| Sumario: | This article deals with the findings of a study regarding the use of Employer Cost Index (ECI) to correlate the relationship between benefits and wages in the U.S. Accounting for employee benefits as a form of real compensation for work has received much theoretical and empirical attention. The hedonic theory of compensating wage differentials contends that workers make tradeoffs between wages and benefits. That is, in lieu of lower wages, workers are compensated by taking the greater benefits offered by employers. Empirical approaches to estimating the tradeoff however, have generally failed to correspond with theory. The value of employee benefits is of increasing importance to researchers and policymakers alike. A Study from the Employee Benefits Research Institute reports that employee benefits became an even greater proportion of total compensation, rising from 26.8 percent to 28.9 percent between 1987 and 1994. Employee benefit cost data, along with wage and salary data, come from the survey used by the U.S. Bureau of Labor Statistics to generate the quarterly price index for employer costs, known as the ECI. Several aspects of the ECI made the calculations of average benefit costs especially troublesome.
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