March 6, 2018

What a Difference a Dollar Makes

Raising the minimum wage by just $1 an hour can reduce absenteeism by almost 10 percent.

Money can't buy everything, but it sure can affect your health. Companies worried about what raising the minimum wage of their workers might do to their bottom line should consider this: Raising the minimum wage by just a dollar an hour meant workers missed less time from work due to illness. Self-reported good or excellent health also improved when the minimum wage was higher.

These are the findings of a recent study that looked at the relationship between the state or federal minimum wage — whichever applied — and how often a state's workers called in sick.

Raising the minimum wage did not lead to increased layoffs or total work hours, undermining the claim that a rise in the minimum wage will lead to more unemployment.

Researchers looked at data gathered over 17 years on employment, income, illness and minimum wage for 19,000 people from over 5,000 families. The state workers were mostly people with a high school education or less.

There was either a 19 percent or a 32 percent drop in illness-related absence from work for every $1 per hour rise in the minimum wage, based on two different statistical treatments of this information. The effect was even larger for people who had the lowest incomes and people who did not work year-round.

For every $1 increase in the minimum wage, between about five and a half and nine and a half fewer hours per worker were lost to illness each year. Yet whenever there's a debate about raising the minimum wage, both conversation and research seem to focus solely on corporate health, not people's health. The study offers some concrete evidence that a rise in the minimum wage is good for people's health, and ultimately, companies' bottom lines.

“The minimum wage generates contentious debates, virtually all of them focused on economics,” said researcher Paul Leigh, a professor of public health and researcher with the Center for Healthcare Policy and Research at the University of California, Davis. “Our results support raising minimum wages because it can lead to previously unmeasured reductions in job absences and improvements in worker health.”

Raising the minimum wage did not lead to increased layoffs or total work hours, undermining the claim that a rise in the minimum wage will lead to more unemployment.

This isn't the first study to point out that the relationship between income and health, one that even extends to how long a person can expect to live. The connection between poverty and poor health is often viewed in terms of the cost of insuring wage-earners who cannot pay much for health insurance, but the relationship between economics and health also runs in a different direction: healthier workers mean a healthier bottom line.

The authors hope that the next time the conversation turns to raising the minimum wage, it covers worker health as well as corporate health. As this study suggests, the two are very closely connected.

The study appears in the B.E. Journal of Economic Analysis and Policy.

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