Health Insurance Coverage and Labor Market Outcomes: Employment, Wages, and Job Mobility

Abstract

Health insurance coverage in the United States has long been intertwined with employment relationships, shaping not only access to medical care but also incentives and constraints in labor markets. Employer-sponsored insurance remains a central channel through which working-age adults obtain coverage, and policy reforms have increasingly altered the set of outside options available to workers and firms. This paper examines how health insurance coverage relates to three labor market outcomes: employment, wages, and job mobility. The core premise is that insurance affects labor supply and job search through risk protection, liquidity, and bargaining, while simultaneously entering labor demand through labor costs, workforce composition, and productivity-linked channels. The analysis frames employment and mobility responses as equilibrium objects emerging from worker choice sets and firm contracting, rather than as purely individual decisions. The paper develops a unified conceptual and econometric framework that accommodates selection into coverage, heterogeneity in valuation of insurance, and dynamic mobility costs. Identification is discussed using quasi-experimental variation from eligibility thresholds, policy expansions, and discontinuities that shift coverage without mechanically dictating labor outcomes. Wage effects are interpreted through a compensating-differentials lens augmented by imperfect competition and institutional frictions that limit pass-through. Mobility effects are interpreted through the interaction of search frictions with coverage portability and pre-existing-condition risk. The paper concludes that credible inference requires jointly modeling coverage and labor outcomes, carefully distinguishing extensive-margin employment responses from within-job adjustments, and explicitly addressing the role of health status and benefit design in shaping both wages and mobility.