• Job lock: Labor force participation (prime-aged workers)

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

    Older adults aren’t the only ones considering health insurance options when making labor force participation decisions. Younger adults do so as well. And, it should not be terribly surprising that spouses’ access to coverage can affect those decisions too. A wife or husband may be less likely to work or work less if her or his spouse has secured coverage for the family. And an unhealthy worker who has a greater relative need for coverage than a healthy worker may be more likely to work if her retention of health benefits depends on it.

    Gruber and Madrian found seven studies of the labor force participation of “prime-aged workers who are not single mothers.”* All seven reported statistically significant evidence consistent with the notion that employer-sponsored insurance (ESI) affects labor force participation decisions among married couples and results consistent with job lock for men.

    Four studies—Buchmueller and Valleta (1999)Olson (1998)Schone and Vistnes (1997), and Wellington and Cobb-Clark (2000)—examined the labor force participation of married women. As Gruber and Madrian explain, they all found “strong evidence that the employment and hours decisions of married women do in fact depend on whether or not health insurance is available through a spouse’s employment.”  GAO (2011) reviewed studies from 2001-2011 and found many consistent with job lock. Kapinos (2009) and Murasko (2008), for example, both found that married women worked less if they had coverage through their spouses. And Royalty and Abraham (2006) found that workers with spousal coverage were less likely to work full-time.

    One might be concerned, however, that a married man may be more likely to work and obtain employer-sponsored insurance (ESI) if his spouse has a distaste for market work. In other words, causality could run the other way. Gruber and Madrian read the evidence to suggest that this is unlikely.

    First, Buchmueller and Valletta (1999) find that the effect of husbands’ health insurance on wives’ labor supply is strongest in larger families, which is consistent with the notion that it is the value of health insurance that is driving the results and not simply tastes for market work. Second, Buchmueller and Valletta (1999) find that wives employed in jobs without health insurance work longer, rather than shorter hours, if their husbands have health insurance. In addition, Olson (1998) shows that conditional on working at least 40 hours per week, wives have a very similar distribution of hours regardless of whether or not their husbands have health insurance. Finally, both Buchmueller and Valletta (1999) and Olson (1998) find that husband’s health insurance reduces the probability of full-time employment for their wives quite substantially, but has only small effects on the probability of part-time employment. These findings taken together provide support for a causal explanation for the effect of husbands health insurance on the labor force participation of their wives, rather than a story based on unobserved correlations with tastes for market work.

    Of course, the conclusion that married women are less likely to work if their spouse has ESI coverage doesn’t say much about job lock. Such women are not in any sense “locked” into work. More broadly, however, the studies lend support for the intuition that the presence of health coverage affects the labor market.

    Those labor-market effects can manifest in job lock for prime-aged men, especially for those who have spouses or dependents who rely on that coverage  Two studies have examined the effect of health insurance on the labor force participation of prime-aged men—Wellington and Cobb-Clark (2000) (mentioned above) and Gruber and Madrian (1997). They include the following statistically significant results:

    • Among 25-54 year old men, continuation coverage (i.e., COBRA) increases the probability of exiting and the time out of the labor force by 15%.
    • Among working-age, married women, spousal health insurance reduces labor force participation by 6-12 percentage points, increases part time work by 1.6-3 percentage points, decreases full time work by 7-13.8 percentage points, and reduces hours worked per week by 15-36%.
    • Among married couples with both partners 24-62 years old, spousal health insurance reduces labor force participation by 23% for women and between 4-10% for men. It reduces annual hours worked between 8-17% for women and 4% for white men.

    More recent work by has focused on the effect of health shocks on employment for workers with and without ESI coverage Bradley et al. (2007) examined breast cancer-diagnosed, married women in Detroit. Those with ESI were ten percentage points more likely to remain with their jobs six months after diagnosis than those with coverage from another source; after 18 months, they were 17 percentage points more likely to stay in their jobs. Tunceli et al. (2009) examined cancer survivors 2-6 years after diagnosis, compared to a non-cancer sample. Those with ESI had a higher employment rate after diagnosis, compared to those with another source of coverage or no coverage. Bradley, Neumark, and Barkowski (2013) found evidence that women with own-job ESI reduce their labor supply by 8 to 11% less after a diagnosis of breast cancer compared to women less dependent on own-job ESI for coverage. All these results are consistent with job lock.

    * Single mothers are covered separately, usually in the context of “welfare lock.”

    @afrakt

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