Firms with Benefits? Nonwage Compensation and Implications for Firms and Labor Markets / Paige Ouimet, Geoffrey Tate.

Format:

Book

Author/Creator:

Ouimet, Paige.

Contributor:

National Bureau of Economic Research.

Tate, Geoffrey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31463.

NBER working paper series no. w31463

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Using administrative data on health insurance, retirement, and leave benefits, we find within-firm variation accounts for a dramatically lower percentage of total variation in benefits than in wages. We also document sharply higher between-firm variation in nonwage benefits than in wages. We argue that this pattern can be a consequence of nondiscrimination regulations, fairness concerns, and the high administrative burden of managing too many or complex plans. Consistent with this mechanism, we show that the presence of high-wage workers in unrelated divisions of a firm as well as workers hired in high-benefit local labor markets positively predicts their colleagues' benefits, controlling for occupation, wages, state, and industry. We find that the resulting high benefits reduce turnover, particularly among low-wage workers, for whom the benefits comprise a larger percentage of total compensation. Moreover, firms with more generous benefits attract and retain more high-wage workers, but also reduce their reliance on low-wage workers more than low-benefit peers. Our results suggest that benefits disproportionately matter for worker-firm matching and, hence, compensation inequality.

Notes:

Print version record

July 2023.