Working longer is an effective way for individuals to improve their retirement security, but a critical question is whether employers will hire and retain them. This concern is especially acute for less-educated workers, who often hold middle-skill jobs that are at greater risk of disappearing. One potential way to boost the prospects of older workers is to reduce the cost to companies of employing them. For example, some policy experts have proposed making Medicare the primary payer for older workers' health care costs or eliminating their Social Security payroll taxes. And European countries have tried wage subsidies. This brief, based on the results of a recent paper, considers a policy that has already been tried in the United States. In the 1990s, nearly every state gradually imposed restrictions on how much employer-sponsored health insurance premiums can vary across small firms based on the characteristics of their workers. Prior to these regulations, a small firm that hired even one additional older worker ran the risk of higher premiums for all of its workers. The regulations made premiums less--or, in some states, not at all--dependent on the age or health composition of a firm's employee pool, thereby reducing the cost of older workers. This brief examines whether the regulations improved labor market outcomes for older workers, by education, particularly at the small firms directly affected by the regulations. The discussion proceeds as follows. The first section provides background on the premium restrictions. The second section describes the data and methodology used for the analysis. The third section presents the results. The final section concludes that while the earnings gap between workers in large and small firms did shrink, especially for workers with only a high school degree, the premium restrictions did little to increase employment for older workers.
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