Publication Date: September 2011
Publisher: Center for Retirement Research at Boston College
Author(s): Eric Toder; Karen E. Smith
Research Area: Economics; Labor
Keywords: fringe benefits; retirement; wages; low-income
Coverage: United States
Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. Because low-income employees receive little tax benefit from saving in qualified retirement plans, however, and may prefer immediate consumption to additional retirement accruals, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan, while high income workers may be willing to give up more than a dollar in wages to get the tax benefit...