Where Does the Wage Penalty Bite?
Publication Date:
Publisher: National Bureau of Economic Research
Author(s): C.A. Gregory; C.J. Ruhm
Research Area: Health
Type: White Paper
Abstract:
This paper is one of a series published by the National Bureau of Economic Research about obesity. The authors examine relationships between body mass index (BMI) and wages—on average, obese women make 2–8 percent less than normal weight women, although obese men do not make less money than men of normal weight—in order to explore whether assumptions guiding previous studies on this topic are true. Data were drawn from the 1986 and 1999–2005 Panel Study of Income Dynamics.
One assumption that has dominated previous research on this topic is that associations between BMI and wages will be seen only when BMIs exceed 30 (e.g., are in the obese range) and that these associations will be linear. A third assumption is that wages and BMI are related because BMI really is a meaningful reflection of health, in which case wages should be negatively associated with both being overweight and underweight.
The authors’ analyses yielded several interesting results. The first is that the assumption that associations between wages and BMI would not be strongly seen at BMIs below 30 did not hold up for women. Women's wages peaked at thresholds far below the obesity cutoff, usually at a BMI of 23 or lower. For men, this finding was somewhat true, depending on specifications of the model; men’s earnings peaked around BMI of 27, then fell modestly. These findings suggests that BMI does not serve as an index of underlying health or medical costs, in terms of wages, but may serve as a proxy for socially-defined physical attractiveness, which is known to affect earnings. In addition, the relationships between wages and BMI differed between blacks and whites, most importantly because the conditional wage function peaks at a considerably higher BMI for minorities and declines more slowly. Lastly, the associations explored in this research were often highly nonlinear, and benefited from the flexible models applied by the authors of this paper.