Productivity and wage effects of “family‐friendly” fringe benefits

TLDR

Family‑supportive employment benefits have risen as employers respond to increasing female labor participation and the need to balance work and family, and economic theory suggests they may pay for themselves through higher productivity and lower wages. The study surveyed 120 employers in an upstate New York county, collecting data on benefits packages and outcome measures to test whether such benefits improve productivity and reduce wages. Employers offering flexible sick leave and child‑care assistance experienced lower turnover, while those providing flexible scheduling and child‑care also tended to pay lower entry‑level wages than competitors.

Abstract

Family‐supportive employment benefits have become increasingly popular in recent years as an employer response to the increasing labor force participation of women, and the consequent need to balance work and family life. Economic theory predicts that these types of fringe benefits could at least partially pay for themselves through a combination of increased productivity and lower wages. A survey of 120 employers in an upstate New York county provides data on benefits packages and outcome measures that are used to test this hypothesis. We find that employers who offer flexible sick leave and child care assistance experience measurable reductions in turnover. Employers who offer benefits like flexible scheduling policies and child care also appear to offset part of the cost of these benefits by paying lower entry‐level wages than do their competitors.