Fat Tax Article and Confusing Econ Paper

I have been talking about this as an inevitable issue in a national health care system since at least HilaryCare, and it was amusing how many people in the 90's told me that we would never go there. But I have long believed that the increased expense of providing health care to obese individuals would produce a social/political climate in which more legal pressure would be brought to bear on the obese, and to the degree that the increased implementation of authoritarian government stuff bothers you, you should be leery of national health care.

One thing that jumped out at me from this opinion piece was this reference to a journal article:

Overweight workers are paid less than similarly qualified, thinner colleagues, according to research by Jay Bhattacharya and M. Kate Bundorf of Stanford. The cause isn’t entirely clear. But the size of the wage difference is roughly similar to the size of the difference in their medical costs.

I find it rather unlikely that medical costs really explain (in a causal, not merely statistical, sense) why obese people earn less because hiring decisions are made by hiring managers who want the best employee they can get (where "best" may reflect sundry prejudices and irrational judgments), not upper-level executive staff who are concerned with company-wide issues like health insurance costs. If as a hiring manager, I reject highly qualified Candidate X because she is obese in favor of less qualified Slim Jim, I may reduce the health costs to the company by some small amount, and perhaps may have a teensy-weensy impact on my own insurance co-pays, etc., but I am going to suffer every day from having to compensate for the lower quality of Slim's work. And if it's a matter of paying Candidate X less than I do Slim Jim, despite her being as good or better as an employee, I risk her jumping ship for another organization that will pay her her worth. It seems to me that economic theory would suggest that hiring practices by individual managers would not properly take into account externalities like medical care costs, but that is not the prediction that they draw.

In the lit review of the full paper (which I can access through school), the authors point to some previous research:

The second finding is that the wages of obese workers are lower than those of their normal weight peers, and in the case of white women, the relationship appears to be causal (Cawley 2004). While obesity could cause lower wages through either invidious workplace discrimination or a negative effect of obesity on worker productivity, the absence of an effect of obesity on wages for either men or black women casts doubt on lower productivity as the explanation. In other words, the literature leaves open the possibility that white women experience significant labor market discrimination in the form of lower wages due to obesity. Our results suggest a reinterpretation of this literature. The lower wages of obese white women appear to be due, at least in part, to the higher cost of insuring these workers.

Um, wait - there is a higher cost of insuring obese white women but not obese men or obese black women? I don't even know whether that is true. Is this something everyone else knows, or at least believes to be true? Unless this is common knowledge, how can we as a hiring managers even know to bypass/under-pay Fat White Fanny in favor of Chunky Charlie or Big Black Bertha on this basis? The more obvious hypothesis is that maybe our culture penalizes white women more for being fat than it does women of color and men. (Arguably, it is more acceptable for women of color to be fat and/or women of color are already so discriminated against as to make further discrimination on the basis of body size of little import.)

Aha, here is something:

The results in Table 5 present important new evidence that suggests a rethinking of the conclusion that the obesity wage penalty for women is due mostly to discrimination. However, our finding of a substantial obesity wage-offset for women but not for men is potentially inconsistent with our interpretation that the differential wage-offset is due to the provision of health insurance. An important premise of this argument, however, is that obese individuals spend more on health care than do non-obese individuals. While results from the studies we discussed earlier indicate that this is indeed the case, we know of no estimate in the literature from nationally representative data that reports yearly medical expenditures for obese and non-obese separately for men and women. [Italics mine]

So they are saying that companies know and are properly acting on disparities in medical expenditures for various classes of employee while this information is not actually known?

...Some of our other findings suggest that [discrimination] is not a likely explanation. First, because we find no evidence of similar wage discrimination for obese women without health insurance or obese men with coverage, attributing the residual difference to discrimination requires an explanation of why discrimination exists only for obese, insured women. Second, we find no evidence of similar wage offsets for different types of benefits or for the working obese with coverage from alternative sources. Maintaining an explanation based upon discrimination thus requires potentially ad hoc reasoning about obese women outside of work settings where employers provide health insurance.

The whole issue of employer-insured vs. uninsured vs. alternatively insured is messy because, to my knowledge, the provision of employer insurance is not randomly distributed throughout the population of companies, nor is the appropriate categorization criterion small versus large companies (which the researchers do look at). The companies that offer insurance differ in type from those that do not; for instance, I believe it is the case that people in "professional" type employment are much more likely to have employer insurance than people in service jobs like restaurants. I would expect obesity to be more detrimental (esp. to a woman) in a professional role than, say, serving up chicken at KFC. Perhaps the researchers did not have access to type of employer in their dataset, but this does not mean that it couldn't be affecting the results.

I also wonder how this intersects with research showing that short men earn less than tall men do or that good-looking people earn more than their plainer counterparts. Is there some kind of differential in medical expense driving this, too?

God, it's after 12:30 a.m. 4:00 a.m. was a long time ago.