NCPA - National Center for Policy Analysis

WHY OBESITY LOWERS WAGES

September 14, 2005

The incidence of obesity has increased dramatically in the United States. Obese individuals tend to be sicker and spend more on health care, raising the question of who bears the incidence of obesity-related health care costs. This question is particularly interesting among those with group coverage through an employer given the lack of explicit risk adjustment of individual health insurance premiums in the group market.

Because obesity is associated with increased risk for a range of chronic conditions, health care costs are higher for obese than for normal weight individuals. Annual medical expenditures are $732 higher on average for obese individuals than for normal weight individuals.

The National Bureau of Economic Research examined the incidence of the healthcare costs of obesity among full time workers. The authors found:

  • The incremental healthcare costs associated with obesity are passed on to obese workers with employer-sponsored health insurance in the form of lower cash wages.
  • Obese workers in firms without employer-sponsored insurance do not have a wage offset relative to their non-obese counterparts.
  • The authors' estimate of the wage offset exceeds estimates of the expected incremental health care costs of these individuals for obese women, but not for men.
  • They also found that a substantial part of the lower wages among obese women attributed to labor market discrimination can be explained by the higher health insurance premiums required to cover them.

Prior studies generally have found that obese workers have lower wages and that the wage reductions cannot be explained by variation in worker productivity. With this evidence, many claim that obese workers - particularly women - are victims of wage discrimination. In contrast, the authors argue that they are not victims of wage discrimination, but rather suffer the costs of their poor health.

Source: Les Picker, "Why Obesity Lowers Wages," National Bureau of Economic Research, NBER Digest, August 2005. Based on: Jay Bhattacharya and M. Kate Bundorf, "The Incidence of the Healthcare Costs of Obesity," National Bureau of Economic Research, Working Paper, No. 11303, May 2005.

For text:

http://www.nber.org/digest/aug05/w11303.html

For abstract:

http://papers.nber.org/papers/w11303

 

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