What's the Effect of Minimum Wage on Health? With Push to $15 an Hour, We May Find Out

Although what is known about the impact of rising minimum wages on health is just beginning, the research that is available points to some important health benefits, according to a new policy brief in Health Affairs.

And a possible new source of data to mine could arise over the next few years, stemming from Amazon's announcement this week that it will raise its minimum wage to $15 an hour for its employees in the United States, including workers hired through temporary agencies, seasonal workers, part-time workers, as well as workers in its Whole Foods grocery store chain.

The current federal minimum wage is $7.25 per hour, and Amazon has said that it will lobby Washington, DC, to raise the rate nationwide to $15. Amazon’s home state, Washington, has the highest minimum wage ($11.50), and California’s minimum wage is scheduled to increase to $15 by 2023. In 21 states, the minimum wage is $7.50. A growing number of cities and counties have set local minimum wages.

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Liberal politicians like Senator Bernie Sanders, I-Vermont, and unions have long charged that the pay of retail and online workers should not be so low that employees are forced to apply for federal benefits like food stamps and Medicaid.There are 3 questions the authors of the brief address: Why does the minimum wage matter? What does research over the past 50 years suggest about the effects of minimum wage increases on unemployment and poverty, which are 2 factors that can affect health? Lastly, what does recent research suggest about the effects of minimum wage increases on the health of low-wage workers?

First, there are 2 sides as to why a discussion of the minimum wage matters. Opponents of raising it claim that widening wage inequality and falling wages are the results of the decline in manufacturing jobs, not changes in minimum wages. They also cite research that says rising minimum wages will results in higher unemployment or fewer work hours, with women and minorities bearing most of the burden.

Proponents of raising the minimum wage cite the decades-long slide in the inflation-adjusted value of the federal minimum wage, as well as declines in inflation-adjusted wages for lower-skilled workers. From 1979 to 2013, wages have risen for those at the highest level, but have remained stagnant for those in the middle or fallen for those at the very bottom.

Effect of Minimum Wage on Unemployment and Poverty

Traditional economic theory holds that an increase in price leads to a reduction in demand. However, is the price for labor the same as a price for a product? Some economists think not; increasing wages could have the effect of increasing the quality of work performed by improving worker morale and other factors. An increase in quality would offset the increase in wages, and effect on employment could be minimal.

As far as poverty is concerned, the authors wrote that the effect of rising wages depends on what happens to 3 different groups:

• The nonworking poor who are not currently in the labor market
• The working poor, if their incomes are raised above the federal poverty level
• People who would be newly unemployed due to increased minimum wages

The nonworking poor are not affected, unless the increased minimum wage convinces them to enter the labor market. The working poor would see an increase in minimum wages, assuming any reductions in work hours are modest. However, a rising wage would reduce the incomes of people who become unemployed.

The overall effect on the poverty rate depends on the combined effects on unemployment, hours worked, and wages of the working poor.

Effect of Minimum Wage on Health

At least 3 mechanisms could link higher wages to changes in health status, the authors wrote.

Higher wages could make it easier for workers and their families to afford medical care, health insurance, and homes in safe neighborhoods.

On the other hand, higher wages could make “heath-harming” products more affordable: tobacco, alcohol, fatty foods, and illegal drugs. However, some research finds that higher wages correlate with lower cigarette use and lower obesity prevalence, which indicates that affordability is not the only factor behind consumers’ choices to purchase and consume unhealthy products.

Second, higher wages could improve job satisfaction, and higher job satisfaction may improve worker health.

Third, higher wages could increase the “opportunity costs” of leisure, which could have either beneficial or harmful effects. Workers might be encouraged to work more hours and have fewer leisure hours. If work increases health and safety risks, compared with leisure, this third effect could harm health. But if work involves exercise or enhances social contacts, or if leisure leads to health-harming activities, this third effect could enhance health.

Most evidence suggests that increases in minimum wages decrease smoking and the number of days with health limitations and increase birthweights among infants of low-wage or low-skilled workers. Effects are more mixed for other populations, such as teenagers and noncontinuously employed adults.

Compared with many other social supports, minimum wages are generally not viewed as handouts, the authors wrote. A higher minimum wage generates no direct burden on taxpayers, and the job satisfaction associated with higher wages may translate into improved health.

They note that family economic security is an important social determinant of health and suggested avenues for future research, such as whether minimum wages have different effects across populations and health outcomes.

Another possibility is to see whether varying levels of increases—for example, $12 versus $15—have different impacts.

In that regard, with Amazon employing more than 250,000 employees across multiple states with different levels of minimum wages, it is entirely possible that Jeff Bezos, Amazon’s chief executive officer and the world’s richest man, has just created another gift for health policy nerds, who are still waiting to see what impact the company's employee healthcare venture with JPMorgan Chase and Berkshire Hathaway will have.