Do Low-Income Workers Benefit from 401(K) Plans?

Center for Retirement Research at Boston College Working Paper No. 2011-14

46 Pages Posted: 3 Oct 2011

Date Written: September 30, 2011

Abstract

Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. Because low-income employees receive little tax benefit from saving in qualified retirement plans, however, and may prefer immediate consumption to additional retirement accruals, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan, while high income workers may be willing to give up more than a dollar in wages to get the tax benefit.

Keywords: economists, employer, fringe benefits, retirement, wages, low-income

JEL Classification: J26

Suggested Citation

Toder, Eric J. and Smith, Karen E., Do Low-Income Workers Benefit from 401(K) Plans? (September 30, 2011). Center for Retirement Research at Boston College Working Paper No. 2011-14, Available at SSRN: https://ssrn.com/abstract=1937795 or http://dx.doi.org/10.2139/ssrn.1937795

Eric J. Toder (Contact Author)

Urban Institute ( email )

Urban Institute
2100 M Street NW
Washington, DC 20037
United States
2022615577 (Phone)

Karen E. Smith

Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

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