Firms with Benefits? Nonwage Compensation and Implications for Firms and Labor Markets
61 Pages Posted: 19 May 2022 Last revised: 9 Aug 2023
Date Written: July 5, 2023
Nondiscrimination regulations, administrative costs, and fairness considerations can constrain the within-firm distribution of benefits. Using novel job-level data on nonwage benefits, we find a larger firm component of the variation in benefits than wages. We show that the presence of high-wage colleagues (or high-wage peers in other local firms) positively predicts workers’ benefits, controlling for job characteristics including own wages. Firms with more generous benefits attract and retain more high-wage workers, but also reduce their reliance on low-wage workers more than low-benefit peers. Our results suggest that benefits disproportionately matter for worker-firm matching and, hence, compensation inequality.
Keywords: Nonwage benefits, Firm wage effects, Worker turnover, Skill distribution
JEL Classification: J32, J63, J01
Suggested Citation: Suggested Citation