2005 May 09 Monday
Obese Workers Paid Less Only When Receiving Employer Provided Medical Insurance

The invisible hand of the market triumphs once again.

STANFORD, Calif. - Studies have consistently shown that obese employees are paid less than normal-weight employees doing similar jobs, leading many people to attribute the gap to prejudice against workers based on their appearance.

But new research from Stanford University health economists adds another wrinkle to understanding these pay differentials: obese workers are paid less only when they have employer-sponsored health insurance.

These findings, just published in a working paper on the Web site of the National Bureau of Economic Research, suggest that employers-recognizing that obese workers are likely to have higher medical costs-compensate with lower pay for them. Given that employment-based health insurance requires that employees in the same plan make the same contributions to premiums, the employers adjust wages to account for the greater expense for obese workers' health care, according to the paper.

"A self-correcting mechanism is at work in the labor market," explained study co-author Kate Bundorf, MPH, PhD, assistant professor of health research and policy at Stanford and a fellow at the university's Center for Health Policy/Center for Primary Care and Outcomes Research. The study doesn't address whether the wage disparity is fair, she noted; it simply demonstrates that there are strong economic incentives for employers to adjust for the varying costs of providing medical benefits to different types of workers. "Our findings reinforce that these market forces are powerful," she said.

The findings also shed light on the question of who bears the cost of obesity-related health care. While it is often assumed that obese workers' medical expenses are passed on to their employers and normal-weight co-workers, the Stanford study indicates that obese workers are paying for it themselves through lower wages.

The market is efficient!

One consequence can be inferred from this result: the rapidly rising cost of health insurance is suppressing wage gains for most workers who receive medical benefits from their employers.

Aside from providing insight into the costs of obesity among workers, the study provides perhaps the strongest evidence to date that the costs of employer-sponsored health insurance are, in fact, passed on to workers through lower wages. By implication, insured workers should be just as alarmed by rising health-care costs as their employers are.

One thought: Once DNA sequencing becomes cheap if employees are allowed to volunteer their DNA sequencing results to employers then employers would be able to better ascertain the odds of illness by employees. Then employees with excellent genetic profiles would benefit from revealing their genetic profiles to employers. One can even imagine job hunters with excellent genetic profiles posting them on web sites with some authentication service certifying the accuracy of the sequence data. Then employers looking for employees could examine the DNA sequences of potential hires before having any direct contact with job seekers.

Share |      By Randall Parker at 2005 May 09 02:01 PM  Economics Health

Matthew Cromer said at May 10, 2005 5:23 AM:


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