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Managerial Econ - How do you think flexible benefit...

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1. Increasingly, employees are being allowed to choose benefit packages from a menu of items. For instance, workers may be given a package of benefits that includes basic and optional items. Basics might include modest medical coverage, life insurance equal to a year’s salary, vacation time based on length of service, and some retirement pay. But then employees can use credits to choose among such additional benefits as full medical coverage, dental and eye care, more vacation time, additional disability income, and higher company payments to the retirement fund.
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Unformatted text preview: How do you think flexible benefit packages would affect an employee’s choice between higher wages and more benefits? In this case, higher wage is correlated with less benefits, other things being equal. Now that the flexible benefits packages are introduced, an employee will enjoy more freedom in choosing his/her own package, and therefore, increase the total utility. However, the increased management cost will be transferred to their earnings. So we would expect an reduced wage rate and benefit amount with flexible benefits packages....
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