The Efficiency of a Group-Specific Mandated Benefit: Evidence From Health Insurance Benefits for Maternity

I consider the effects of "group-specific mandated benefits", such as mandated maternity leave, which raise the costs of employing a demographically identifiable group. The efficiency of these policies, relative to more broad-based financing of benefits expansions, will largely be a function of the valuation of the mandated benefit by the targeted group. Such valuation should be reflected in substantial shifting of the cost of the mandate to groupspecific wages; however, there may be barriers to the adjustment of relative wages which impede such shifting. I study several 1976 state mandates which stipulated that childbirth be covered comprehensively in health insurance plans, increasing the cost of insuring women of child-bearing age by as much as 5 % of their wages. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for the group which benefitted from these mandates; hours rise and employment falls, as may be expected from an increase in the fixed costs of employment. These results are confirmed by using a 1978 Federal mandate as a "reverse experiment".