Social insurance programs and compensating wage differentials in the United States

Abstract

This dissertation brings together empirical analyses of the impact of social insurance programs on compensating wage differentials under different institutional frameworks. I study three periods: the late nineteenth century prior to the introduction of Unemployment Insurance, the Great Depression when Unemployment Insurance is introduced, and then the recent period, in which UI has been long established. Initially, late nineteenth century labor markets with no social programs for workers were investigated. Three different data sets were analyzed from two different states, Maine and Kansas, to examine the precautionary saving behavior of workers and the wage premium they received for the expected unemployment prevalent in their industry. Results showed that workers were receiving statistically and economically significant wage premiums in two of the three samples. Also, in two of the three samples, households were able to save against expected unemployment using family resources. In the second chapter, after reviewing the historical backgrounds of social insurance programs, namely Workers' Compensation, Compensation for Occupational Diseases, and Unemployment Insurance (UI), the empirical literature about the impacts of these programs on wages is reviewed. Later in the chapter, hours and earnings data for various manufacturing industries across forty-eight states for the years 1933-1939 are brought together with the state UI, Workers' Compensation, and Compensation for Occupational Diseases provisions to test the impact of these laws on wage rates. The economic history and origins of UI have not been elaborated before and no previous study has analyzed the simultaneous impacts of different social insurance programs. Results showed that higher accident rates, limited working hours and the higher regional cost of living had a positive impact on wages. Workers' Compensation continued to have a negative impact on wages. During its infancy, UI benefits did not have a statistically significant effect on wages. The last chapter analyzes the impact of UI and the unemployment rate for the labor market of the worker on wage rates using micro level modern data. Results from the analysis of the National Longitudinal Survey of Youth suggest that expected UI benefits have a negative and statistically significant impact on wages, holding worker and labor market characteristics constant. However, the unemployment rate of the labor market did not have a statistically significant impact on wages.