Salary or Benefits?

Paul Oyer ()

No 11817, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Employer-provided benefits are a large and growing share of compensation costs. In this paper, I consider three factors that can affect the value created by employer-sponsored benefits. First, firms have a comparative advantage (for example, due to scale economies or tax treatment) in purchasing relative to employees. This advantage can vary across firms based on size and other differences in cost structure. Second, employees differ in their valuations of benefits and it is costly for workers to match with firms that offer the benefits they value. Finally, some benefits can reduce the marginal cost to an employee of extra working time. I develop a simple model that integrates these factors. I then generate empirical implications of the model and use data from the National Longitudinal Survey of Youth to test these implications. I examine access to employer-provided meals, child-care, dental insurance, and health insurance. I also study how benefits are grouped together and differences between benefits packages at for-profit, not-for-profit, and government employers. The empirical analysis provides evidence consistent with all three factors in the model contributing to firms' decisions about which benefits to offer.

JEL-codes: J32 J33 K31 M52 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-law
Note: LE LS
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Citations: View citations in EconPapers (35)

Published as Oyer, Paul. "Salary or Benefits?" Research in Labor Economics 28 (2008): 429-467.

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Chapter: Salary or benefits? (2008)
Working Paper: Salary or Benefits? (2004)
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