Do Minimum Wages Affect Non-Wage Job Attributes? Evidence on Fringe Benefits

Abstract

Although many studies have tested neoclassical labor market theory's prediction that employers will react to binding minimum wages by reducing employment levels, much less empirical research has explored the possibility that employers also respond to minimum wages by adjusting non-wage components of the job, such as fringe benefits, job safety, and access to training. Using Current Population Survey data for 1979–2000, this study investigates the effect of minimum wage legislation on the provision of employer health insurance and employer pension coverage. The authors examine effects of state and federal variation in minimum wages on groups likely to be affected by the minimum wage, and compare these effects to estimates found for groups unlikely to be affected. Whether the analysis uses only state-level variation or federal and state variation in minimum wages, the results indicate no discernible effect of the minimum wage on fringe benefit generosity for low-skill workers.