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...
In approximately 73% of health insurance plans that are offered to full-time employees by segregated establishments the entire premium each month for coverage on a single person is paid by the company. In contrast to this the employers pay the entire monthly premium in less than 50% of the health insurance plans that they offer to employees that work part-time. For plans that require workers to make a contribution, however, the differences that are seen between part-time employees and full-time employees are very small. Based on single coverage, full-time employees require an average contribution of $40.19 while part-time workers require an average contribution of $45.86. For those that have family coverage as opposed to single coverage the difference between the two groups is even smaller than this and is not even seen to be statistically significant.
Another way that part-time worker plans differ from those of full-time workers is that part-time worker plans have more restrictions on issues such as pre-existing conditions. This helps to lower the benefit cost for employees that work only part-time in many establishments. The third and final way that these plans differ so strongly between full-time and part-time is the eligibility requirements based on length of service. Many part-time plans have a probationary period and almost 50% of them have a probationary period that is six months or longer. In contrast to this, fully 98% of plans for full-time employees that have a probationary period now have a period of three months or less.
Table 4. Proportion of full- and port-time jobs covered by various medical plan provisions by type of establishment (integrated or segregated), 1993-94 in percent, except where noted]
Integrated establishments
Characteristic
Part-time
Full-time jobs
Fee arrangement:
Fee-for-service
PPO
HMO
Self-insured
Employee contribution for single coverage:
Flat amount
Average monthly contribution in dollars)
No information
Employee contribution for family coverage:
Flat amount
Average monthly contribution in dollars)
No information
Preexisting restriction
Eligibility requirement:
Number of months:
No information
Number of plans
Number of establishments
Segregated establishments
Characteristic
Part-time
Full-time jobs
Fee arrangement:
Fee-for-service
PPO
HMO
Self-insured
Employee contribution for single coverage:
Flat amount
Average monthly contribution in dollars)
No information
Employee contribution for family coverage:
Flat amount
Average monthly contribution in dollars)
No information
Preexisting restriction
Eligibility requirement:
Number of months:
No information
Number of plans
Number of establishments
Note: Sample restricted to establishments reporting data for both full- and part-time jobs.
Source: Microdata from 1993 and 1994 Employee Benefits Survey. Buchmueller, 1999.
Based on the information that has been presented above in the tables and that has been discussed in the paper, it can be seen is that there are many differences not only between those that are union and non-union but also between those that are full-time and part-time. These union to non-union differences and full-time to part-time differences seem to be the largest significant differences when it comes to whether employers provide health care for their employees and whether they provide good quality health care or just the minimum that they have to provide in order to keep their employees from changing jobs to find better benefits. As health care costs continue to rise it is likely that some individual companies will change their mind about offering health care coverage to their employees and therefore various employees will the left without coverage.
However, at this point in time it is difficult to tell whether this will happen anytime soon or whether changes will be made to the health care costs in order to bring them down and allow more individuals such as the self-employed to have health care coverage at an affordable rate. From a labor economic standpoint, however, health care coverage is an extremely important issue right now and employers and individual companies that are considering health care benefits or considering changing health care benefits for their employees must look at this issue carefully in order to avoid problems that could be caused by canceling coverage or by requiring layoffs and other cutbacks because the health insurance costs have gone so high.
Endnotes
Parsley, C.J. 1980. Labor union effects on wage gains: a survey of recent literature. Journal of Economic Literature, 18(1): 1-31; Freeman, R.B., & Medoff, J.L. 1984. What do unions do? New York: Basic Books; Lewis, H.G. 1986. Union relative wage effects: a survey. Chicago: University of Chicago Press; Hirsch, B.T. & Addison, J.T. 1986. The economic analysis of unions: new approaches and evidence. Boston, Mass: Allen and Unwin.
Belman, D. & Heywood, J.S. 1991. Direct and indirect effects of unionization and government employment on fringe benefit provision. Journal of Labor Research, 12(2): 111-122; Belman, D. & Heywood, J.S. 1990. The gender gap in pensions and wages. The Review…
