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Who Pays for Public Employee Health Costs?

In: State and Local Health Plans for Active and Retired Public Employees

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  • Jeffrey Clemens
  • David M. Cutler
Abstract
We analyze the incidence of public-employee health benefits. Because these benefits are negotiated through the political process, relevant labor market institutions deviate significantly from the competitive, private-sector benchmark. Empirically, we find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries. Strong teachers' unions were associated with relatively strong linkages between benefit growth and growth in total compensation. We further find that when economic conditions are poor, straining public budgets, benefit growth is more readily shifted back to public employees. Our analysis is consistent with the view that the costs of public workers' benefits are difficult to monitor, contributing to benefit oriented, and often under-funded, compensation schemes.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jeffrey Clemens & David M. Cutler, 2013. "Who Pays for Public Employee Health Costs?," NBER Chapters, in: State and Local Health Plans for Active and Retired Public Employees, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13295
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    18. Marika Cabral & Caroline Hoxby, 2012. "The Hated Property Tax: Salience, Tax Rates, and Tax Revolts," NBER Working Papers 18514, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Brenøe, Anne Ardila & Canaan, Serena & Harmon, Nikolaj & Royer, Heather, 2019. "Is Parental Leave Costly for Firms and Coworkers?," IZA Discussion Papers 12870, Institute of Labor Economics (IZA).
    2. Lutz, Byron & Sheiner, Louise, 2014. "The fiscal stress arising from state and local retiree health obligations," Journal of Health Economics, Elsevier, vol. 38(C), pages 130-146.
    3. Kim, Dongwoo & Koedel, Cory & Xiang, P. Brett, 2021. "The trade-off between pension costs and salary expenditures in the public sector," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(1), pages 151-168, January.
    4. Johnston, Andrew C., 2021. "Preferences, Selection, and the Structure of Teacher Pay," IZA Discussion Papers 14831, Institute of Labor Economics (IZA).
    5. Lubotsky, Darren & Olson, Craig A., 2015. "Premium copayments and the trade-off between wages and employer-provided health insurance," Journal of Health Economics, Elsevier, vol. 44(C), pages 63-79.
    6. Clemens, Jeffrey & Cutler, David M., 2014. "Who pays for public employee health costs?," Journal of Health Economics, Elsevier, vol. 38(C), pages 65-76.
    7. Meiselbach, Mark K. & Abraham, Jean M., 2023. "Do minimum wage laws affect employer-sponsored insurance provision?," Journal of Health Economics, Elsevier, vol. 92(C).
    8. Andrew Chamberlain, 2015. "Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State," Journal of Labor Research, Springer, vol. 36(4), pages 347-388, December.
    9. Byron Lutz & Louise Sheiner, 2014. "The Fiscal Stress Arising from State and Local Retiree Health Obligations," NBER Working Papers 19779, National Bureau of Economic Research, Inc.
    10. Qin, Paige & Chernew, Michael, 2014. "Compensating wage differentials and the impact of health insurance in the public sector on wages and hours," Journal of Health Economics, Elsevier, vol. 38(C), pages 77-87.
    11. Jeffrey Clemens & Lisa B. Kahn & Jonathan Meer, 2018. "The Minimum Wage, Fringe Benefits, and Worker Welfare," NBER Working Papers 24635, National Bureau of Economic Research, Inc.
    12. Nicholas Tilipman, 2022. "Employer Incentives and Distortions in Health Insurance Design: Implications for Welfare and Costs," American Economic Review, American Economic Association, vol. 112(3), pages 998-1037, March.
    13. Morrill, Melinda Sandler, 2014. "Active and retired public employees’ health insurance: Potential data sources," Journal of Health Economics, Elsevier, vol. 38(C), pages 147-152.

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    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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