Endogenous Fringe Benefits, Compensating Wage Differentials and Older Workers

Labor economists tend to think of insurance policies, supposedly paid for by a firm, as truly being paid for by workers, in that they will receive a somewhat smaller wage. It is believed that the wage one will receive is dependent on the type of insurance that they are getting. This research attempts to illustrate the magnitude of wage differences caused by receiving different insurance plans. The researchers feel that thinking of job-insurance choice as exogenous rather than endogenous leads to fundamental errors in ones ability to estimate the wage differentials of these insurance policies. An empirical model is created in order to better analyze the data. Data analysis shows that those people with an insurance plan outside of a corporation are more likely to take jobs that do not offer insurance. People that receive insurance from an outside source are also less likely to have jobs with pensions or a generous vacation plan. From the data they find a wage differential of 6,300 per year. Many other interesting findings are provided.