Unions and private wage supplements

Abstract

Private wage supplements are an important part of total compensation. A model of workers’ supplement expenditures is developed which shows that, although the expenditure determinants sometimes differ between broad industry/occupation subsamples, earnings, price effects of preferential tax treatment and economies of group purchase, unionization, the product market power of the firm, and worker age are usually significant determinants of supplement expenditures. The firm’s goal of reducing turnover costs as well as demographic, locational, and industry variables also systematically affect supplement expenditures. Supplements usually increase progressively with wages, indicating that often made proportionality assumptions are invalid.