The Labor Supply of Older Americans

The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of "entrepreneurship lock" by using recent panel data from matched Current Population Surveys. We use difference-indifference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on business creation for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages business creation by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. We also do not find evidence from the previous literature and additional estimates that other confounding factors such as retirement, partial retirement, social security and pension eligibility are responsible for the increase in business ownership in the month individuals turn 65. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient level of business creation.

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“…Social Security eligibility does not appear to generate shifts in employment behavior precisely at age 65. (Munnell and Sass 2007).…”

Section: Additional Estimates and Potentially Confounding Factorsmentioning

confidence: 99%

Is employer-based health insurance a barrier to entrepreneurship?

Fairlie

Kapur

Gates

2011

Journal of Health Economics

127

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“…First, the earliest age of eligibility for Social Security benefits is 62; benefits received by individuals at that point are reduced (in an actuarially neutral way) relative to what would be received if one were to retire at the full retirement age. Administrative data on Social Security benefits reveal that individuals are far more likely to begin claiming benefits at age 62 than at age 65 (Munnell and Sass ). In 2004, 56 percent of eligible men elected to receive Social Security benefits starting at age 62 compared with 23 percent when they turned 65.…”

Section: Retirement Social Security and Other Potentially Confoundimentioning

confidence: 99%

Job Lock: Evidence from a Regression Discontinuity Design

Fairlie

Kapur

Gates

2015

Industrial Relations

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Employer-provided health insurance in the United States is suspected of restricting job mobility, resulting in "job lock." Previous research on job lock finds mixed results using several methodologies. We take a new approach to examine whether employer-based health insurance discourages job mobility by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure for identifying age in months from matched monthly CPS data and a relatively unexplored administration measure of job mobility, we compare job mobility among male workers in the months just prior to turning age 65 to job mobility in the months just after turning age 65. We find no evidence that job mobility increases at the age 65 threshold when Medicare eligibility starts. Our results are robust to different bandwidths, non-linear age profiles, and frequency of age measurement. The upper bounds of 95 percent confidence intervals for these estimates can rule out the existence of any job lock in some cases, and in most cases can rule out the large levels of job lock found in many previous studies in the literature. We also do not find evidence that other factors such as retirement, reduction in hours worked, social security eligibility, pension eligibility, and sample changes confound the results on job mobility in the month individuals turn 65.

show abstract

“…First, the earliest age of eligibility for Social Security benefits is 62; benefits received by individuals at that point are reduced (in an actuarial neutral way) relative to what would be received if one were to retire at the full retirement age. Administrative data on Social Security benefits reveal that individuals are far more likely to begin claiming benefits at age 62 than at age 65 (Munnell and Sass 2007). In 2004, 56 percent of eligible men elected to receive Social Security benefits starting at age 62 compared with 23 percent when they turned 65.…”

Section: Other Policy Changes At Age 65mentioning

confidence: 99%