Employment Sorting by Size: The Role of Health Insurance (Text Version

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On September 16, 2009, Barbara Schone made this presentation at the 2009 Annual Conference. Select to access the PowerPoint® presentation (998 KB).

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Slide 1

Employment Sorting by Size: The Role of Health Insurance

Lan Liang and Barbara Schone
 

 

Slide 2

Goals of Our Analysis

• To add to the literature on the labor market effects of obesity
• To investigate whether obesity has an impact on worker sorting
• Two types of sorting of key interest:
  • Sorting by firm size
  • Sorting by insurance availability at a job
• Use similar approach to Kapur et al. (2008)

 

Slide 3

The Policy Relevance of Obesity

• According to the CDC ~ 34% of all adults are obese (2005 - 2006)
• Obesity is correlated with a number of serious health conditions
• Expected medical expenses are higher for obese individuals

 

Slide 4

Measuring Obesity

• Based on Body Mass Index (BMI)
  • BMI = Weight (lb)/Height2 (in) x 703
• BMI is correlated with body fat (but not perfectly)

 

Slide 5

What Do We Know about Labor Market Outcomes & Obesity?

• Some evidence that obesity adversely affects wages
• Mixed evidence that employment is affected
• Obesity may adversely affect worker productivity
• Some evidence of discrimination against obese workers
• Many of the effects vary across men and women

 

Slide 6

How Might Weight Affect Sorting across Firms for Insurance?

• With higher expected medical costs, obese workers might have greater demand for insurance
• Higher expected medical costs might lead firms to avoid obese workers since obesity is observable (if there are no full wage offsets)
• Normal weight people might find insurance less attractive and have reduced demand
• Net Effect: Insurance coverage could either increase or decrease for obese workers

 

Slide 7

How Might Weight Affect Sorting across Firms by Firm Size?

• If absenteeism is higher for obese workers, smaller firms might have a harder time adjusting to absenteeism and may be more inclined to avoid obese workers
• Obese workers may be more attracted to firms with generous benefits (e.g., sick leave) and may be more inclined to work in large firms as a result
• Net Effect: Obese workers are expected to be more likely to be employed in large firms

 

Slide 8

The Interaction of Firm Size and Insurance

• Large firms will also be more attractive because they are more likely to offer insurance
• Due to greater risk-pooling opportunities, an obese worker will have a smaller effect on the pool in a large firm than a small firm
• Net Effects: Conditional on offering insurance, obese workers may be more likely to be employed in large firms

 

Slide 9

Specific Research Questions

• How does weight affect the likelihood of being employed in a small firm?
• How does weight affect the likelihood of being employed in a job that offers insurance?
• Does weight affect the interaction effects of being in a small firm and being offered insurance?
• Do the patterns differ between men and women?

 

Slide 10

Data

• MEPS Full Year Data from 2002-2004
• Single Employed Persons Aged 21-64
• N = 14,150
• Results are weighted and adjust for the complex survey design

 

Slide 11

Measuring BMI

• Based on self-reported height and weight information
• 4 Weight Categories
  • Underweight (BMI < 18.5)
  • Normal (18.5 = BMI <25)
  • Overweight (25 = BMI < 30)
  • Obese (BMI = 30)

 

Slide 12

Key Dependent Variables

• Whether a worker is offered insurance from his main job
• Whether a worker is employed in a small firm
  • Use firm size = 25 for main results
  • Data report establishment, not firm size
  • Use establishment size and whether a firm has multi-establishments to derive a conservative measure of small firm

 

Slide 13

Descriptive Information

	Underweight	Normal Weight	Overweight	Obese
Proportion of Workers Employed in a Small Firm
All Workers	54.4	41.4	40.5	38.5**
Men	54.7	44.3	43.7	42.4
Women	54.3	38.9	35.4	35.5**
Proportion of Workers Offered Employment-Based Insurance
All Workers	64.9	68.3	69.6	73.2***
Men	62.0	63.5	66.5	70.2***
Women	65.9	72.4	74.6	75.5**

 

Slide 14

Interactions between Firm Size and Offers

	Small Firm & Offered	Small Firm & No Offer	Large Firm & Offered	Large Firm & No Offer
Men
Underweight	34.8	20.1	26.8	18.5
Normal	18.0	26.3	45.7	10.0
Overweight	18.4	25.3	48.0	8.3
Obese	21.2*	21.2***	49.0*	8.6
Women
Underweight	25.8	28.5	41.8	3.9
Normal	19.7	19.2	53.1	8.0
Overweight	18.7	16.6	56.1	8.6
Obese	19.2	16.3**	56.5*	7.9

 

Slide 15

Key Patterns

• Relative to Normal Weight Persons:
• Obese women are less likely to work in a small firm
• Obese workers are more likely to be offered insurance
• Obese workers are more likely to work in a large firm that offers insurance
• Obese men are more likely to work in a small firm that offers insurance (p < .10)

 

Slide 16

Multivariate Analysis

• Logit Models
  • Being employed in a small firm
  • Being employed in a firm that offers insurance
• Multinomial Logit with 4 Outcomes:
  • Small firm & offered
  • Small firm & not offered
  • Large firm & offered
  • Large firm & not offered
• Overall and by Gender
• Controls include sex, age, race/ethnicity, education, children, health status, region, MSA, unemployment, year dummies

 

Slide 17

Logit Results Odds Ratios

	Pr (Small Firm)	Pr (Offered HI)
All:
Underweight	1.74***	0.85
Overweight	0.91	1.15**
Obese	0.87**	1.37***
Men:
Underweight	1.48	1.04
Overweight	0.96	1.12
Obese	0.90	1.40***
Women:
Underweight	1.82***	0.79
Overweight	0.85***	1.18*
Obese	0.85***	1.34***

 

Slide 18

Multinomial Logit Results Odds Ratios

	Underweight	Overweight	Obese
Ref:  Large/Offer
Large/No Offer	1.10	0.91	0.82*
Small/Offer	1.95***	0.95	1.01
Small/No Offer	1.59*	0.85**	0.71***
Ref:  Large/No Offer
Small/Offer	1.78	1.04	1.22
Small/No Offer	1.45	0.94	0.86
Ref:  Small/Offer
Small/No Offer	0.82	0.90	0.70***

 

Slide 19

Key Findings from Logits

• Obese workers are (relative to normal weight):
  • Less likely to work in a small firm
  • More likely to work in a firm that offers insurance
  • Small firm result is not statistically significant for men
• Overweight workers are (relative to normal weight):
  • Less likely to work in a small firm
  • More likely to work in a firm that offers insurance
  • Not statistically significant for men

 

Slide 20

Multinomial Logit Findings

• Relative to normal weight, obese:
  • Workers are less likely to be in a small firm without insurance than a small firm with insurance
  • Workers are less likely to be in a large firm without insurance than a large firm with insurance
  • Workers are less likely to be in a small firm without insurance than a large firm with insurance offered

 

Slide 21

Implications

• Firms that offer insurance are not avoiding obese workers
  • Demand effects outweigh supply effects or
  • Maybe there is a full wage offset
• No statistically significant evidence that small firms are avoiding obese workers (with or without insurance being offered)
• Driven by women more than men
• Could we observing behavior driven by normal weight workers rather than obese or overweight workers?

 

Slide 22

Relevance

• Efficiency of labor markets
• Efficiency of health insurance

 

Slide 23

Future Steps

• Add married workers as an additional control group
• Compare obesity effects to unobservable conditions
• Consider hires of workers and worker separations