Compensating Wage Differentials and the Health Cost of Job Strain
Alexander Ahammer, Marco Caliendo, and Felix Degenhardt
2025
We estimate the trade-off between earnings and healthcare utilization resulting from strenuous working conditions, using rich administrative data from Upper Austria that link employment histories with healthcare claims over two decades. To address selection bias, we leverage mass layoffs as quasi-exogenous shocks that push workers out of strenuous jobs. By comparing workers with varying opportunities to re-enter strenuous employment, we can isolate the causal impact of job strain on earnings and health outcomes. We find that a 1% increase in wages due to strenuous work is associated with a 0.5% rise in healthcare expenditures. Our findings provide the first unified causal evidence of compensating wage differentials and their hidden health costs, showing that higher pay in strenuous jobs comes at a measurable and persistent cost to worker health.