Effects of the Minimum Wage on Infant Health

HealthyBabyThe minimum wage has increased in multiple states over the past three decades. Research has focused on effects on labor supply, but very little is known about how the minimum wage affects health, including children’s health.

What follows is an excerpt from a paper, published by the National Bureau of Economic Research, that links a higher minimum wage to improved health outcomes for infants, specifically increase in birth weights driven by increased gestational length and fetal growth rate. 

The Working Paper is available from the National Bureau of Economic Research.

Effects of the Minimum Wage on Infant Health

By George Wehby, Dhaval Dave, Robert Kaestner
Published by the National Bureau of Economic Research, www.nber.org

Changing the minimum wage is one of the most common ways that policymakers use to increase income among low-skilled persons. It is also one of the most controversial. Recently, there has been several relatively large increases in minimum wages. Seattle, San Francisco, Los Angeles, New York and Washington DC all have $15 minimum wage laws on the books. These minimum wage rates are double the current federal level minimum wage, and other states are contemplating similar increases. President Obama passed an executive order raising the minimum wage of federal contractors to $10.10. The flurry of recent, legislative activity on the minimum wage and the size of recent minimum wage increases have renewed once again the debate over the value of minimum wage statutes.

Proponents of increasing the minimum wage suggest that it would increase earnings and reduce income inequalities. Opponents, however, argue that an increase in the minimum wage will raise employers’ cost of labor, decrease employment and raise prices. The debate is fueled by the fairly mixed evidence on the effects of the minimum wage on employment with some studies finding no significant changes in employment, while others finding a modest decline. Findings related to earnings are more consistent and show that minimum wages raise wages for low-skilled workers.

Notably, potential effects of the minimum wage on non-labor market outcomes such as health are not commonly considered in the debate, which is an oversight, as such effects are important for understanding the full impact of minimum wage policies. Economic theory suggests that an increase in the minimum wage may improve health among workers through an income effect. However, if a higher minimum wage reduces employment for some individuals, this can result in an opposite effect for that group. Effects on health may be particularly relevant for infants because of the short, but critical period of gestation that influences infant health; increases in income around the time of pregnancy can affect both maternal health, for example, because of better nutrition and less financial stress, and their babies’ health. Evidence from other income-enhancing policies including the earned income tax credit (EITC) indicates a positive effect on infant health among poor mothers. Therefore, understanding how minimum wage changes affect infant health is essential for understanding not only short-term consequences, but also potentially long-run impacts on health given the importance of early life status for long-term wellbeing.

We provide one of the first studies of the effects of minimum wages on infant health. Specifically, we evaluate how state-level minimum wages affect birth weight, gestational age, and fetal growth among births in the US between 1989 and 2012. We employ a difference-in-differences approach to obtain estimates of the effect of minimum wages that are plausibly interpreted as causal. Focusing on a sample of low-educated women, we find that an increase in the minimum wage is associated with a significant increase in birth weight: a $1 increase in the minimum wage increases birth weight by about 11 grams, which would imply an 85 grams increase with a $7.75-dollar increase in the minimum wage from the current federal level of $7.25 to $15. A $1 increase in minimum wage is also associated with a 0.2 percentage point, or 2%, decrease in the probability of low-birth weight. Changes in birth weight and low-birth weight of these magnitudes are clinically important, particularly because they are population averages that mask larger effects for some portion of the sample, and suggest that minimum wages may have important and long-lasting effects on health.

Mechanisms Linking Minimum Wage and Infant Health
Conceptually, an increase in the minimum wage can improve infant health through a positive income effect on maternal health and health behaviors that can have effects on fetal health. As noted above, the majority of studies examining earnings report an increase in hourly or weekly wages following a rise in the minimum wage, with larger effects among women than men (Belman et al., 2015; Congressional Budget Office, 2014). Greater income from an increase in the minimum wage can improve nutrition. As noted above, there is evidence linking a higher minimum wage to lower BMI, which may also occur through a higher minimum wage raising prices of out-of-home food consumption (Meltzer & Chen, 2011). More generally, an increase in income may affect consumption of healthy and unhealthy goods such as alcohol and smoking. Greater income may increase medical care such as prenatal care services, particularly among those who are in low-paying jobs, likely to be affected by the minimum wage and likely to be without health insurance. Increased income may increase financial security, which may reduce maternal stress, a factor linked to fetal growth (Camacho, 2008). As noted above, there is also some evidence linking the minimum wage to fewer days in poor mental health among workers (Horn et al., 2016). There may be additional effects stemming from these changes, for example, greater financial security, less stress and improved mental health may reduce health behaviors such as smoking that are often used to treat stress (Byrne & Mazanov, 2016; Saffer & Dave, 2005).

On the other hand, the positive effects of the minimum wage through increased earnings among workers may be offset by potential declines in employment. Two studies reported employment declines when focusing on very low-educated women (Pinoli, 2010; Sabia, 2008). Given the evidence of an increase in earnings relative to the decline in employment, however, it is reasonable to hypothesize a net positive income effect on infant health among low-income women. Using data from the Current Population Survey (CPS), we provide some evidence of an increase in household income and in annual as well as hourly earnings on average among low-educated women of childbearing age, which is the sample we focus on for examining effects on children’s health.

If the minimum wage affects employment, this may also lead to reallocation of time use due to the easing of time constraints and an increase in non-work/leisure time. Greater availability of time, ceteris paribus, may lead to an increase in time-intensive activities, including certain health-promoting behaviors such as preparing healthy meals at home and exercising or obtaining preventive healthcare.

An increase in the minimum wage may also reduce reliance on welfare programs such as food stamps (SNAP). There is evidence of a decline in enrollment and expenditures on the Supplemental Nutrition Assistance Program (SNAP) with increasing minimum wage rates (Reich & West, 2015). However, there is no evidence for effects on other welfare program participation such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Medicaid enrollment, housing assistance programs, and cash assistance programs including Aid to Families with Dependent Children (AFDC) and Temporary Aid to Needy Families (TANF) (Sabia & Nguyen, 2015).

Finally, price effects related to the minimum wage may result in reduced consumption, some of which may have adverse effects on maternal and infant health such as food consumption, grocery shopping and housing improvement. However, evidence suggests very modest increases in prices with the largest effects on restaurants (MaCurdy, 2005).
Overall, the evidence on the effects of the minimum wage on employment, earnings, participation in social welfare programs and prices suggest that the minimum wage will have salutary effects on maternal and infant health. This is because the dominant effect of the minimum wage is to raise incomes of workers. There are small offsetting effects related to employment loss and higher prices, although higher prices may reduce consumption of unhealthy goods as well as healthy products. Thus, we expect that the minimum wage will be positively associated with infant health.

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