Fringe benefits and the demand for part-time workers

Abstract

In the US, tax code nondiscrimination rules and other institutional constraints require employers to offer the same fringe benefits to all full-time workers, but allow them to deny benefits to part-time workers. As a result, firms that offer generous fringe benefits to higher skill workers have an incentive to hire lower skill workers on a part-time or contingent basis. This paper uses cross-section establishment data to investigate the effect of employer-provided fringe benefits on the demand for part-time workers. The results indicate that firms that offer more generous fringe benefits make greater use of low wage part-time workers; there is no significant relationship between fringe benefits and the proportion of high wage workers employed part-time.