Date of Award

2010

Document Type

Campus Access Dissertation

Department

Moore School of Business

Sub-Department

Economics

First Advisor

McKinley L. Blackburn

Abstract

Fringe benefits, or non-wage compensation paid by an employer to employees, play an important role in labor markets. This dissertation consists of three chapters that study the importance of compensating wage differential theory to wage outcomes associated with employer-provided health insurance (EHI) in the United States, participation decisions regarding employer-associated pension plans in Britain, and labor market consequences of the recent Massachusetts EHI mandate.

The first chapter uses 1996 and 2001 Survey of Income and Program Participation to examine the evidence for compensating wage differentials associated with EHI in the US. The results provide no evidence of a tradeoff between wages and EHI coverage. On the other hand, the results do suggest that employees who work in states with income taxes are more likely to receive EHI than those in states without income taxes. Fixed effects, first differencing and instrumental variable estimation are used to address the potential ability bias and endogeneity problems in wage models with EHI as an independent variable. While both fixed effects and first-differencing estimation provide evidence of a positive relationship between wages and EHI, validity tests cast doubt on fixed effects estimation. Instrumental variable estimates, however, provide no evidence of a tradeoff in either direction.

The second chapter uses 1992-2006 British Household Panel Survey data to examine the determinants of an employee's decision to participate in occupational (and other) pensions in Britain. The results show that being married, middle aged (age 35-54), working in a large firm, working full time, having high tenure, being a union member, and being covered by a union lead to a higher probability of participating in an occupational pension. The study suggests that an employee usually makes a tradeoff decision about participating in an occupational pension based on the spouse′s occupational pension status. A further exploration of spousal effects shows that there is no evidence of spousal effects on the wife, while a husband′s decision is affected by the wife′s pension status. The number of children appears to correlate with a lower probability of participating in a personal pension (relative to the basic state pension), but no impact on an employee′s participation in an occupational pension.

The third chapter uses 2004, 2005, 2007 and 2008 Current Population Survey and merged Outgoing Rotation Group data and examines industry-level EHI coverage, average hourly wage, employment and working hours in Massachusetts and several neighboring states before and after the passage of a Massachusetts law mandating EHI for most workers. Results in this study are partially consistent with the prediction. They suggest that industries with a higher initial EHI coverage experience an increase in EHI coverage, a decrease in employment and a decrease in the percentage of workers that are full-time. However, there is no clear wage effect on such industries. The policy effect also appears to vary with firm size. A higher percent of medium firms in an industry tends to be associated with the mandate lowering EHI coverage and the average hourly wage, but increases in the percentage of workers that are full-time. One overall effect of the policy does appear to be a decrease in employment as a result of the law.

Share

COinS