Employment-related health insurance, disability, and labor supply

Health, work, and earnings are all influenced by access to health insurance. Development of public policies which might encourage employment would be aided by quantitative analysis of the interactions between these factors. This study analyzes effects of employment-related health insurance on labor participation and on hours worked for both healthy and disabled persons by simultaneous maximum likelihood estimation of an hours of work equation, corrected for sample selection, and a probit for the probability of work. The primary data source is the 1990 U.S. Census Bureau Survey of Income and Program Participation.; The effects on labor supply of health insurance through the worker's job or through a spouse's job in addition to wages and salaries, unearned income, demographic factors, and disability status are considered. Disability is measured for adults by limitations in activities of daily living (ADLs), instrumental activities of daily living (IADLs), or mobility tasks. For children, disability is defined as limitations in age-appropriate functions necessary for play, school, or mobility. Mental health is measured as mental illness, mental retardation, or developmental disability. Interactions of insurance with mental and physical health of the worker and family members are also modelled.; Results indicate that disability is associated with large and statistically significant reductions in both labor force participation and hours of work. These negative effects are mitigated only partially by employment-related health insurance. Mental disorders have more profound negative impacts on labor supply than do functional limitations. For all workers, healthy and disabled, employment-related health insurance increases work an average of 24 hours per month. For workers with functional limitations, job-related insurance is associated with 2 additional work hours per month per limitation. Health insurance through a working spouse's job has no effect on labor supply except for persons with mental disorders who work about 22 fewer hours per month. Thus, employment-related health insurance significantly affects labor supply; the direction and magnitude of this impact differs by type and extent of disability.