Employer Health Benefit Costs and Demand for Part Time Labor

Abstract

The link between rising employer costs for health insurance benefits and demand for part-time workers is investigated using non-public data from the Medical Expenditure Panel Survey- Insurance Component (MEPS-IC). The MEPS-IC is a nationally representative, annual establishment survey from the Agency for Healthcare Research and Quality (AHRQ). Pooling the establishment level data from the MEPS-IC from 1996-2004 and matching with the Longitudinal Business Database and supplemental economic data from the Bureau of Labor Statistics, a reduced form model of the percent of total FTE employees working part-time is estimated. This is modeled as a function of the employer health insurance contribution, establishment characteristics, and state-level economic indicators. To account for potential endogeneity, health insurance expenditures are estimated using instrumental variables (IVs). The unit of analysis is establishments that offer health insurance to full-time employees but not part time employees. Conditional on establishments offering health insurance to full-time employees, a 1 percent increase in employer health insurance contributions results in a 3.7 percent increase in part-time employees working at establishments in the U.S.