Utilizing a simple theory of the labor market indicates that employers are generally concerned regarding the level of total worker compensation as opposed to the division between the wages that they actually pay and other compensation such as benefits. However, looking at this so simply ignores many of the important differences between benefits and wages. Generally it has been asserted that benefits represent what are called quasi-fixed costs, which means that they do not vary with the number of hours that are worked as wages do but rather they vary instead with the number of workers at the company. Because of this, what type of structure employee compensation packages have often influences the demand that an employer has for both part-time and full-time workers as well as the decisions that they make regarding overtime hours and pay.
There are several issues that need to be considered here and they will be explained briefly and then presented in table form. Although the data for this these particular tables comes from 1994, it is still relevant today because the issues that are dealt with here have not changed significantly over the period of time with the exception of the higher price of health care. As can be seen in the table below, which comes from a 1999 study, the differences in the rate of coverage between part-time and full-time jobs vary considerably. This ranges from approximately 19% for savings plans to around 63% for benefits such as health insurance. Some benefits are not required by law and for those benefits that are not required by law full-time jobs are much more likely to have benefit plans than are part-time jobs.
Table 2. Benefit provision and costs for full- and port-time workers March 1994
Characteristic
Vacation
Holiday
Percent of jobs covered
Part time
Full time
Average cost per hour
Part time
Full time
Average annual cost
Part time
Full time
Number of covered jobs
Part time
Full time
Health
Characteristic
Sick leave
Insurance
Percent of jobs covered
Part time
Full time
Average cost per hour
Part time
Full time
Average annual cost
Part time
Full time
Number of covered jobs
Part time
Full time
Legally
Characteristic
Pension
Savings required
Percent of jobs covered
Part time
Full time
Average cost per hour
Part time
Full time
Average annual cost
Part time
Full time
Number of covered jobs
Part time
Full time
Source: Microdata from the March 1994 Employment Cost Index. Buchmueller, 1999.
In order to help investigate how employers generally prorate the costs that they have associated with health insurance benefits, one study took a sample of 253 establishments that had at least one full-time and one part-time employee that both had health insurance. These firms contributed 787 full-time jobs and 424 part-time jobs to the employment cost index sample. The information presented below in table 3 indicates three different cost measures utilizing the establishment as the unit of observation. These include the average cost for the employer of the health-care benefits that were provided to part-time jobs, this same type of cost provided to full-time jobs, and the difference within the establishment between these two. The mean for each one of these variables was reported as well as the 25th, 50th, and 75th percentiles for comparison.
It can be seen by looking at this that the difference in the overall mean yearly costs for health insurance plans between those that were part-time jobs and those that work full-time jobs is approximately 24% which is very close to the differential that was to be expected. The difference between the median costs is also very similar. This suggests once again that those that offer health insurance to workers that are only part-time help to structure benefits, cost sharing, and other provisions of the plan in ways that help partially prorate the cost based on employee hours.
Table 3. Differences in annual health insurance costs between full- and part-time jobs, March 1994
Characteristic
Part time
Full time
Difference
Number of jobs
Number of establishments
Mean
Standard deviation
25th percentile
Median
75th percentile
Source: Microdata from the March 1994 Employment Cost Index. Sample restricted to establishments reporting data for both full- and part-time jobs. Buchmueller, 1999.
The last issue that must be looked at here in table form is the average provision of many of these plans and whether the establishments that were utilized for earlier tables are classified as being segregated or integrated. Of the 264 establishments dealt with here that have at least one full-time employee on the health insurance plan and at least one part-time employee that also has a health insurance plan, 192 of them are seen to be integrated and 72 are segregated. It is estimated by looking at the tabular data below that there are three specific ways in which establishments that are segregated work to lower the cost of health benefits that they provide to part-time workers.
The first one of these is to require that part-time workers pay...
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