Over at the Business & Economics section of the blog, Sebastian Wisniewski reviews why artificially high miminum wages cause job losses.  Here's another reason: it deprives some low-income earners of health insurance.

Americans are free either to accept or decline health insurance, an important distinction from other countries, which I recently discussed in the Wall Street Journal and a short paper.  However, low-income earners are not free to make this choice because the state forbids them from taking employment below the minimum wage, and some of them would undoubtedly prefer to take health benefits as some share of their remuneration instead, as higher earners do.  In 2006, the California minimum wage was $6.75 per hour and the the median hourly health insurance premium for a single person in the small-group market was $2.02.

Low-earning, childless adults are generally ineligible for Medi-Cal benefits, so must rely on private health insurance if 3rd party health benefits are important to them.  Let's assume that these people pay no income taxes, so are not penalized by the tax code for receiving money wages instead of health benefits.  Nevertheless, if an employer could pay $4.73 per hour plus $2.02 worth of health benefits, some minimum-wage earners would take this package instead of a $6.75 per hour paycheck.  Unfortunately, this is illegal.

Indeed, workers earning more than the minimum wage are subject to the same trap.  In an area where only the median health plan was available in 2006, a worker earning up to $8.77 per hour would be unable to trade money wages for health benefits, because choosing health benefits would result in his wage falling below the minimum.  There is some indication that this "Pay don't Play" tax unnecessarily reduces the number of insured Californians.

In 2007, only Connecticut, Oregon, and Vermont had state minimum wages higher than California's.  Although we cannot draw a strong relationship between minimum-wage laws and annual incomes relative to the Federal Poverty Line (FPL) (because hours worked, as well as wages per hour, affect annual incomes), low earners are oever represented amongst the uninsured in California versus other states, a likely indicator that the high minimum-wage law is artificially inflating the number of uninsured amongst low-income earners.

The table below (from a forthcoming Healthy California briefing paper, to be published by PRI in January). shows the percentage of uninsured in California and the rest of the U.S., averaged over 2005 and 2006, disctributed by household income, according to the Current Population Survey).  (Two words of caution are due here: the actual number of long-term uninsured is likely half the figure that the CPS suggests, and the high number of illegal immigrants in California also skews the number of uninsured here, as discussed in a previous paper).  Nevertheless, the CPS is the most current survey available that reports the uninsured state by state, and the difference between California and the rest of the U.S. is the important thing to note.

3.2 percentage points more of the California population is reckoned as uninsured versus the rest of the U.S. However, this is mostly accounted for by people earning less than 200 percent of the FPL, for which the proportion of uninsured is 2.4 percentage points greater in California, whereas it is only 0.8 percentage points greater for higher-income households.  This highly suggests that California's high minimum wage is forcing low-income workers out of health insurance.  Furthermore, this "Pay don't Play" tax increases every year with the minimum wage: $7.50 in California today, and going up to $8 on January 1 (except in San Francisco, where it will jump to $9.36).