Fringe Benefits and the Earnings Equation: A Test of the Consistency Hypothesis

A study was conducted to determine the extent of possible biases in measuring the returns to human capital investments and pay differentials attributable to various worker characteristics when fringe benefits are neglected. A subset of the National Medical Care Expenditure Survey was used for data....

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Bibliographic Details
Published in:The Journal of human resources 1987-01, Vol.22 (1), p.126-137
Main Authors: Kiker, B. F., Sherrie L. W. Rhine
Format: Article
Language:English
Subjects:
Bias
Coefficients
Communications
Compensation
Earnings
Employee benefits
Employee compensation
Human capital
Labor costs
Labor markets
Measurement
Personality traits
Statistical analysis
Statistical significance
Vacations
Wages
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Summary:A study was conducted to determine the extent of possible biases in measuring the returns to human capital investments and pay differentials attributable to various worker characteristics when fringe benefits are neglected. A subset of the National Medical Care Expenditure Survey was used for data. The sample consisted of 1,518 full-time, full-year workers employed in the private nonfarm sector of the economy. Results indicated that the elasticity coefficient on total compensation in a fringe benefit equation exceeded unity. Therefore, changes in wages and fringe benefits were not proportional. It also was found that the rate of return to an additional year of experience at the mean was higher for both males and females in the presence of fringe benefits. Finally, it was found that the ratio of fringe benefits to total compensation increased with increases in higher education and experience.
ISSN:0022-166X
1548-8004
DOI:10.2307/145871