at times cars require repairs. Sometimes, you want to upgrade your car, such as adding a new stereo system or new tires. Since there are a lot of things to spend money on in life, you have to decide how much to spend on your car and how much to spend on other items. The same can be said for the health of individuals. This idea is referred to as the Grossman Model, developed by Michael Grossman in 1972, and it is widely accepted as an accurate economic health model.

So what does the Grossman Model have to do with measuring health to answer our question? It all comes down to investing in one’s health. Essentially the Grossman Model predicts that as people get wealthier, they get healthier, because they invest in their health through eating well, spending money on the doctor, and exercising, to name a few examples. So, we’d be tempted to predict that as minimum wage increases, people get healthier. But is it true?

Before we look at the results, let’s weed out a lot of other factors that can influence people’s health. The researchers in this study considered individual characteristic, such as race and education, state characteristics (some states are “healthier” than other states), state and national policies that could affect the health of workers, and even month-by-month health trends (people are sicker in certain months than in others). With these many factors controlled for, we can begin observing the results.

In this study health was measured through three survey questions. First, people were asked, ‘In general, how would you rate your health?’ The possible responses are (1) excellent or very good health and (2) fair or poor health. Second people were asked, ‘Now thinking about your physical health, which includes physical illness and injury, for how many days during the past 30 days was your physical health not good?’ And similarly, people were asked, ‘Now thinking about your mental health, which includes stress, depression, and problems with emotions, for how many days during the past 30 days was your mental health not good?’ These questions are subjective, and the researchers recognize this fact, but point out that these self-reported health measures have also been proven to be directly related to real objective health effects, like mortality, in almost a dozen other studies.

So, here are the results. For men who did not experience a minimum wage increase, “50% report their health as very good or excellent while 13% report their health as fair or poor. The average number of days in the last 30 on which men report their physical and mental health was not good is 2.01 and 2.72. Turning to women, 51% report their health as very good or excellent, 14% report their health as fair or poor, and the average number of days in the last 30 on which physical and mental health are reported as not good is 2.67 and 4.21.”

And now let’s compare to those who did experience a minimum wage increase, and for the sake of this study, an increase of $1 per hour. The amount of employed men who reported their health as fair or poor was 6% higher, at 19% versus 13%. However, employed men also reported that they experienced 0.12 fewer bad mental health days, 2.60 versus 2.72. There is no discernible change for any of the health measure among employed women.

It is not clear from this study that increases in minimum wage have any positive effects on workers’ physical health. In fact, there may be evidence to suggest that minimum wage increases have a negative effect on workers’ physical health. However, the study may also show that workers’ mental health is improved by an increase in minimum wage.

There are a number of factors considered by the researchers, which could explain why an increase in minimum wage does not have a clear positive effect on workers’ physical health. First, additional income may not be spent on healthy foods or lifestyles. People may spend money on health-harming products, such as alcohol or cigarettes. Second, many minimum wage earners provide a second source on income for their families, meaning that the family as whole, and the family’s health, may not be effected by an increase in the minimum wage. Third, as minimum wages increase, opportunity for work decreases, and this may offset the effects of a wage increase as fewer jobs are available.

The study does show, however, that increases in minimum wage do positively affect mental health for workers on the whole. As people make more money, people’s financial worries diminish.

So, can increasing the minimum wage make you healthier? It depends. You may worry less about your finances, but it’s not clear that your physical health will improve. In terms of physical health, the study is inconclusive. Many States throughout the country are considering an increase to the minimum wage, and while this may have many effects, a clear impact on physical health is not one of them without further study. 

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Source: Do Minimum Wage Increases Influence Worker Health? Brady P. Horn, Joanna Catherine Maclean, Michael R. Strain, Working Paper 22578, National Bureau of Economic Research, August 2016.