The effects of health on the wages of Australian workers: gender differences and the impacts of macroeconomic conditions
International Journal of Manpower
ISSN: 0143-7720
Article publication date: 29 October 2020
Issue publication date: 8 July 2021
Abstract
Purpose
The purpose of this study is to examine the effects of health on wages of Australian workers, with a focus on gender differences and the role of macroeconomic conditions in the effects.
Design/methodology/approach
The first 15 waves of the Household, Income and Labour Dynamics in Australia survey are used to estimate a wage model that accounts for the endogeneity of health, unobserved heterogeneity and sample selection bias.
Findings
The results show that, after accounting for the endogeneity of health, unobserved heterogeneity and sample selection bias, better health increases wages for Australian male workers, but not for female workers. The results also show that accounting for the endogeneity of health, unobserved heterogeneity and potential sample selection bias is important in estimating the effects of health on wages. In particular, a simple ordinary least squares estimator would underestimate the effect of health on wages for males, while overestimate it for females, and simply addressing the endogeneity of health using instrumental variables could overestimate the effect for both genders. It is also found that the effects of health on wages fall under depressed macroeconomic conditions, perhaps due to reduced job mobility and increased presentism during a recession.
Originality/value
This study adds to the international literature on the effects of health on wages by providing empirical evidence from Australia. The model applied to estimate the effects takes advantage of a panel dataset to address the bias resulting potentially from all the sources of the endogeneity of health, unobserved heterogeneity and sample selection. The results indeed show that failing to address these issues would substantially bias the estimated effects of health on wages.
Keywords
Acknowledgements
The paper uses the data in the confidentialised unit record file from the Department of Social Services’ (DSS) Household, Income and Labour Dynamics in Australia (HILDA) Survey, which is managed by the Melbourne Institute of Applied Economic and Social Research. The findings and views reported in the paper, however, are of the author's and should not be attributed to the DSS or the Melbourne Institute.
Citation
Cai, L. (2021), "The effects of health on the wages of Australian workers: gender differences and the impacts of macroeconomic conditions", International Journal of Manpower, Vol. 42 No. 5, pp. 842-865. https://doi.org/10.1108/IJM-06-2020-0273
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited