The Growth of Fringe Benefits and the Meaning of Wage Setting by Wage Comparisons

Abstract

NON-MARKET wage-setting procedures oblige labor and management to depend on wage comparisons to pave the way for an agreement on a proposed wage adjustment.2 Whether the presentation of 'comparable' wage data in collective bargaining negotiations is made before an arbitration or governmental wage board, or in a conciliation or mediation hearing, labor attempts to show that the firm is paying wages less than the wages paid by other firms and management attempts to refute this contention with comparisons of their own. In the absence of trade unions, private management tries to determine and pay the comparable wage, particularly if labor is scarce. Without information on what this wage is, management may set a wage that will result in a slow drain of its manpower. In the government or non-profit sector, public management sets wages largely by comparisons with the wages of occupations in the private sector. Furthermore, wage setting by wage comparisons has an element ofjustice in it. There is widespread support for the idea that the wage paid to one worker is fair when it is what the other fellow gets for the same kind of work. However, translating the idea of fair wage comparisons into accurate cross-section measurement is difficult; for the wage package has undergone significant changes in composition, primarily because of the growth of fringe benefits. It is now a major effort to enumerate the elements of the wage package. Even if some enumeration is made, it has become almost impossible to reduce these elements to a monetary standard from which inter-firm comparisons can be accurately made.3