Non‐wage benefits,costs of turnover and labour attachment

Like firms in established market economies, many Russian firms provide non‐wage benefits to their workers, such as housing, medical care or day care. This article explains the provision of benefits as a strategic choice for firms in the presence of labour and service market imperfections. Analysing unique survey data for 404 industrial establishments from 40 Russian regions, the authors provide strong evidence that non‐wage benefits are used by firms to attach workers and thereby reduce the costs of labour turnover in the face of tight labour markets. It is also shown that this attachment strategy works due to imperfections in the regional markets for social services.