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Effects of the Tax Treatment of Fringe Benefits on Labor Market Segmentation

Author

Listed:
  • Frank A. Scott
  • Mark C. Berger
  • Dan A. Black

Abstract

Current federal tax law requires that all workers having the same experience with a firm must receive essentially the same package of fringe benefits in order for those benefits to qualify for preferential tax treatment. The authors argue that this “nondiscriminatory†provision of fringe benefits promotes labor market segmentation by inducing workers to sort themselves across the economy according to their demand for fringe benefits. Several empirical tests using 1968–78 data confirm the existence of sorting and suggest that labor market segmentation increased over time as workers responded to changes in incomes and marginal tax rates.

Suggested Citation

  • Frank A. Scott & Mark C. Berger & Dan A. Black, 1989. "Effects of the Tax Treatment of Fringe Benefits on Labor Market Segmentation," ILR Review, Cornell University, ILR School, vol. 42(2), pages 216-229, January.
    • Handle: RePEc:sae:ilrrev:v:42:y:1989:i:2:p:216-229
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    Citations

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    Cited by:

    1. Garen, John & Berger, Mark & Scott, Frank, 1996. "Pensions, non-discrimination policies, and the employment of older workers," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(4), pages 417-429.
    2. Lehrer, Steven F. & Pereira, Nuno Sousa, 2007. "Worker sorting, compensating differentials and health insurance: Evidence from displaced workers," Journal of Health Economics, Elsevier, vol. 26(5), pages 1034-1056, September.
    3. Kate Bundorf, M., 2002. "Employee demand for health insurance and employer health plan choices," Journal of Health Economics, Elsevier, vol. 21(1), pages 65-88, January.
    4. Harley Frazis & Mark A. Loewenstein, 2009. "How Responsive are Quits to Benefits?," Working Papers 426, U.S. Bureau of Labor Statistics.
    5. Dan A. Black, 1996. "Family Health Benefits and Worker Turnover," Labor and Demography 9604001, University Library of Munich, Germany.
    6. Paul Oyer, 2008. "Salary or benefits?," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 429-467, Emerald Group Publishing Limited.
    7. Harley Frazis & Mark A. Loewenstein, 2013. "How Responsive are Quits to Benefits?," Journal of Human Resources, University of Wisconsin Press, vol. 48(4), pages 969-997.
    8. Shore-Sheppard, Lara & Buchmueller, Thomas C. & Jensen, Gail A., 2000. "Medicaid and crowding out of private insurance: a re-examination using firm level data," Journal of Health Economics, Elsevier, vol. 19(1), pages 61-91, January.
    9. Jos van Ommeren & Arno van der Vlist & Peter Nijkamp, 2002. "Transport-Related Fringe Benefits," Tinbergen Institute Discussion Papers 02-063/3, Tinbergen Institute.
    10. ASAI Yukiko, 2019. "Costs of Employment and Flexible Labor Demand: Evidence from Maternity and Parental Leave Reforms," Discussion papers 19024, Research Institute of Economy, Trade and Industry (RIETI).
    11. Dale Belman & John S. Heywood, 1997. "Changes in the Relative Provision of Public-Sector Pensions," Public Finance Review, , vol. 25(4), pages 426-441, July.
    12. Richard Hirth & Reagan Baughman & Michael Chernew & Emily Shelton, 2006. "Worker preferences, sorting and aggregate patterns of health insurance coverage," International Journal of Health Economics and Management, Springer, vol. 6(4), pages 259-277, December.
    13. Anthony M. Marino & Ján Zábojník, 2008. "A Rent Extraction View of Employee Discounts and Benefits," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 485-518, July.
    14. Dranove, David & Spier, Kathryn E. & Baker, Laurence, 2000. "'Competition' among employers offering health insurance," Journal of Health Economics, Elsevier, vol. 19(1), pages 121-140, January.
    15. repec:eee:labchp:v:3:y:1999:i:pc:p:3309-3416 is not listed on IDEAS
    16. Garen, John, 2006. "Use of employees and alternative work arrangements in the United States: a law, economics, and organizations perspective," Labour Economics, Elsevier, vol. 13(1), pages 107-141, February.
    17. Steven F. Lehrer & Nuno Sousa Pereira, 2008. "Worker Sorting, Health Insurance and Wages: Further Evidence from Displaced Workers in the United States," CEF.UP Working Papers 0804, Universidade do Porto, Faculdade de Economia do Porto.
    18. Sang-Hyop Lee & Gerard Russo & Lawrence H. Nitz & Abdul Jabbar, 2005. "The Effect of Mandatory Employer-Sponsored Insurance (ESI) on Health Insurance Coverage and Labor Force Utilization in Hawaii: Evidence from the Current Population Survey (CPS) 1994-2004," Working Papers 200512, University of Hawaii at Manoa, Department of Economics.

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