Higher pay, healthier babies

By Jim Schnabel

Published on December 22, 2016

smiling babyTo raise or not to raise the minimum wage? It’s a hotly debated question among policymakers and economists these days, because the overall economic impact of raising minimum wages isn’t yet well understood. But a new University of Iowa study suggests that decision-makers should be looking at broader impacts, for it finds evidence that increases in the minimum wage lead to improvements in infant health.

“Effects of the minimum wage on secondary outcomes such as health often go unconsidered in the debate, which is an oversight,” says George Wehby, CPH associate professor of health management and policy and lead author of the study.

A baby’s health depends critically on the mother’s health during pregnancy, and economists know that a higher income can improve maternal health in various ways, for example by enabling better diet, improving access to prenatal care, and/or reducing stress.

To investigate this issue in the context of minimum wage raises, Wehby and colleagues Dhaval Dave of Bentley University and Robert Kaestner of the University of Illinois at Chicago examined data on U.S. births during 1989-2012 to the millions of mothers aged 18-39 who had no college degree and were therefore most likely to be affected by minimum wage raises.

As the investigators reported in a National Bureau of Economic Research working paper in June 2016, state minimum wage raises during this period were followed by improvement in the birth weight and gestational age—basic measures of infant health— of babies born to these mothers in the affected states. Birth weight increased by about 11 grams on average for every $1 per hour increase in the minimum wage.

“That’s a meaningful and plausible effect,” says Wehby, “and it would translate into an increase of about 85 grams [3 ounces] for a raise in the current federal minimum wage from $7.25 to $15 per hour, as some have proposed.”

The researchers were able to account for differences in time trends between states, as well as changes in state welfare policies during the period, to minimize the effects of confounding factors and thereby isolate the effect of minimum wage raises on infant health. Highlighting two possible routes through which this effect could work, they linked minimum wage increases to greater use of prenatal care and less smoking by the pregnant mothers in their sample.

Wehby and colleagues are following up with studies of broader impacts of minimum wage increases on children’s well-being.

“It’s an active research area for us—we’re now looking at behavioral and learning outcomes throughout childhood,” Wehby says.

The full paper is available at http://www.nber.org/papers/w22373.

This story originally appeared in the Fall 2016 issue of InSight.