Non-wage Benefits Research Articles

Lessons from privatization: labour issues in developing and transitional countries

This study assesses the labour market consequences of privatization in developing countries (the Republic of Korea, India and Mexico), and transition economies (Bulgaria, the Czech Republic, Eastern Germany and Hungary) during the first half of the 1990s. Based on over 20 case studies in seven countries, the book considers the effect of privatization on productivity and on the level and structure of employment. The evolving patterns of industrial relations in privatized firms and the subsequent changes in wages, remuneration systems and non-wage benefits are also examined. This detailed and analyzed overview of the labour market consequences of privatization should improve an understanding of the circumstances under which it should be successful. It should also clarify some of the difficult choices to be made in order to prevent privatization becoming a zero-sum game, with some winners and many losers.

Symposium on Wages: Introduction

With the ACTU's 'living wage' claim currently before the Industrial Relations Commission, this symposium is particularly timely. However, it is not confined to issues directly relevant to the 'living wage' claim. Two articles in the December 1995 issue of the Economic and Labour Relations Review are a good introduction to the symposium. The first of these by John Burgess, focuses on the way movements in wages are measured. Burgess points out that 'the analysis and interpretation of aggregate wage data has become more difficult' (p. 216). He gives five reasons for this: (a) falling award coverage, (b) the development and uneven spread of enterprise bargaining, (c) the industrial and demographic restracturing of the workforce, (d) the growth in non-wage benefits, and (e) the growth in non-standard employment. Burgess concludes with the warning that there is now no single wage series that can be used with confidence as an indicator of wage movements across the board. Increasingly there will be greater dispersion in wage rises and all aggregate wages series 'require careful evaluation and analysis before being interpreted' (p. 299). The second article, by David Plowman, gives a history of minimum wage determination and discusses legacies of that history which raise issues today. The two most important of these issues are the role of minimum wages in a decentralized system of fixing wage rates and the weight to be given to needs as against capacity to pay (including consideration of differences between men's and women's wages and price and productivity measures to be used in wage rate discussions). The symposium in this issue begins with two articles focussing on the effects of minimum wage rates on employment. That by Valentine sets out the traditional arguments supporting the conclusion that an increase in the minimum wage rate leads to a fall in employment. At the microeconomic level, with a rise in the minimum wage, substitution effects lead a firm to replace some unskilled labour with other classes of labour or capital. Also, as costs of production will rise, firms will reduce the level of production. The extent to which this occurs will depend on expectations about how much a higher price will reduce demand. Valentine also points out that a rise in the minimum wage will probably also have an impact on the supply of unskilled labour. It is likely to increase the number of housewives who enter the workforce and may lead young people to terminate their education earlier than they would otherwise have done. Also a rise in the minimum wage may reduce the extent to which unskilled workers upgrade their skills. When he shifts to look at the macroeconomic effects, Valentine is concerned to counter the argument that higher wages will lead to greater expenditure and hence higher employment. His most important argument is that, if the share of wages in income rises, that of profits must fall and this will have a negative impact on business investment Valentine then turns to an influential study by Card and Kreuger, which found that a rise in the minimum wage rates actually increased employment in fast food restaurants in New Jersey. He argues that the circumstances in this particular industry are such that changes in the minimum wage are likely to have less effect on employment than in many other industries, at least in the short ran. If a longer time had been allowed to elapse the study may have found more substitution of capital for unskilled labour. Valentine also queries the data collection procedures used in the study and concludes that the study 'gives economists no reason to revise their traditional view on this subject'. The second article, by Nevile, takes an opposing position on the effects of minimum wage rises on employment, but puts it in a wider context. After pointing out that trends to increasing income inequalities in Australian society increase the need to protect the incomes of low income families, it argues that it is very difficult for the taxation and social security system alone to do this. …

The expansion of temporary help employment in the US, 1982-1992: a test of alternative economic explanations

Employment in the temporary help supply (THS) industry more than tripled in the US between 1982 and 1992. During that period, the variability and cyclical sensitivity of THS jobs, their average weekly hours and real hourly earnings were extraordinarily high. In addition, changes in temporary employment levels disproportionately affect aggregate employment flows over this period. One possible explanation of the dramatic rise and variability in THS jobs is demographic changes in the composition of the labour force towards groups believed to prefer impermanent job commitment or temporal flexibility in supplying labour services. A contrasting view considers it part of an explicit human resource strategy increasingly adopted by firms seeking greater 'numerical' or cost flexibility. This strategy may reflect an employer response to greater volatility in demand, intensifying price competition pressures in product markets and rising quasi-fixed costs incurred for permanent employees such as nonwage benefits. A two-sector model is developed that presents permanent and temporary (secondary) sectors as distinct labour market segments. Three-stage least squares estimation of non-nested models of aggregate employment in the help supply industry is conducted. The results more strongly support the hypothesizedeffect of the 'employer strategy/opportunity' set of variables in the model. Specifically, fluctuation in industrial output, intensified foreign competition, the relative magnitude of nonwage labour costs and extent of paid time-off are all positively associated with temporary employment. In addition, the diminished bargaining power of labour has allowed employers to exploit the labour cost savings of temporary hires. The only variable in a 'labour force composition' model at all positively associated with levels of temporary employment is the proportion of married women in the labour force. Implications are then drawn for public policy, given that the rapid rise in temporary jobs reflects labour input strategies adopted by employers more than a growing worker preference for such jobs.

Aggregate Wage Indicators, Enterprise Bargaining and Recent Wage Increases

AbstractTo what extent have wages recently increased in Australia? Have these increases been excessive? There are a myriad of wage data series produced by the Australian Bureau of Statistics. These series reflect different questions and different perspectives about wages. In the context of the previously centralised wage determination process the dissection and analysis of aggregate wage series was an important exercise for industry and academic economists. However, the analysis and interpretation of aggregate wage data has become more difficult in the light of a number of developments: (a) falling award coverage, (b) the development and uneven spread of enterprise bargaining, (c) the industrial and demographic restructuring of the workforce, (d) the growth in non-wage benefits, (e) the growth in non-standard employment What are the available options for measuring aggregate wages growth in the light of these above developments? To what extent has recent wage growth been excessive?

Poor African American Women and Work: The Occupational Attainment Process

I use multiple measures to examine the occupational attainment process among urban African American women from low-income backgrounds. Using 10-year follow-up data and earlier study data, I found that employment histories and current employment had more impact than childbearing events or amount of education on the income and job quality of minority women in their mid-twenties. Simply being employed led to an adequate job with minimal financial self-sufficiency. The most important contributor to a “good job,” one with ample earnings and more than adequate non-wage benefits, was having content-specific educational goals in high school, attaining post-high school training in the same content area, and obtaining jobs that utilized this content background. These findings suggest that chronological interruptions in the traditional occupational attainment process are normative for poor African American women, and, by themselves, are not opportunity costs; however, interruptions in content consistency result in lowered occupational attainment.

A note on benefit differentials of black and white female workers

Large national micro-data bases (such as Current Population Survey and Survey of Income and Programme Participation) lack information on employer outlays for the fringe benefits paid workers. Therefore, this paper motivates research on intra-firm black–white differences in non-wage fringe benefits using data on female office workers of a large public university. Empirical results indicate that racial differences exist among the fringes (pension, health and life insurance, sick leave, longevity pay, vacation) and also vary across department sizes. The differentials tend to disappear, however, when combined benefits or total compensation is used as a modelling framework. These results suggest potential sensitivity of regression model estimates, of black–white benefit gaps to the degree of aggregation in the data being modelled.

What is a Minimum Wage?

The minimum wage is high on the political agenda both in Britain and the US. Despite much research, one aspect of minimum wage definition has received little attention‐non‐wage benefits. In this article, Mary Campbell argues that non‐wage benefits like employers' pension contributions and profit‐sharing should be included in any definition of minimum wages.

A note on the substitution between wage and non-wage benefits in spot labour markets

Recent empirical work suggests that spot labour market workers have a strong preference towards wages over fringe benefits. This paper provides a theoretical framework based on this finding. After a discussion of the utility function and equilibrium, the paper proceeds to a comparative statics analysis. An important result is that workers spend all extra compensation on wages only. This is shown to be true in the case that wage benefits are taxed. Furthermore, proportional taxes have no effect for workers' choice between wage and non-wage benefits.

Who bears the cost of non-wage benefits?

Who bears the cost of non-wage benefits?

Union premiums in the federal and private sectors: Alternative evidence from job queues

Although traditional wage estimates indicate a larger union-nonunion differential in the private sector compared to that in the federal sector, the role of non-wage benefits is ignored in such comparisons. A job queue approach shows that premiums to unionized employment (in terms of both wage and non-wage benefits) are lower in the federal sector than in the private sector. This approach not only overcomes the limitations of wage studies in examining the relative superiority of union over nonunion jobs in both sectors, but also strengthens their conclusions through a more appropriate alternative method.

Nonwage Benefits in a Simultaneous Model of Wages and Hours: Labor Supply Functions of Young Females

This article argues that the negative relationship between weekly hours worked and the gross hourly wage rate is due to the provision of fringe benefits. As the total weekly wage increases, employers and employees avoid taxation by substituting wages with nontaxable, nonwage benefits. I produce a wage that incorporates the benefit effects and estimate the corresponding labor-supply elasticities. An estimator is presented for the wage/hours market locus and the structural labor-supply function. An empirical application indicates that an estimated negative labor-supply elasticity associated with the observed gross wage is reversed when the adjusted wage is employed.

Nonwage benefits as a limited-dependent variable: Implications for the impact of unions

To better delineate the role of unionism in influencing the provision of nonwage benefits, this article argues that benefits should be viewed as a limited-dependent variable. Employing such an approach, the study finds that previous OLS estimates of the union effect embody substantial biases, which vary by industrial and employee-group classification. Moreover, the role of unionism — plan initiation versus ability to augment benefit levels at established plans — varies according to employee group, industrial classification, and the type of benefits.

The Inclusion of Fringe Benefits in Estimates of Earnings Loss: A Comparative Analysis

Abstract No abstract available.

Job Queues and Wages

This paper uses job applications data to investigate the relationship between job queues and wage differentials. The main finding is that openings for jobs that pay the minimum wage attract more job applicants than jobs that pay either slightly more or slightly less than the minimum wage. This spike in the job application rate distribution suggests that ex ante rents generated for employees by an above market-level minimum wage are not completely dissipated by reductions in nonwage benefits. In addition, we find that highly unionized firms, large firms, and firms in high-wage industries tend to receive relatively many job applicants for openings.

The Determinants of Fringe Benefits: Additional Evidence

In the private nonfarm economy, employee compensation in the form of direct payment for time worked declined from 75.1 Wo in 1961 to 63.3Wo in 1982. Paid leave (vacations and holidays) grew from 7.6Wo to 9.1Wo of total payroll. Employer contributions to social security and other retirement programs went from 9.3Wo to 11.5% while employer expenditures for life, accident, and health insurance increased from 2.7Wo to 6.6Wo, with the remainders for 1961 and 1982 equalling expenditures for sick leave, unemployment compensation, bonuses, and other items.' Labor-market analysts generally have neglected these important components of total compensation. A reason for this neglect has been paucity of data on the value of fring benefits that firms provide their individual employees.2 While the growth in fringe benefits has been attributed to several factors, the following are particularly important: preferential treatment of non-wage benefits under social security, state and federal tax laws, the changing age and sex composition of the work force, and the effect of rising disposable incomes.3 The objective of this paper is to investigate the determinants of the dollar value of total fringe benefits as well as its taxable and nontaxable components. The specific concern is with the impact of marginal tax rates, age, gender, and family disposable income on these benefits. In the analysis that follows, a unique data set is used that contains information on the value of annual pension contributions, sick leave and vacation days that employers

Interregional Labor Migration and Information Flows

A model of interregional labor migration is developed that incorporates a complex system of information concerning migration and employment opportunities, as well as a heterogeneous population in which groups of workers differ in their assumed levels of skill, attitudes toward risk, and willingness to move. "Three channels are examined: interpersonal communication, general source information, and specific source information targeted at unemployed workers. In this process, trajectories of welfare levels (composed of wage plus nonwage benefits), information flows, vacancy and unemployment levels are generated for different worker and job types, regional aggregates, and the system as a whole. The behavior of the model is examined by means of numerical simulations and sensitivity analyses."

City Size Effects, Trends, and Policies

As cities increase in size, so do wage rates for the same work. There is evidence that the wage differential is persistent and stable over time, which suggests that the differential does not arise from a lack of adjustment that is in process of correction. Indeed, there is an inverse relation between size and growth rate. Large metropolitan areas with high wage rates have been losing population in recent years, which is hardly a sign that their higher wage rates are temporary inducements to workers to move into those cities. It is much more plausible that the differential is a more-orless permanent money payment that compensates urban residents for costs they bear as population size increases. This argument does not deny that there are nonwage benefits as well as costs of city size, that city size effects may vary between individuals and groups, or that there may be scope for improved policy on population distribution. Nonetheless, the benefits of size seem to be outweighed by the costs; all types and groups of people generally can and do move about until alternative locations are less attractive than their current location; and solutions to population distribution problems will often emerge as byproducts to the solutions of more basic problems.

Nonwage Benefits of Vocational Training: Employability and Mobility

Examines the effects of vocational training on labor-force participation and unemployment. Earned-income effects of vocational training; Changes in occupational mobility; Implications for employment. (Abstract copyright EBSCO.)

Nonwage Benefits of Vocational Training: Employability and Mobility

Nonwage Benefits of Vocational Training: Employability and Mobility

Compensation in Union and Nonunion Plants, 1960–1965

Examines the differences in earnings and nonwage benefits between union and nonunion workers in manufacturing industries in the United States from 1960 to 1965. Union effect on wages; Comparison of wage increases; Information on the supplementary benefits of workers. (Abstract copyright EBSCO.)