Income Level and the Value of Non-Wage Employee Benefits

With continuing increases in the cost of medical insurance and other “fringe” benefits, payroll cost for monetary and non-monetary aspects of compensation is a significant factor for most organizations. While this is not a new phenomenon, relatively few studies in the empirical literature have examined the role of fringe benefits in employee compensation plans. Especially in under researched areas, it is imperative that researchers utilize ideas and theories from other disciplines to further our knowledge. Accordingly, this paper borrows the concept of elasticity from the economic literature to help explain and understand employee perceptions of two of the most common, costly, and important benefits—medical insurance and retirement plans. Specifically, the relationship between the current income of employees is analyzed in relation to employee perceptions of the value and importance of benefits. Results suggest that employees do not value medical insurance and retirement plans in the same manner. This result is interpreted in terms of the change in the marginal utility of the specific benefit.     

Employee health insurance decisions in a flexible benefits environment

This study investigates the factors which influence employees' choices among different health insurance options under a flexible benefits plan. Employee-specific selection and demographic data provided by the former National Cash Register (NCR), were used to analyze the effects of employee and plan characteristics on choice of health care plan. Results suggest that employees' health plan choices are influenced by premium, deductible, and coinsurance amounts, and by employees' age, gender, salary, and marital status. The results are considered within an expected utility maximization model. Implications for the design of flex plans as well as future research and theory are discussed. © 1996 by John Wiley & Sons, Inc.     

The effect of disability pension incentives on early retirement decisions

I investigate the incentive effects of disability pensions on disability retirement entry as a special type of early retirement. The implicit tax rate on further work is included as a forward looking incentive measure. A substantial change of the disability pension legislation caused exogenous variation in disability benefits in Germany in 2001 and is used to obtain estimates of individual's responses to financial incentives. Benefit levels appear to have no effect on the labour market behaviour. At the same time, there is a sizable and significant disincentive effect of implicit taxes on labour market income, indicating that alleviating such disincentives would likely increase labour force participation. Since the response to financial incentives occurs mainly among those in good health, such a policy might on the other hand imperil the aim of providing insurance against a health‐induced loss of one's working capacity.     

Social Security and the Retirement and Savings Behavior of Low Income Households

In this paper, we develop and estimate a model of retirement and savings incorporating limited borrowing, stochastic wage offers, health status and survival, social security benefits, Medicare and employer-provided health insurance coverage, and intentional bequests. The model is estimated on a sample of relatively poor households from the first three waves of the Health and Retirement Study (HRS), for whom we would expect social security income to be of particular importance. The estimated model is used to simulate the responses to changes in social security rules, including changes in benefit levels, in the payroll tax, in the social security earnings tax and in early and normal retirement ages. Welfare and budget consequences are estimated.     

高管薪酬激励、内部控制有效性与公司业绩——来自沪深A股上市公司的经验证据

采用2010—2014年沪深A股非金融保险类上市公司的数据对上市公司高管薪酬激励、内部控制有效性与公司业绩的关系进行实证检验,研究结果显示：高管薪酬激励程度越高,内部控制有效性越好;内部控制有效性、高管薪酬激励与公司业绩都存在显著的正相关关系;内部控制有效性是高管激励程度对公司业绩影响的中介变量,三者之间存在显著的局部中介效应,以控股权不同进行分组检验也证明了这一效应的存在。因此,上市公司在制定高管薪酬激励计划时应当考虑内部控制对薪酬激励效果的影响,为达到激励高管进而提升公司业绩的目的,需要建立与高管薪酬激励相配套的机制,完善上市公司内部控制制度。     

Defined benefit versus defined contribution pension plans: How are the interests of employees and the public best served?

Prior to the enactment of the Employee Retirement Income Security Act of 1974 the rate of formation of defined benefit retirement plans exceeded the rate of formation of defined contribution retirement plans. Following its enactment the trend has been reversed. This article reviews the development of public policy with respect to privately sponsored retirement benefits, takes note of the legislatively mandated regulatory distinctions between defined benefit and defined contribution plans, outlines the distinctions between the plans from the perspective of plan sponsors versus plan participants, and questions the appropriateness of the movement away from defined benefit plans in terms of public policy objectives regarding retirement income security.     

Pensions: theories of underfunding

The widespread underfunding of private defined benefit pensions has generated concern over the viability of employers' promises of retirement benefits. Years ago, similar concerns led to the creation of pension benefit insurance plans by governments in the United States and a number of other countries. This paper studies the causes of underfunding in an environment without pension benefit insurance. We find that the optimal level of retirement benefits will be offered and fully funded if the employer has sufficient internal funds or is able to borrow all it needs. If loans are not enforceable, an employer with limited resources will generally underfund pensions. Further, if pension investments earn lower returns than other investments, pensions will be underfunded. Thus, the paper highlights the link between financial markets and the underfunding of pensions.     

Benefits and Strategic Outcomes: Are Supplemental Retirement Plans and Safer Driving Related in the U.S. Trucking Industry?

We suggest that a firm's benefits can relate to important organizational outcomes that have strategic implications. We propose a number of mechanisms that could relate benefits to strategic outcomes, including the notion that benefits can help attract and retain the type of employees who are most likely to perform in ways consistent with the firms’ strategies. We illustrate this with the case of supplemental retirement benefits in an actual setting, the long‐haul trucking industry. We report positive organization‐level relationships associated with the management choice of offering these benefits. Our results show that firms offering supplemental retirement plans engage in significantly safer driving practices, as measured by the proxy of driver insurance costs, as hypothesized. These findings show that benefits can be related to outcomes that have strategic implications for the firm. By showing that retirement plans may be of value to organizations, we help to bridge the academic‐practitioner divide and provide motivation and guidance for additional work on this important but underresearched topic. © 2015 Wiley Periodicals, Inc.     

Health care and retirement costs in North America spiralling uncontrollably: what are employers to do?

This article addresses some of the issues related to the rising costs of employee benefits in the United States and Canada in terms of the cost of retirement pensions and employer-provided health insurance for employees and retirees. We examine various factors that affect the cost of these services for organizations as well as how these might affect the choices employers might be forced to make. We elaborate on how various factors might compel employers to shift the cost of benefits to employees. Specifically, we elaborate on various legislative, economic, and demographic constraints on these employee benefits and examine in detail two employer practices of concern, namely cash balance retirement plans and consumer-directed healthcare plans.     

On the structure of unemployment benefits in shirking models

An increase in unemployment compensation is commonly argued to raise unemployment in a shirking model of efficiency wages. This prediction is based on the assumption of a uniform benefit level. However, 32+13if differential benefits for shirkers and non-shirkers exist, higher unemployment compensation for non-shirkers will reduce unemployment. In the long-run, this effect is amplified. Therefore, not only the level of benefits influences unemployment in an efficiency wage economy but also eligibility conditions, the effectiveness with which benefits are administered and, more generally, the institutional design of the unemployment insurance system.     

个人所得税纳税筹划的必要性与可行性

要合理避税,就必须对个人纳税进行筹划。本文对个人所得税的相关规定和个人所得税筹划现状进行研究,分析了个人所得税筹划的必要性,从最大限度给员工交纳住房公积金或社会保险费、发放通评补贴分种收入、通过集体福利分流收入、工资薪金与劳务报酬转化、单独列支项目、某些单位采用年薪制等6个方面提出了工资薪金个人所得税纳税筹划的措施;从最大限度将一些收入转化为费用列支、适时少计费用、将资本性支出转为收益性支出、采用拆借方法、采用融资租赁方式等5个方面提出了个体工商户个人所得税纳税筹划的措施。     

SOCIAL SECURITY AND RETIREMENT DECISION: A POSITIVE AND NORMATIVE APPROACH*

Abstract Social insurance for the elderly is judged responsible for the widely observed trend towards early retirement. In a world of laissez‐faire or in a first‐best setting, there would be no such trend. However, when first‐best instruments are not available, because health and productivity are not observable, the optimal social insurance policy may imply a distortion on the retirement decision. The main point we make is that while there is no doubt that retirement systems induce an excessive bias towards early retirement in many countries, a complete elimination of this bias (i.e. a switch to an actuarially fair system) is not the right answer for two reasons. First, some distortions are second‐best optimal. This is the normative argument. Second, and on the positive side, the elimination of the bias might be problematic from a political perspective. Depending on the political process, either it may not be feasible or alternatively it may tend to undermine the political support for the pension system itself.     

Utilization control in HMOs.

Health Maintenance Organizations (HMOs) have emerged as a major vehicle to reduce transaction costs associated with defining the limits of health insurance coverage and to provide appropriate provider incentives. This article explains the heterogeneous set of incentives used by HMOs to reimburse providers and performs empirical tests of their effectiveness. The empirical analyses reveal that utilization of health care services is reduced when (1) physician compensation is based on salary or capitation arrangements rather than some measure of output; (2) bonuses and paybacks are based on individual rather than group performance; and (3) when the HMO operates as a proprietary (for-profit) organization. Utilization is not significantly affected by incentives placed on the hospital. Finally, physician ownership of the HMO was found to lead to higher levels of utilization.     

FLEXIBLE RETIREMENT

Flexible retirement – that is, the opportunity to choose one's own personal retirement age – is a hedge against pension risk and provides insurance to workers facing health or productivity shocks. Flexible retirement and flexible pension schemes are in practice closely linked because of imperfect capital markets and institutional restrictions. I discuss three necessary conditions to provide insurance through flexible retirement. First, it should be possible to adjust the pension starting date at limited cost. This condition is gradually being fulfilled, as many countries are moving toward more actuarially neutral pension schemes. Second, individuals should be willing to adjust their labor supply in case of a wealth shock. This condition seems largely fulfilled, although the available empirical evidence suggests that the ‘standard retirement age’ is at least as important as the income effect. Third, the labor market should be able to deal with flexible individual retirement decisions. This condition is gaining importance, but has not yet received much attention in the literature. Institutions often hamper employment past the ‘standard retirement age’. Moreover, the hiring rates of older workers are low and their unemployment duration is high. Institutional reforms facilitating flexible retirement opportunities are desirable from an insurance perspective.     

Can you pay employees to innovate? Evidence from the Canadian private sector

Using 7 years of data representing the Canadian private sector, we estimate the effects of the major components of compensation on a rarely studied form of employee performance: innovation. Although there are some limitations inherent in the data, our results indicate the complex motivation required for consistent innovation success. Surprisingly, we find that fixed pay (salary) and individual performance pay have no effect on innovation, while variable group pay and indirect pay (employee benefits) have a positive effect. In other words, our results suggest that you can pay employees to innovate, provided that you select the right compensation incentives.     

Acceptance of buyout offers in the face of downsizing: empirical evidence from the Korean electronics industry

Using a sample of 812 employees in a major Korean electronics company, this study examines the predictors of acceptance of buyout incentives. As in the retirement research, the results here suggest that employees are more likely to accept buyouts the larger the size of the incentive, the older they are at the time of the offer and the poorer their health. However, in contrast to early retirement research, the results here suggest that it is the better performers, those whose spouses are still in the workforce and those who have already declined previous incentives who are most likely to accept buyout incentives in early and mid-career. This study also highlights five differences between American-based and Korean-based firms in their use of early buyout offers. Korean employees were more likely to accept buyout offers the higher their salary, while in the US salary and acceptance of such offers are typically inversely related. Also, while US firms focus on buyout incentives for older workers, Korean firms will often target workers in their thirties and forties. Korean firms typically offer one-time, lump-sum bonuses as departure incentives, whereas American firms are more likely to add years of age and/or service in calculating pension benefits. While US firms often offer some type of part-time employment contract to their early retirees, Korean firms often prohibit this arrangement. Finally, compared to the US, the greater stigma associated with interfirm mobility in Korea cuts against the acceptances of these offers.     

The Role of Defined Benefit Pension Plans in Executive Compensation

Abstract

Although defined benefit (DB) pension plans constitute a significant portion of both annual compensation and firm-related wealth for many CEOs, prior studies of CEO compensation contracts generally exclude these plans from their analyses due to lack of data. Taking advantage of recently increased disclosure requirements, we analyse the role of DB pension plans in these contracts. We find that firms with CEO DB pension plans grant the CEO annual compensation that is larger than predicted by economic determinants. We also find that more powerful CEOs, identified by their extraordinary pension benefits, receive higher total pay in addition to the pension benefits. We find no evidence that CEO pension benefits contribute to the pay-for-performance sensitivity of the annual pay.     

Using simulation as a tool in selecting a retirement age under defined benefit pension plans

This paper examines how simulation modeling can be used to select a retirement age under defined benefit pension plans. This approach construes the variables affecting pension benefits as probabilistic variables. Simulations are then run to generate probabilistic values for the real value of pension benefits for alternative retirement ages. By construing variables affecting pension benefits as probability distributions, this approach reflects the uncertainty facing individuals contemplating retirement. By generating estimates of retirement benefits as probability distributions rather than as single deterministic values, the model provides individuals with a more realistic and complete frame of reference for making the retirement decision. The author is grateful to an anonymous referee and Joachim Zietz. JEF editor, for helpful comments.     

A NEW ROLE FOR CONSUMERS' PREFERENCES IN THE PROVISION OF HEALTHCARE

In the present allocation of resources in healthcare, preferences of consumers as the ultimate financiers of healthcare services are judged to be of little relevance. This state of affairs is being challenged because the past decade has seen great progress in the measurement of preferences, or more precisely, willingness-to-pay (WTP) as applied to healthcare services. This article reports evidence on WTP of the Swiss population with regard to three hypothetical modifications of the drug benefit to be covered by social health insurance: delaying access to the most recent therapeutic innovations (among them, drugs) by two years in exchange for a reduction of the monthly premium; substituting original preparations by generics, again in return for a lowered premium; and the exclusion of preparations for the treatment of minor complaints from the drug benefit. Using discrete-choice experiments, WTP and its determinants are estimated. Average WTP for avoiding such a delay (which acts across the board) is much higher than for eschewing the exclusive use of generics (which are claimed to be largely equivalent to the original) or the retention of 'unimportant' drugs in the list of benefits – a rating predicted by economic theory. In addition, a great deal of preference heterogeneity between the French-speaking minority and the German-speaking majority was found, pointing to considerable efficiency losses caused by uniformity of social health insurance.     

ECONOMIC DETERMINANTS OF WORKERS’ RETIREMENT DECISIONS

The landscape for older workers has changed dramatically in recent decades. Governments have made cuts to public pension programs, private pensions have shifted from defined benefit to defined contribution plans, equity and housing markets have been unusually volatile, and workers have experienced declining morbidity and mortality. At the same time, the labor force participation rate for older men and women has been rising over the past two decades, implying later retirement. Are these phenomena related? This paper reviews the large and growing body of literature exploring the economic determinants of workers’ retirement decisions, including public and private pensions, wealth and savings, health and health insurance, and labor demand.