• Job lock: Job mobility

    Links to all posts in the series to which this post belongs are in the introductory post

    My last several posts described research relating health insurance to labor market participation. That’s one vector for job lock—health insurance incentivizing entering or staying in the labor force. But there’s another, and more commonly studied, vector for job lock—staying with a particular firm for the coverage it offers, stifling job mobility (aka, affecting job choice or job turnover).

    Gruber and Madrian surveyed 18 papers in this area, finding a mixed literature. Six studies found statistically significant results consistent with job lock. Six returned only statistically insignificant results. Results in six other studies were mixed or could not be evaluated.

    A principal challenge in the study of the effect of health insurance on job mobility is that it’s difficult to disentangle whether someone has declined to switch jobs because of health insurance or, instead, because of other job-related factors. Confounding arises because some job-related factors (e.g., other benefits) are correlated with the availability of employer-sponsored insurance. If an employee stays at a firm that offers ESI, is that because he prefers the other benefits of working at that firm? Or because of the ESI? How could you tell?

    The identification strategy pursued in almost all of the other analyses of job turnover has been to compare the probability of job departure or turnover of otherwise observationally equivalent employees who differ only in the value that they are likely to place on a current employer’s health insurance policy. Various measures of the value of health insurance have been used. These include: [1] Health insurance coverage from a source other than one’s current employer, most often through a spouse or some sort of continuation coverage such as COBRA; [2] Family size; [3] Health conditions; [4] Health status. [References to papers employing each of these measures omitted.]

    These approaches have their strengths, but no study is ideal; the authors discuss various limitations of work in this area (omitted here for brevity). However, one 1994 paper by the two authors is singled out as particularly strong because it “uses a completely exogenous source of non-own-employment based health insurance.” The study exploited variations in state laws that mandated continued access to employer-provided health insurance for the non-employed (state laws akin to COBRA). They found that continuation coverage increased turnover by 10% and interpret it as a lower bound because the high cost of continuation coverage policies make it unlikely that the state laws fully alleviated job lock.

    Gruber and Madrian summarize the disparate findings in this area by using them to bracket the likely size of job lock. Their own work based on continuation coverage policies provides a lower bound, while work based on spousal insurance coverage provides an upper bound.

    Our view is that the approach of using alternative sources of insurance is more credible. Both approaches suffer from potential endogeneity problems, but the health/expected expenditures approach has a host of additional difficulties that do not arise with the alternative insurance approach. Moreover, within this alternative insurance approach the research by Gruber and Madrian (1994) provides an estimate which is likely free of endogeneity bias, by using variation in state and federal continuation of coverage mandates. So a conservative approach to reading this literature would be to take the results of Gruber and Madrian (1994) identified from continuation of coverage laws as providing as lower bound 10% estimate of the magnitude of job-lock, and the results from the spousal insurance approach as providing an upper bound estimate of 25-35% (Madrian, 1994b; Buchmueller and Valletta, 1996). [Links added.]

    GAO (2011) reviewed studies from 2001-2011 and found most consistent with job lock including Adams (2004) and Gilleskie et al. (2002). The former found that among 25-55 year old, married men, ESI reduces job mobility by 22.5% for those without alternative coverage. The latter, that among 24-35 year old, married males, ESI reduces job mobility by 10-15%.

    Despite their potential methodological weaknesses, many (though a minority) of studies of the effect of health insurance on job mobility did not find consistent, statistically significant results indicating job lock. If one was motivated to argue against job lock, this is where one should look, though it requires willfully ignoring the majority of studies that do find a statistically significant job lock effect. Of course, it’s important to keep in mind that the effect of health insurance on job mobility is only one kind of job lock. It tells you nothing about its effect on labor force participation, covered earlier in the series.


    Comments closed