Government-Mandated Benefits, Taxes, and Wages

• Published in: Southern economic journal Vol. 62; no. 1; pp. 53 - 70
• Main Author: Melese, François
• Format: Journal Article
• Language: English
• Published: Chapel Hill, N.C., etc Southern Economic Association and the University of North Carolina at Chapel Hill 01.07.1995; Southern Economic Association and the University of North Carolina; Southern Economic Association
• Subjects: Economic benefits; Economic impact; Economic models; Economics; Employee benefits; Employee compensation; Employees; Employers; Employment; Government mandates; Health insurance; Income taxes; Insurance premiums; Mandatory insurance coverage; Social security; Studies; Tax benefits; Tax payments; Taxation; Taxes; Wage & price controls; Wage rates; Wages; United States > US
• ISSN: 0038-4038; 2325-8012
• DOI: 10.2307/1061375

An examination is made of the prospect that targeted employers adjust wages to compensate for legislated increases in benefits. While this short-run management response, adjusting wages to compensate for increased benefits, avoids significant up-front costs to employers, it nonetheless involves sacrifice on the part of certain employees. The model suggests that while one category of employee may be indifferent (or even prefer) this adjustment, attracting and retaining another category is problematic. If employers require employees in the latter category, they have 3 management options: 1. Modify the wage adjustment. 2. Modify existing voluntary benefits. 3. Offer new benefits. An exploration of these options provides a natural development of the model and offers a starting point to help policymakers analyze ripple effects of government-mandated benefits.