Effects of the Tax Treatment of Fringe Benefits on Labor Market Segmentation

Frank Scott, Mark Berger and Dan Black

ILR Review, 1989, vol. 42, issue 2, 216-229

Abstract: Current federal tax law requires that all workers having the same experience with a firm must receive essentially the same package of fringe benefits in order for those benefits to qualify for preferential tax treatment. The authors argue that this “nondiscriminatory†provision of fringe benefits promotes labor market segmentation by inducing workers to sort themselves across the economy according to their demand for fringe benefits. Several empirical tests using 1968–78 data confirm the existence of sorting and suggest that labor market segmentation increased over time as workers responded to changes in incomes and marginal tax rates.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:42:y:1989:i:2:p:216-229

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