The effect of obesity or disability on the wages on employees in employer-sponsored health insurance plans

As labor can be compensated through either wages or non-wage (fringe) benefits, employers have incentives to reduce wages of employees in response to the costs of non-wage benefits (Woodbury, 1983). Health insurance is different than most fringe benefits as costs associated with it vary substantially across different individuals in an often uniform and observable way (Levy and Feldman, 2001). Evidence of whether wage penalties are made in response to the provision of employer-sponsored health insurance (ESI) is mixed, and evidence of whether potential penalties are levied more heavily on those with expected or actual high health care costs, like those who are obese or have physical disabilities, has not been well documented. This research explores this relationship using the University of Michigan Health and Retirement Study from 2006. This research tests the hypotheses that wages are lower for full-time workers with ESI obtained through their employer than those without; lower for obese full-time workers with ESI than obese full-time without; and lower for physically disabled full-time workers with ESI than physically disabled full-time workers without. It also tests whether wages are similar between the obese and disabled, and if there are race or gender effects. The findings of this research do not support any of these hypotheses. Employer-sponsored insurance has no significant effect on wages, whether obese, disabled, or not.

Obesity

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