ACCOUNTING FOR EMPLOYEE BENEFITS:

Issues of Measurement, Valuation and Social Equivalencies

Neil GilbertSchool of Social Welfare

University of California BerkeleyEuropean Measures of Income, Poverty, and Social Exclusion:

Recent Developments and Lessons for U.S. Poverty Measurement(Washington D.C. Nov. 4, 2009)

Employee Remuneration Package: BLS CategoriesEmployee Remuneration Package: BLS Categories Hourly Compensation Costs:Hourly Compensation Costs:

* Hourly Direct Pay* Hourly Direct Pay Pay for Time WorkedPay for Time Worked

Basic wagesBasic wages Piece ratePiece rate Overtime premiumsOvertime premiums Shift differentialsShift differentials Bonuses and premiums paid Bonuses and premiums paid

regularlyregularly Cost-of-living adjustmentsCost-of-living adjustments *Other Direct Pay *Other Direct Pay Pay for time not worked Pay for time not worked

(vacations, holidays, and other (vacations, holidays, and other leave, except sick leave)leave, except sick leave)

Seasonal and irregular bonuses Seasonal and irregular bonuses Social allowancesSocial allowances Pay in kindPay in kind

* Employer Social Insurance * Employer Social Insurance Expenditures (both Expenditures (both legally required and contractual) legally required and contractual) and Other Labor Taxesand Other Labor Taxes

Retirement and disability Retirement and disability pensions Health insurancepensions Health insurance

Income guarantee insurance and Income guarantee insurance and sick leave sick leave

Life and accident insuranceLife and accident insurance Occupational injury and illness Occupational injury and illness

compensation compensation Unemployment insuranceUnemployment insurance Family allowances Family allowances Other social insurance Other social insurance

expendituresexpenditures

How to Value Employee Benefits?How to Value Employee Benefits?

Costs to EmployerCosts to Employer

Market ValueMarket Value

Low-end Standard ValueLow-end Standard Value

Value to EmployeeValue to Employee

Table 2: Employee Benefits as % of hourly compensation costs for production workers in manufacturing 1975-2006 *

1975 1980 1985 1990 1995 2000 2006

United States

23.6 25.8 26 27.2 28.1 27.1 29.5

Austria 46 47.7 49.7 49.9 49.4 48.6 48.5

Denmark 14.9 16.5 17.7 16.3 21.4 26.1 28

Finland 28.2 32.7 33.7 38.2 38.8 37.6 40.6

France 40 41.5 44.7 46.3 45.7 45.3 44.3

Germany ---- ------ ------ ---- 43.6 42.2 42.1

Netherlands

40.9 42.3 42.6 42.5 42.6 40.3 41.8

Norway 28.3 30.7 31.3 31.4 29.2 29.8 32.9

Spain 48.1 44.6 43.8 46.2 47.3 44.1 45.5

Sweden 31 38.1 40.5 40.8 39.7 41.6 43.5

U. K. 21.1 27.9 26.2 25.8 26.2 31.1 30.3*Employee benefits include the employer’s costs of all compensation minus pay for time worked Source: Calculated from BLS “International Comparisons of Compensation Costs” Table 13

Table 3. Primary Categories of Employee Benefits

2006 Employee Benefits for Production WorkersTotal Other Direct Social insuranceBenefits Pay and related costs

United States 29.5 7.6 21.9

Austria 48.5 21.5 27.0

Denmark 28 17.6 10.4

Finland 40.6 19.6 21.0

France 44.3 12.2 32.1

Germany 42.1 19.1 23.0

Netherlands 41.8 19.4 22.4

Norway 32.9 12.9 20.0

Spain 45.5 19.9 25.6

Sweden 43.5 10.4 33.1

U. K. 30.3 9.0 21.3

Toward a more comprehensive Toward a more comprehensive accountingaccounting

Resolve conceptual and Resolve conceptual and methodological issues about what to methodological issues about what to count and how to value benefitscount and how to value benefits

Incorporate monetary value of Incorporate monetary value of untaxed employee benefits into untaxed employee benefits into income measuresincome measures

Address the treatment of functionally Address the treatment of functionally equivalent social benefitsequivalent social benefits

What is the value of leisure time?What is the value of leisure time?