Raising the Minimum Wage Saved Lives
By Atheendar Venkataramani, MD, PhD
March 12, 2021
Atheendar Venkataramani is a physician and economist at the University of Pennsylvania, a senior fellow with the Leonard Davis Institute of Health Economics*, and a member of the 2021 Tradeoffs Research Council. His research focuses on health and socioeconomic inequality. His research focuses on health and socioeconomic inequality.
One of the most contentious omissions from the newly passed COVID relief package was a proposed increase of the federal minimum wage to $15 per hour. The public health consequences of minimum wage increases have received relatively little attention in these debates even though it is well known that economic insecurity harms health. That suggests increased financial security from a higher minimum wage could offer positive benefits for health, and a recent study shows that state-level minimum wage increases have actually saved lives.
The 2020 study published in the Journal of Health Economics by William Dow, Anna Godøy, Christopher A. Lowenstein and Michael Reich examined the impact of minimum wage hikes between 1999 and 2017 on mortality from suicide, alcohol-related causes and drug overdoses, the so-called “deaths of despair” that have been rising among lower-income, less educated Americans over the last 20 years.
To pin down the causal effects of rising minimum wages on suicide, alcohol, and drug overdose deaths, the authors treated each state’s increase as a natural experiment, examining how death rates among people with a high school degree or less changed in states implementing an increase at a given time versus rates in states not raising their minimum wage. They found that a 10% increase in minimum wages led to a 2.7% reduction in suicide death rates among people with a high school degree or less.
These effects were more pronounced for women and did not differ across race and ethnicity. The authors found a similar decrease in suicides when states increased their Earned Income Tax Credit (EITC), which also benefits low-income families. They did not, however, find any impacts of EITC or minimum wage hikes on deaths from drug overdoses or alcohol-related causes. All together, they found that raising the minimum wage and EITC prevented more than 8,000 suicides over the 19-year study period and that raising the generosity of both benefits by 10% could prevent nearly 800 each year.
These findings echo those from other scholars, who have found similar associations between minimum wage hikes and reduced rates of suicide and depression, among other health outcomes. They also relate to a growing literature on the importance of a range of social policies for population health.
Still, there is much we don’t yet know. The highest minimum wage adopted during the period the authors studied was $12, so the extent to which these results apply to a $15 minimum wage is not known. The increasing number of cities and states adopting the $15 standard will enable similar studies to ascertain their health impacts. In addition, minimum wage and EITC policies apply primarily to people with jobs. Intriguing new evidence from a pilot experiment in Stockton, California, suggests that basic income grants (also known as a “basic universal income”), for which eligibility does not depend on employment, may have positive effects on mental health.
It seems likely that the Biden-Harris administration and Congress will continue to pursue ambitious social and economic policies, and the potential health effects of these policies should be of interest to all of us.
*The Leonard Davis Institute of Health Economics is one of Tradeoffs’ financial supporters, and their support has no influence on their inclusion in Research Corner.