Labor Economics

Does improved health impact earnings?

According to a recent paper by Stephens and Toohey (2022), the answer is ‘yes’.

This paper examines the labor market effects of a randomized health intervention of working-age men that was focused on reducing mortality due to coronary heart disease, the leading cause of death in the United States. MRFIT succeeded in improving the health of the Special Intervention group along several dimensions. We find that the intervention also significantly increased earnings by 3 percent and family income by 4 percent with no concurrent effect on labor force participation.

The authors note that there are other potential causal mechanisms to consider. For instance, perhaps better health makes you more attractive looking to the other (or same) sex and attractiveness leads to higher earnings. Alternatively, it could be the case that better health leads to longer longevity which could impact human capital investments. Despite these alternative explanations, the authors find that observed increase in wages is likely a direct impact that improved health has on productivity.

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