LABOR AS A QUASI-FIXED COSTS: APPLICATION TO FRINGE BENEFITS. INVESTMENT PROPERTIES OF FRINGE BENEFITS. Definition of Fringe Benefits : Compensation in some form other than currently spendable cash
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1910-20: WC laws
1935: Soc. Sec.
1960s: Health ins.
1980s: IRAs, savings plans, annuities
1990s: continued trends of 1980s, family policies
Who gets benefits
Manu > Non-Manu
Blue collar > White collar*
Union > Non-Union
Office < nonoffice
Larger firms > smaller firmsFACTS ABOUT FRINGES
1. Payment in-kind
Current payment in some form other than cash; e.g., insurance
2. Deferred Compensation
3. Misc. Perks
1. Constrained Maximization
2. Benefits as a quasi-fixed cost
predictable costs, easy admin; lower costs; shift risk.
Difficult to manipulate retirement age
Rapid vesting, portable
Risk of insufficient savings
Risk of low ROIPros and Cons of shifting from Defined Benefit to Defined Contribution
Traded in Markets
Buyers and sellers meet through pricing
Ownership can be transferred
Tend to be excludable
Consumers and producers do not meet at an exchange
Difficult to make excludable
Ownership not necessarily discernableTwo Types of Goods:Private versus Public Goods
Does Benefit Coverage Change
the Price of Leisure?