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Fringe benefits: History and economic analysis

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Fringe benefits: History and economic analysis

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Content FRINGE BENEFITS! HISTORY AMD ECONOMIC ANALYSIS c by Lester P. Gideon A Thesis Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree MASTER OF ARTS (Economics) January 1958 UMI Number: EP44753 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. U M T Dissertation Publishing UMI EP44753 Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106- 1346 UNIVERSITY OF SOUTHERN CALIFORNIA G R A D U A T E S C H O O L U N IV E R S IT Y P A R K L O S A N G E L E S 7 'se &¥Si T h is thesis, w ritte n by Lester. P* .Gideon......... .... .... u n d e r the guidance o f Ai.8 .—F a c u lty C om m ittee , and a p p ro v e d by a ll its members, has been p re sented to and accepted by the F a c u lty o f the G raduate S chool, in p a r tia l fu lfillm e n t o f the requirem ents f o r the degree of Jester., of ..Arts... J'CHN-Dr-eoOKE rV Acting Dean Dmn Date....- J . a i r u a r . 3 r ; , . . . 1 5 . 5 8 - ....... Faculty Committee „ /• TABLE OP CONTENTS CHAPTER PAGE I. INTRODUCTION TO THE PROBLEM............... 1 Definition of fringe benefit ........... 2 Contents of this study .......... 2 PART I DEFINITIONS AND BRIEF HISTORIES OF EACH FRINGE COVERED IN THIS REPORT II. LEGALLY REQUIRED PAYMENTS .................. 7 Old-Age Survivors Insurance ........... . 9 Unemployment Compensation ............. 11 Workmen’s Compensation ................. 13 III. MUTUALLY AGREED-UPON PAYMENTS............. 20 Pension Plans.......... 21 Group Insurance Plans................... 26 Termination Pay.......................... 29 IV. PAYMENTS FOR ON-THE-JOB, NON-WORK TIME . . 35 Rest Periods ............ 35 Miscellaneous Non-Work Time............. 1^2 V. PAYMENTS FOR TIME NOT WORKED AND NOT ON EMPLOYER’S PREMISES................... . k-7 Vacations .............................. Ij-7 Early history of the vacation movement. Vacation periods..................... 5l CHAPTER Vacation pay........... Vacation theory .... Holidays ................. Sick Leave ............... Other Non-Work benefits Civic Duties ........... Miscellaneous ......... Summary........ .. VI. PROFIT-SHARING PLANS .... Definition ............... Early history ........... Operation of the plans . . Critique of profit sharing Educational benefits . . PART II ECONOMIC ANALYSIS AND ASPECTS OF FRINGE BENEFITS VII. RECENT WRITINGS ON FRINGE BENEFITS . VIII. SIGNIFICANCE OF FRINGE BENEFITS AND ECONOMIC SURVEY ........ Incidence of fringe increases . . Who ought to pay for fringes . . The employee laid off ........ The remaining employees . . . . ili PAGE 56 58 62 65 65 67 68 70 70 70 73 77 80 8I 4- 97 103 108 110 110 CHAPTER PAGE The employer..................... 110 The consumer..................... Ill Conclusion .......................... 113 IX. SUMMARY, CONCLUSIONS, AND THE FUTURE . . . Il6 Legally required payments. ................ 118 Old-Age and Survivors Insurance . • . 119 Unemployment Compensation ........... 122 Workmen’s Compensation ............... 123 Agreed upon payments...................... 125 Pension plans ................... 126 Life and group insurance benefits . . 127 Termination pay ............... 129 On-the-Job, Non-Work benefits ........... 130 Rest periods. ................. 131 Miscellaneous benefits . ......... 132 Payments for time not worked and not on employer’s premises............. 133 Vacations .......................... 133 Holidays .......................... 136 Sick-Leave .......... 138 Other Non-Work benefits........ lij.0 Profit sharing .............. lij-3 Educational benefits ......... II4 .B Summary ............................... II 4 .7 ' CHAPTER PAGE i ! | Conclusions....................... llj .8 t BIBLIOGRAPHY .............. 151 APPENDIX A....................................... 158 APPENDIX B.......................... l6l | APPENDIX C....................................... 165 i 1 APPENDIX D........................................ I67 APPENDIX E............. I69 ; TABLE * 1 I i x . II. III. I I i | i i 1 7 • i i i v. i 7 1 * i l ! vii. VIII. LIST OP TABLES Fringe Payments by Type of Payment, 1953.................................. Comparison of 19U-7» 19^4-9# 1951 and 1953 Fringe Payments for 130 Identical Companies .... ......... Calculation of Pension Pay for Non- Contributing Employees of the Fire stone Tire and Rubber Company . . . . Calculation of Pension Pay for Contri buting Employees of the Firestone Tire and Rubber Company ........ Calculation of Pension Pay for the Employees of Hughes Aircraft Company................................ Benefits of the Hughes Group Insurance Program . . . ....................... An Example of the Major Medical Plan of Hughes Aircraft Company ............. Time in Service Requirements for Termination Pay ..................... vi PAGE 159 160 162 163 l6if l66 168 170 vii LIST OP FIGURES FIGURE PAGE 1. Theoretical Demand Curve, Gasoline Consumption.............................. lOij. 2. Theoretical Demand Curve, Cigarette Consumption...........* ................. 10l|_ 3. Gasoline Theoretical Cost Curve ........... 105 I 4.. Cigarette Theoretical Cost C u r v e......... 105 CHAPTER I INTRODUCTION TO THE PROBLEM The Economic Report of the President for 1956 indi cates that the average weekly earnings of workers in manufacturing industries in the United States in 1956 were I80.13.1 This was an increase of 83$ over I9I 4- 6. However, in recent years the monetary wage is no longer an adequate measure of personal income, nor is it a measure of the cost of labor in production. The total costs to employers were increased on an average of 3U-* 6 cents per payroll hour in 1953 because of the fringe benefits that many 2 workers get. Pensions, social security, insurance and 1 | other benefits have added to the well-being of employees | substantially and at the same time have increased the cost j of doing business. Other indirect income and costs are provided for in non-productive time allowed to the em- ; ployee by the employer. Such benefits include vacations, \ holidays, rest periods, and cleanup time. This study will include these and other benefits which are adequately described as fringe benefits. Economic Report of the President, Transmitted to the Congress, January 23, 1957 (Washington:Government Printing Office, 1957)> p. 150. 2 Fringe Benefits (Washington:' United States Chamber of Commerce, 195l+)> p. 6. Covers the major industry groups in the United States. I Definition of fringe benefit* For the purpose this report, a fringe benefit is defined as compensation ^ not made as a direct payment for productive labor; rather 9 it is a payment based upon a predetermined formula which will result in an added cost of labor and which must be paid by the employer, on the employee's behalf, either to the employee as additional income or to another party for the purchase of some benefit which the employee might ^ receive upon some contingent occurrence. Contents of this study. This study is divided into two parts. Part I will define and give a brief historical background of the fringe benefits covered by this report. First, there are the legally required payments which must i be made by the employer on behalf of the employee. Pay- ' ments are made for: (1) Old-Age and Survivors Insurance, j a Federal Government plan, (2) Unemployment Compensation, j I a Federal and State Government plan, and (3) Workmen's Compensation, a state plan. i I Second are voluntary or agreed upon payments. This i group of fringes are granted to employees because of a mutual agreement between the employee's representatives and the employer. Payments are made for pensions, group i j health and life insurance, and termination pay. It must I ! be pointed out that this study is made only on that portion of the benefits paid by the employer. No part of the payments which are made by employees can qualify as a fringe. Third is a group of benefits which includes paid rest periods, cleanup time, travel time, in general all paid time for which the employee is on the job, but doing j nonproductive labor. This group excludes lunch periods ! i and other time on the employer’s premises for which com pensation is not paid. Fourth is a group of benefits for time not worked, and not on the employer’s premises. This group includes, but is not limited to, vacations, holidays and the like. As a rule benefits in the latter two groups are generally agreed upon at collective bargaining sessions. I t However, in certain cases, many benefits are voluntarily made to employees, without prior demands by employee 3 groups. ^Bnployers initiate retirement plans, unemployment plans, and other plans which have a government sponsored I counterpart, to prevent additional government intervention j or to gain some advantage by the use of private plans. They grant profit sharing, educational benefits, insurances, and so forth, to lower their own taxes and/or prevent the governments' entry into further social aid to the worker. In all cases, however, employers realize that these benefits are here to stay and the attraction and j retention of key personnel depends on the good morale that I these benefits provide. Prior to World War II it was ! generally the practice of employee groups to demand fringe ; benefits. Since World War II employers have used fringes as counter-offers to the wage demands of unions. It is for the foregoing reasons that many benefits are volun- j tarily given to employees. " - - Fifth is profit sharing plans by which the employ ees receive a share of the company^ net earnings. The portion received by the employees is not considered as costs of labor, since they are distributed after all other - co'sts have been determined. j . . Part II contains an economic analysis of, and con- j elusions about, fringe benefits. As part of the con clusions, the present trends in all the fringes included in this report are indicated, and an attempt is made to predict the areas which are likely to be dynamic and those which may become nearly stagnant. This analysis is based j | upon the current trends in collective bargaining as reflected in signed agreements and in recent changes in < j state and Federal legislation. i j It would appear that the economics of fringe 1 benefits would receive much space in textbooks on labor. i i : However, a search of recently written books by several j j leading economists revealed that very brief mention is J made. On the average about one and one-half pages are devoted to the subject in a brief survey form. It is true, however, that fringes receive a much better treat ment individually. But this is generally an explanation J | of each as it affects bargaining rights and legality. { | j Chapter VII contains a brief summary of the writings of J many well-known economists in the field of labor. 5 There are presently available many separate com prehensive studies on each of the various fringe benefits. The purpose of this report is to describe in one study the major fringes by type, give a brief history of their development, analyze their economic significance, and j indicate the possible trend for each in the future. j i The classification of fringes has been adapted from! the categories used by the United States Chamber of Commerce in its research study on fringe benefits.^- Wherever possible, references are made to contract pro visions of labor-management agreements and handbooks on benefits which employers issue to their employees. The collective bargaining agreements and manuals of eight employers in the Los Angeles area were chosen for this purpose. i The appendices contain: (A) A comparison of 19^-7» i 19^9* 1951» and 19E > 3 fringe payments as a percentage of total payroll. (B) Pension pay determinations. {C) The benefits provided by the Hughes' Group Insurance Program. (D) Hughes* major medical payment calculations. (E) The time-in-service requirements of a telephone company in determining termination pay. ^Fringe Benefits. Ibid. PART I DEFINITIONS AND BRIEF HISTORIES OF EACH FRINGE COVERED IN THIS REPORT I CHAPTER II j 1 LEGALLY REQUIRED PAYMENTS The fringe benefit payments to be described in this chapter are those required by law. Payments are made for: ! (1) Old-Age and Survivors Insurance, (2) Unemployment Com pensation (Federal and State), and (3) Workmen’s Compensa tion Insurance. Consideration is given only to the portion which is required to be paid by the employer. Modern day social insurance began in Germany in ,/ 188 3, when insurance programs were set up to provide maternity and sickness benefits for wage earners. In l88i j . , | this coverage was broadened to include accidents. In I889, j it was extended further to include incapacitation, old-age, J and death benefits. I 1 j One author describes modern day social insurance as i ! follows: I Social insurance may be described as a relatively Inexpensive form of insurance devised by the state to guarantee the wage earner and his dependents a mini mum of income during periods when through forces largely beyond his control, his earnings are impaired or cut off. It aims to secure the worker and his family against economic emergencies resulting from the i temporary or permanent loss of a job through unemploy- i ment, sickness, invalidity or old age, and against ' those other emergencies which arise from the death of | the bread-winner of the family. 1 i -^Abraham Epstein, Insecurity, A Challenge to | ASirica (Chicago: Random House, 1949), P* 28. 8 Many state, Federal, and loeal laws have been enacted to guarantee a minimum income, and to extend benefits to workers in case of unemployment, retirement, ! or injury on the job. These legally required payments are sometimes levied in part upon the employees and in all instances upon the employers. The payments made by employers must be added to their costs of doing business. The payments made by the employer are indirect j income for the employee, because of the ‘ benefits which are \ likely to accrue to him. It might be possible for the I employer to pay the employee the additional amount as , income and then let the employee pay for his own benefits. i j However, by law, the burden of collection and payment falls ' 2 : upon the employer. The amount to be paid is determined by applying a percentage formula to the total payroll of the employer. They are cost of production items that must| i i I be paid for by the employer and passed on, if possible, to I j the consumer. If an employee earns $2.00 per hour, and his fringe benefits are 7^ per cent, the employer must pay • out fifteen cents for these benefits; the actual total 2 As shown by previous attempts at voluntary plans, I slight participation would result from such plans on a J voluntary payment basis by employees. To secure 100$, ! or almost 100$, participation, laws have been enacted to ! force payment by or on behalf of employees. Employers ! have been designated as intermediaries in the collection and payment to the government of the revenues. 9 labor cost becomes $> 2.l5 per hour.-^ Old-Age and Survivors Insurance. The benefits and | tax provisions for Old-Age and Survivors Insurance, In I ; general, are contained in Title II of the Social Security ! Act, 1935* as amended through 1956. Currently, monthly payments are made under stipulated conditions to those j eligible over the age of 65.^ If the beneficiary should i die prior to reaching the age of 6 5* monthly or lump sum I i I ! payments are made to eligible survivors. Taxes by which i 1 this program is supported are levied upon employers, j | employees, and self-employed persons. The collection of | | the taxes is covered by provisions in the Internal Revenue ! ; c j Code.p f | The amount paid to the worker as a benefit is dependent upon the amount earned by him or her during a I given period of time, defined as quarters. The maximum benefit payment is $1 6 2 .8 0 per month to a man and wife, if both are over 65. The tax levied is dependent upon the wages of the individual during a calendar year. Currently ^See Appendix A for data on the extent of fringe benefits and their growth from 19^-7 through 195 3* ^Amendments made in 1956 allow working women, wives, and widows to receive lower benefits at a younger age. ^Federal Insurance Contributions Acts are Regula- 1 tions 91, 106, and 128 of the Internal Revenue Code. | the maximum paid by either the employee or the employer is | two and one-quarter per cent (2^%) of the first $>1| .2 00. of income or $9^*50 P©** year. The United States Government entered the field of social security in 1935* This was at a time when low incomes made it hard to save, and when there were no j widely used private pension plans. This insurance was made compulsory. Voluntary plans have always failed to attract young people, and their participation was necessary in order that the costs of the plan could be kept low. Even when private insurance companies were stimulated by the government there was a failure to attract the par ticipation of the younger worker. By putting the insurance on a national compulsory basis the benefits became greater ! and the costs to the individual lower. In 1939* 1950, 19^2, and 1956 the benefits were raised; also the covered workers' contributions. The costs however, are very low when compared to the benefits I received. The benefits are tax-exempt and the beneficiary I , usually receives in one monthly payment an amount greater than he paid into the fund in any one year. Another feature of the plan is that the beneficiaries are paid on j the basis of a formula that guarantees a minimum income, rather than on the basis of the total annual incomes | earned before retirement. For instance, a person with an ^Effective January 1, 1957._______ 1 income of $2 5,0 0 0. per year will receive the same benefits as a person earning f l j . 2 0 0. per year. Unemployment Compensation. The Social Security Act does not set up a system of unemployment compensation or insurance. Nor does it create benefits for the unemployed. The objective of the Act was to encourage the states to set up unemployment compensation systems. The Act did not contemplate that the Federal Government should assume the responsibility for creating and administering a national system of unemployment insurance, as it did in the case of Old-Age and Survivors Insurance. Under the Act, that responsibility rests with the states-. 1 Unemployment was considered to be a state problem. Some states already * | provided for unemployment compensation, rj In-as-much as the states were charged with the ' responsibility for administering the unemployment com pensation fund the atmosphere created by this Federal law tended to force the states to provide such benefits. This was accomplished by levying a 3% tax on all payrolls. Any state that had an unemployment plan would be allowed to keep up to 2.7$» Therefore, since the revenue would be | collected in either case it is to the advantage of each j I state to have provisions to aid its unemployed. Unemploy- ?Glenn Miller, American Labor and the Government (New York: Prentice-Hall, Inc., 19^8), p. 350. _ __ ment compensation is an assistance given to those who are out of employment due to causes beyond their control. The tax is paid entirely by the employer. In fact it is illegal to pass the costs on to the employee, directly. j ' j Unemployment compensation plans started around the / I ' j mid-l8 0 0’s when trade unions and other associations ! ! ! assisted their members during periods of unemployment and 8 other maladies. As early as 1893, a few towns in Switzer- i land attempted to solve the problem by collecting funds j voluntarily from their citizens. This early attempt to j i provide a central fund voluntarily proved to be unsuccess ful. Later, in l89f>> the city of St. Galen, Switzerland, i attempted compulsory collection, but this attempt ended in 9 failure after two years. Later the Ghent System was developed and used in Europe. This system provided for i j supplemental sums to be paid by labor unions and other ; | workingmens1 societies for the benefit of unemployed j workers. j However, no national government undertook the I o t j Although family or community aid dates from early l history, predetermined fund collections are recent. I I Europe, a system proposed by Ghent was widely | enacted. This was a system in which municipalities and j local authorities supplemented the sum paid by labor unions and workingmens’ societies. This system proved to be used extensively in Belgium, the Netherlands, the Scandinavian countries and Prance. 13 adoption of an unemployment plan prior to 1911. Britain was the first, in that year, to adopt it as an institution. The British plan was successful and the United States and j Sweden began similar plans. The influence of these three nations led to adoptions of similar plans throughout the world. j The first attempt by a state at compulsory unemploy- j ment insurance in the United States was unsuccessful. This 1 I ' was in Massachusetts in 1 9 1 6. Wisconsin inaugurated the t first successful plan for unemployment compensation in the j \ Western Hemisphere in 1932. Three years later, in 1935* 4" the Federal Government started the system currently in use j under the Social Security Act. Under the influence of the ! ; Act, all the states and territories now have provisions for aid to the unemployed. 1 i Workmen’s Compensation. Workmen’s compensation | insurance plans are designed to compensate employees for I personal injuries received while performing operations in ! | the scope of their employment. Payments are made for 1 death, permanent total disability, permanent partial dis- I 10 I ability, and temporary total disability. I 7 1 . .i ■ . 1 1 10See: (1) United States Department of Labor Bureau of Labor Standards, Supplement to Bulletin Ho. l6l, State Workmen1s Compensation Laws (Washington: Government Printing Office, November 195!?) J and (2) Students Labor Law Service (New York: Prentice-Hall, Inc., 19'M^» revised through 1951l), pp. 9021-9 0 5 0, for a complete list of all 34! i The full amount of lost wages is, never paid as | benefits. If this was done, there would be a great tempta tion to prolong disability beyond actual recovery. If death occurs due to an industrial aeeident the eligible dependents of the worker are paid up to a predetermined amount. The methods of meeting the requirements of the various state laws are through: (1) Insurance companies, (2) self-insurance, or (3) contributions made directly to the state.^ Of the fifty-four state and territory plans benefits applicable to the various states. The maximum amounts payable, where stated, for death benefits as of January 1956, range from a low of $l|.000 in j Puerto Rico to a high of $20,000 in Hawaii. California’s j maximum is $1 0 ,0 0 0 unless there is a widow with one or more dependents, • In which case the maximum is $12,500. Total permanent disability payments range from a maximum low of $20,00 per week in Puerto Rico to a high of $150.00 in Arizona. In California the maximum is $35.00 per week for j life. Permanent partial disability payments range from a , maximum low of $l6.00 in Vermont to a high of $126.92 in Arizona. In California the maximum is $35*00 for ij.00 weeks. (May be more or less). The range of payments for temporary total disability is the same as for permanent with the exception that the payments are made only for the period of disability or a shorter total period. As a penalty for failure to be covered in those states which have an elective plan (see f.n. 1 2) the em ployer Is denied the use of the common law defenses (see f.n.’s 1 3-1 5) and is subject to higher losses, since a maximum is usually stipulated for recovery under the law. In addition the offense is a misdemeanor in most states subjecting the offenders to fines and imprisonment. ^In California, "... about two-thirds of the employers elected to operate under a private plan, and three-fourths of those insured the risk with a private carrier." Successful Snployee Benefit Plans (New York: Prentice-Hall, Inc., 1952), p. 65* ! in existence today, twenty-eight (including 23 states) are compulsory and twenty-six (including 25 states) are elec- | tive. The two plans differ as explained in the following I j quotation: J A compulsory statute is one which requires every j employer within the scope of the law to accept the i l act and pay the compensation specified. An elective | act on the other hand, is one which employers may refuse to accept if they prefer the risk of a suit for j damanges by the injured workman, 12 | I In elective states the employers may be self in sured, that is, assume all of the risks. However, the failure to be covered under a state supported plan could result in greater damage claims. Each state law specifies i a maximum payment for the various disabilities. Failure to comply with the law will prevent the maximum payments j j from being applied. Also, failure to comply prevents the ' employer from pleading the common law defenses if sued for | damages. In addition, many of the laws state that the j i [ failure to provide coverage is a misdemeanor and subjects i j the offender to fines and/or imprisonment. Many states, i ! however, exempt employers with fewer than a stated minimum i number of employees. J | Workmen1s compensation is by no means new. The J I | i fact that a government agency oversees its operation, j I | ! however, is new. Prior to the Industrial Revolution, I I 1 P Students Labor Law Service, op. cit., p. 9018. employees were very close to their employers, often living in the same house. In many cases of injury the 1 ) employer merely aided, physically and financially, the employee who was injured. The question of legal liability i was rarely raised; rather compensation was voluntarily j ! ! given. j i i In other cases of injury, the injured employee j j could recover only by suing his employer for negligence. | In most such cases, the presence of the employer at the I i point of injury was necessary to show that the employee | j was acting under the orders of the employer. To prove a t | case and obtain judgment, it was necessary to show: i (1 ) the employers’ negligence, (2) that there was no con- j 13 tributory negligence on the part of the injured employee, i i Th I (3) that a fellow servant ^ was not responsible for the j accident, and (Ip) that the accident was not an assumed J risk."^ " I ^ Normally this would be shown by indicating that the employee did what a "normal and prudent" man would have done under the same set of circumstances. ^The fellow-servant rule originated in the English courts in 1837* The United States Courts quickly followed. The fellow-servant is one who is working with the injured employee and would be the one who is more responsible for the accident than the employer. I -^Many jobs because of their nature are inherently j dangerous. If this is known to the employee at the time J of employment, it beeomes an assumed risk. Handling of explosives is an inherently dangerous job. If the job is taken and an explosion results, the assumed risk principle With the advent of the factory system, the employee I ; and employer became less personally acquainted* Moreover, 1 » the employer was further removed from the working area. ; i Very often he was not on the premises nor even in the same ! locality. It became very difficult to prove the first point above: the employer's negligence. Therefore, many i compensatable injuries resulted which left the burden of 1 expense on the injured party. 5 | I j In response to the great demand for relief, Bismark j secured the passage of the first workmen’s compensation ! legislation in Germany, in 188I|_. This act compensated i j employees for injuries received while working at the j i I position for which they were employed. It was not wholly j adequate, but it was compulsory and the first step in this i field. Austria followed in 1 8 8 7, and Norway in 18914-» with i i | similar plans. 1 1 ! In 1897, England enacted the first law to provide | coverage for any accident which caused an injury to a l worker in the course of his employment. However, coverage i was elective on the part of the employer. By 1902, there was a great demand for similiar legislation in the United States. The tremendous ex pansion of industry and the increase in industrial j ! will prevent recovery for the personal damages to the employee; provided that there is no negligence on the employer's part. If the, employee did not desire to assume the risk, he should not have taken t_ne_job._ 1 8~ ! I accidents resulted in the passage of compensation laws in I 16 ^ i " forty-three states by 1920. The state Supreme Courts of , 1 three states declared such legislation to be unconstitu tional.^ The United States Supreme Court held such acts to 1L3 j be constitutional in 1917* Many states soon after passed legislation on the basis of the Supreme Court’s decision, and subsequent actions in their state supreme courts concurred. However, opposition was very strong. Labor unions (opposed at first; later supported) and insurance com panies (they made large profits from premiums for liability insurance) were the greatest forces in opposition. Today, litigation rarely exists concerning the employers’ liability for injuries.^ The major eause of litigation now concerns the problem of the employees 1 right to re cover. Further, the problem of litigation is of minor T A xdA11 except Arkansas, Florida, Mississippi, North Carolina, and South Carolina. ■^Maryland, 1902; Montana and New York, 1910. The laws of four other states were contested in their respec tive Supreme Courts, but were upheld. The states were: G&lifornia, New Jersey, Washington, and Wisconsin. 1 f t New York Central Railway Co. vs. White (1917)> 2^3 U.S. 188; 37 S. Ct. 2lp7. l^They are forbidden against covered employers. In 1 those states with voluntary plans, if the employer refuses or neglects to be covered, he waives his right to immunity. interest in those industries or concerns which have a j complete medical and accident protection plan for their on employees. Group insurance policies will compensate covered employees if recovery is refused under the work men’s compensation acts. vFor a discussion of group insurance plans, see Chapter III. ! CHAPTER III I i t MUTUALLY AGREED-UPON PAYMENTS Many benefits and fringes are granted through, collective bargaining and the good-will of the employers. i Such fringes have no history of being legally required. As mentioned in Chapter II, all benefits and fringes in this study include only that portion of the costs paid for by the employers. The payments on behalf of the employees are not considered for tax purposes to be a part of his regular pay. Included in this chapter are pensions, life and group insurance premiums, and termination pay. ; These fringes constitute benefits which the employee would be able to purchase for himself, if not provided by the employer. They are distinguished from the benefits in Chapter II by the fact that they are not legally required, j i ! 1 Group insurance premiums are paid by employers according 1 i j to a predetermined formula and do not depend on the actual J pay of the employee or the time spent on a given job. ! Termination pay and pension premiums are payments made by ! the employer and are based upon the actual amount that the ! 1 employee would earn over a given period of time. ! i» - i ___________________ i | ^Por example: The income for a forty-hour week is 1 the basis for determination in this group, regardless of overtime and other income. For the legally required benefits, the tax is paid on the gross earnings (at least until a maximum amount is earned). In some cases, however, 21 Pension Plans* A typical clause in a collective bargaining agreement is the following quotation from the 2 Hughes 1 Agreement, j Bnployer agrees that Its existing group insurance j and pension plans, or substantially equivalent plans, ] shall be continued in effect throughout the term of j this Contract for employees represented by the Union. No specific mention has been made of details in this j clause. However, if no mention has been made in the con- j tract and if there is no specific waiver, pensions are a I proper subject for bargaining with the union, under a National Labor Relations Board decision.^ It is necessary that provisions of pensions plans are not made in the con- j i tract. With few exceptions, such as in the agreements covering Alcoa employees,^- no other mention is made. There are two good reasons for this: (1) each time negotiations arise, there would certainly be quibbling over certain terms of the plan, and (2) the plan might expire with the there is a flat rate per employee per hour of work, but this is not based upon his wages. 2 Hughes Aircraft Company and Aircraft Industry Workers Local 1553* AFL, Agreement, revised through February 3, 1953* Section XX. ^Tidewater Associated Oil Co., 85 NLRB 1096. ^"The agreement between Alcoa and its union spells out the minimum plan in detail. Aluminum Company of America and UAW Local 8 0 8, CIO, Agreement and Working Rules, September 27, Article 3 8. (Contract. Stability is essential. It prevents the un- i certainty that both employers and employees would have if year to year changes could be made. i Pension plans, when once negotiated, may take the * form of a trust fund set up by the employer, or may be j i carried with an insurance company, which assumes the risks i j ! and liabilities. j I An example of a trust fund is that of the Firestone £ . ! Tire and Rubber Company. v \ . . . , the pensions granted under this Plan shall be paid from a pension Trust Fund established for the purpose of providing pensions under the Plan. . . . The Trustee will be a Trust Company or Companies or Bank or Banks with trust powers, and the trust agree ment shall contain such provisions not inconsistent with this Plan as the Company deems appropriate. j The same company also has a contributory plan. j This plan is handled through an insurance company.^* I . . . Sums of money. . . will be held by the Prudential under the terms of a Group Annuity Con tract until applied to purchase pensions under the terms of said Contract from time to time. . . as employees shall be granted a pension. The trust fund is set up for employees who do not i contribute to the retirement fund. Pension plans vary widely and every plan must be individually tailored to fit ^The Firestone Tire and Rubber Company, Non-Contri butory Pension Plan and Contributory Retirement Income Plan for Salaried Employees (Newark: Prudential Press. T 95F)7 1 p.“ iF:--------- -------- L Ibid. j a particular situation and for a particular employer- j I j j employee group. : i | Most plans specify a minimum retirement age; usually 65 for men and as low as 60 for women. In certain cases j i reduced amounts may be paid and retirement granted as low j as 55.7 jn case of death before retirement, the employee's1 j "... total contributions, with interest, will be I • Q j returned to his beneficiary. . . ” In the event of death ' 9 j after retirement begins, . . . , His beneficiary will be paid any excess of j { his contributions, plus interest up to the normal (or J earlier) retirement date, over the sum of the retire- | ment income payments previously made under this Plan to him and his contingent annuitant, if any. Most plans provide for a choice by the employee of a payment method upon retirement.^ Pension plans have i had an important place in the history of industry since i 7 “With the consent of the Company and Employee. . • will be automatic after age 55 as well.” Hughes Aircraft Company, Retirement Plan (Culver City: Hughes Aircraft Company, 1951), p. 7. 8 Firestone, o£. cit., p. 23. ^Ibid., p. 2J 4. . (These clauses are typical and reflect the majority of cases. See also Hughes, Retire ment Plan, p. 13.) •^See Appendix II for samples of retirement-pay calculations. The normal plan begins payments upon retirement and terminates at death. Optional plans are: (1) Joint and Survivor Annuity, under which the retired employee will receive reduced payments for his life and then another person will receive the same payments for his or her life; and (2) Social Security Adjustment Option, n the latter part of the nineteenth century. Like Old Age and Survivors Insurance and compensation insurance, these plans were developed in Europe. In more recent years, the voluntary pension plans have played a considerable part in the extension of incomes upon retirement. These plans have provided retired employees with a larger income than would be possible under the bare subsistence plan of the OASI. In a recent survey, the following facts and conclusions were ob- 12 served: (l) 2^.7% of the reporting firms had programs which covered 1^0.7^ of the reported employees. The employers with larger labor forces are more likely to have a retirement program. (2) Insurance companies are used in more plans than any other type. However, a large per centage of employees are covered under trust systems. Twenty-three per cent of the firms, large and financially strong corporations, manage their own programs. (3) The I number of pension plans in operation are directly related I j to the size of the firms. The larger firms are more I ' under which a person retiring before 65 may receive higher j payments until 65, when Social Security payments are received. 11 For a further discussion of the early development of insurance, refer back to Chapter II. 1 ? Employment Benefit Plans, Nationwide Survey, 12 Metropolitan Areas (Washington, D.C.: Research Council for Economic Security, May 1950), p. l6. 25 likely to have pension plans than smaller firms. ( I j . ) The range in size of the industry groups is equally large. The finance and transportation industries have the highest percentage of coverage, the manufacturing, trades, and service industries are next, and the construction indus- j tries have the lowest. But it must be pointed out that j all industries which have a large percentage of migratory I i or non-permanent employees have the least. f f j One important fact noticed in this study is that i i salaried personnel have a higher percentage of coverage I I than the wage earner or those covered by collective bar- l gaining agreements. i ! Some industries are composed of employers with but I ; a few employees. Coverage for retirement benefits are provided in such cases by employer groups or by union- established funds. The milk-wagon drivers1 fund in Chicago is an example of the former, and the plans set up by the men's clothing and coal mining unions are examples of the j latter."^ j The union and industry retirement plans overcome one of the major problems arising from a single firm plan: Namely, termination of employment terminates pension benefits. It is apparent that there is a trend for more 13 Pearce Davis and Gerald J. Matchett, Modern Labor Economics (New York: The Ronald Press Company, 1954-)> p. 15b. 26 industry-wide or nation-wide coverage in addition to local area plans.^ This may be accomplished by the transfer of retirement credits between companies covered by the same underwriter, or possible transfer of funds between different underwriters. Group Insurance Flans. Insurance plans are designed to give supplemental benefits to workmen's com pensation acts, or to provide payments in cases not covered. While workmen's compensation plans cover the worker on the job, insurance plans set up by the employer cover the employee in such items as sickness, accidents, deaths, and medical care, while not on the job. Many 15 plans are paid fully by the employer. In addition, many provisions of the employees' coverage include their 16 dependents. Many plans require separate payments by the ^"Teachers in California schools may accumulate time anywhere in the state and in certain cases anywhere in the nation. The same is true on a nationwide scale for college professors. 15 Examples of employer paid plans include: (1) Hughes Aircraft Company, (2) The Firestone Tire and Rubber Company, and (3) The Aluminum Company of America. ’ ’ Dependents are: (a) an employee's wife or hus band, (b) an employee's unmarried children (including any step-children, legally adopted children and foster chil dren) from l l } . days up to 19 years of age. . . . You may not include as a dependent, a wife, husband or child who is eligible for insurance as an employee. ...” Your Hughes Croup Insurance Program (Culver City: Hughes Air craft Company, 1956), pi o. 27 employee for dependent coverage. ^ T/ffhen paid by the employer the premium is based i i upon a flat rate for all covered employees. These policies are all underwritten by an insurance company. In many j states, laws permit employers to cover their employees in i | a broad form of coverage to include non-occupation dis abilities, as well as workmen's compensation, and other 18 i types of group plans. The following quotations are taken from the Hughes j j Group Insurance Program explanatory booklet,1^ and are j typical of the benefits given by other employers. First, ' i on life insurance: I i | | Your Life Insurance will be paid in full in the i event of.death at any time or place or from any cause. \ The benefit will be paid in a lump sum or in monthly I installments to the beneficiary designated by you. 1 Group Insurance covers death on or off the job and is j in addition to any other benefits you might receive. * ! | Second, on Accidental Death and Dismemberment J (workmen's compensation): . . . This coverage provides for payments in the ■^Hughes employees are charged $1.86 per week to cover dependents. (Hughes Group Insurance, ojd. cit♦, p.l}-. , Alcoa employees pay $1.70 per week for a wife or wife and children and $1.25 for children only. Aluminum Co., op. cit., Article 38 II. - i O Disability Insurance Provisions (Sacramento: State Printing Office^ 1955)* Such plans in California are called "Voluntary Plans,” while "State Plan" is the title for the state sponsored program. •^Hughes Group Insurance. op. cit. . pp. 8-12. For a list of benefit provisions ^seeiTppendix C. ___ _______ i event of loss of life or dismemberment through | accidental means, including bodily injuries which J arise out of and in the course of employment. . . . In case of accidental death, benefits will be paid to the beneficiary named by you. In the event of dis memberment, benefits are payable to you directly. Third, relative to non-occupational disability benefits: (1) Income payments. If you are disabled and unable to work because of a non-occupational accident or sickness, the weekly benefit to whieh you are entitled is shown below. Your weekly earnings will be taken as l/l3 of the pay received by you during the calendar quarter preceding commencement of the disability. . . . You will also be entitled to payment of $10 for each full day while confined in a hospital qualified under the Code for the first l l j . days during any one disability. (2) Hospital benefits. 1 j | If you are confined in: a lawfully operated hospital,! i as a result of a non-occupational injury or disease J I for which benefits are not payable under any workmen’s j ! compensation law, you will be entitled to payment of J | the following benefits shown below: j 1 I ! (1) EMPLOYEES’. BENEFITS: | Payment for the actual charges made by the hospital I for board and room up to $1 2 .£ 0 per day of confinement j for the first 70 days. . . . - j (2) DEPENDENTS’ BENEFITS: Payment for the actual charges made by the hospital for board and room to f> 1 2 .£0 per day for the first I 31 days of confinement. : (3) EMPLOYEES AND DEPENDENTS: Payment for the actual charges, other than for board and room, made by the hospital up to $300 for employees and dependents plus 7$% o f the next $700 for dependents only. . . . (3) Surgical fees. If you or your dependents undergo a surgical operation as a result of a non-occupational injury i or disease for which benefits are not payable under any Workmen's Compensation law, payment will be made for the actual surgical fees charged you or your 29! I dependents up to the maximum amount indicated in the "Schedule of Operations.” . . . A recent innovation in the group plan of the Hughes Aircraft Company is the Major Medical Expense Benefits 20 provisions. This plan provides for a maximum benefit of $5 *0 0 0 for each insured employee, regardless of the 21 number of separate disabilities. The plan provides for payment of benefits for medical expense Incurred for non-occupational accident or illness in excess of the deductible amount for each calendar year, which is the sum of: (a) Benefits pro vided under the basic group plan, (b) hospital benefits payable during the first fourteen days of hospital confinement under the California U.C.D. law, and (c) $100, 00. This deductible amount applies only once in any one calendar year even though you may have several different disabilities. The plan provides for payment of Q0% of such medical expenses in excess of the deductible amount, the balance of such expenses to be borne by the insured employee. i , Termination Pay. Termination pay may be defined ! as: "Payment by an employer of a sum of money in addition | I ! to wages, to a worker whose employment is permanently ter- I 22 i minated." Termination pay is not new. Indentured ' I ' servants in the early colonization of America received a i 20 I Ibid., pp. 15-17. ! 21Ibid., p. 15* See Appendix D for an example of ! the major medical plan. < « 2 ? Personnel, Policies and Practices (New York: Prentice Hall, 1953), p. 5^01. i _ lump sum payment at the end of their term. It is common 1 today in the South for employers to give termination pay to their Negro servants. Termination pay is also known as severence pay. There are two schools of thought concerning the primary mover in its development: (1) Prom labor’s standpoint, i j claims are made that it was a union-fought-for type of security. (2) On the other hand employers feel that it was their offspring. It might be pointed out that it was indirectly caused by unions; because, employers have used this as a devise for preventing union activity. Whatever the real direct reason, severance pay is a dynamic fringe. The trend is for even more employees to be covered. i Whether the plans are innaugurated through the benevolence ' 23 ! of the employer, or through wage concessions by the j ; union,^ termination pay is here to stay and will tend to Increase throughout industry In the years to come. This is definitely a recent innovation in the wage- policy of employers. If such a wide-spread program had been in operation in the early 1 9 3 0’s it might be assumed that many more employers would have been bankrupt. But on the otherhand, had such a policy been in use, widespread ^As in the case of the Firestone Tire and Rubber Company. ^As in the Steel Industry. 31 unemployment might not have occurred; at least not as ; seriously. t » i I One of the strongest arguments of the union organizer is that the union can offer security against layoffs or dismissals. An employee, if a union member, | believes that the union will attempt to aid him in obtain- , I i I ] ing other employment in case of layoff. During the time of i i unemployment, if financially in need, the union will pro- ivide him at least with the bare necessities. This appeal f ■ to the security of the working man has been successful in j i | J drawing the worker into unionism and in return has aided i i J the union in obtaining these benefits from employers. ! i . i j Many progressive employers, believing that this i attitude is prevalent, have initiated termination policies as a means of providing security for their employees, 1 thereby negating the appeal of the unions in their organi zational activities. Economically speaking, there is a limit to the extent of any such program by the employer. He must set up a reserve to provide for termination-pay- 25 ments, and a good manager realizes that his one great 25 In plans initiated by employers without a union's interference, a degree of protection from bankruptcy is provided; "The Company shall have the right to change, modify, or terminate this Plan at any time in its entirety, I without iiability of any kind. ..." Firestone, Pension Plan, op. cit., p. l l j.. 3 2 ' concern is to keep the business solvent. Therefore, in a I highly unionized plant, termination pay is not as preva- j lent as in those that are open or have very weak unions. I I Unions, however, are quick to contend that the higher ! | wages procured for their members helps to pay for short i ! I I | j periods of unemployment. The end result, if this be true, , | is that the employers pay for this fringe anyway. But in j | this study, we are not concerned with indirect payments; j ! but rather with the direct payments for termination pay. < ! ! : Termination pay for those plans adopted, generally i 26 ■ are based upon an employee’s time in service. Appendix > 1 1 E contains a sample term of employment requirement by a telephone company. The longer an employee has been work ing, the more his termination pay. This is understandable because older workers are rarely hired right away, in most I cases. Also it is an incentive for longer service. [ Termination pay is given for workers who are ter- 1 j minated for reasons not of their own volition. There is I no provision for workers who quit or are separated for reasons other than permanent layoff.2^ Nevertheless, the 1 payment is a fringe that mtist be pro-rated against all of 26 Davis and Matchett, o£. cit., p. l6l. 27»The provisions. . . do not apply in the case of i (a) an employee leaving the service voluntarily without inducement by the Company to terminate such employee’s services, _(b) an employee on a leave of absence, or (c) an employee qualified to retire with pension. '1 Ibid. i the workers and added to the cost of labor. The fact that t j it gives security to those who are discharged and potential security for those still employed (allays any fear of unemployment hardships) indicates that this is a good fringe. For the most part, severance pay is made to employees who would also be eligible to receive benefits from the unemployment compensation funds. Since the employer must pay into the unemployment compensation fund an amount determined on the basis of his past experience of layoff payments, the severance payment plan might cost less money than the unemployment compensation plan. There | are two reasons why this could be true. (1) Under the ! state plans, the benefits and costs of administration * j paid for by the state on behalf of the employer are deter- I - I mined and the premiums are calculated and are charged to | i the employer over a set period of time. Due to this, he may pay more into the fund than the state pays out. (2) Whether there is a company fund set up, or a pay-as-you-go plan, the company can have the use of the money until paid as a termination benefit. Also, only the exact amount that the employee is entitled to would be paid. i i The steel industry has a limited severance-pay 28 plan. The plan is limited because it only affedts a ■p Q Personnel. Policies and Practices, loc.cit. I I | group of employees rather than an individual. There are | i I i two requirements that must be met before payment will be made: (1) An entire department or plant must be shut down and (2) the employee must have three years of accumulated j i j service with the employer. This plan differs from that I ; i ~mentioned earlier in that the limited severance-pay plan is designed to prevent the physical movement of a plan or firm to another location. i In general, the former plans protect the individual * employee against unemployment hardships. The latter plan protects the union or all employees of a department or plant from a wholesale layoff. The movement of plants from the New England states to the South will no doubt ; cause labor to demand at least the limited severance-pay I i I plan. i CHAPTER IV I I PAYMENTS FOR ON-THE-JOB, NON-WORK TIME i There are many benefits that the average person l !fails to realize as fringes. These fringes are disguised I because direct compensation is reflected in the pay-check % of the employee. Unlike other fringes which add costs directly to the product, this group adds costs indirectly through a reduction In output."^ Such fringes include paid rest periods? lunch periods; wash-up, travel, elothe- ichanging, and get-ready time. Rest Periods. Prior to 191^-> rest periods were allowed for young children and women in many industries of Europe and the United States. (Today, many states have 2 ; legislation requiring rest periods for women. ) | The earliest dates for granting rest periods are j •unknown. However, the great influx of this fringe occurred for both men and women during World War I as a means of Increasing production over a longer work day with less I l Normal productivity increase is not considered. ! There Is an argument, however, that due to these fringes, j output will remain the same, for the increase in efficiency I will more than compensate for the slaektime. i ^Typical is the California Women and Children Regu lations issued by the Industrial Welfare Commission, Order Number 1-52, effective August 1, 1952. 36 fatigue on the worker. The great demand for goods re- 1 quired workers to work long hours, Sundays,.and overtime, i ; i A noted decrease in efficiency, an increase in labor dis- j i turbanees, and disciplinary difficulties eventually led to ! i o I j large scale investigations and reports on the subject. : | Rest periods, as a fringe, are not readily adaptable j to all types of industries. Those that have scheduled rest periods, such as at 10 AM and 3 PM, are in the type of work in which there is a continuous process; such as | j an assembly line, desk job or the like. i i In many cases, rest periods are covered in collec- ! ; tive bargaining agreements.^ Also, they are becoming more q ' ■ ! common as a subject of negotiation. A recent study by 1 the United States Department of Labor indicates that at j least one-quarter of all wage agreements now contain rest ! periods clauses. ! • 5 I "Dne such report is: National Research Council, Fatigue of Workers (New York: Reinhold Publishing Corp., I 19ip-) • , i ^"Hughes Aircraft Company and Aircraft Industry I Workers Local_l553. AFL Agreement, revised through ] February 3, 1953, SectioHjQCT^--- i 5"Time Out For Coffee--A New ’Fringe Benefit1, U.S. News & World Report, January 18, 1957, PP* 6 1-6 3. This Ys a report by the Ohio Manufacturers Association, which con ducted a survey of 600 firms in Ohio. This survey also reveals that 9 of 10 Ohio employers allow the rest period, or "coffee breaks" as the report calls' them. Further, of 1 the ten per cent who do not have breaks, one-third of the j employees take unauthorized time off. However, less than I one per cent of the surveyed firms expressed outright dis- | approval of rest periods. 6Ibid., p. 6 3. 37 The firms that have no rest periods* or which cover only part of the workers, are in areas where: (1 ) pre- ! determined interruptions will cost much more than the value, i of the fringe, or (2) there is substantial waiting time on 7 a given operation. For example: Automatic equipment i I operators are required to insert raw material and take off j 1 I ! the finished product. In such cases, more than one-half of I : the employee’s total work time might be spent "resting. 1 1 1 i | In industries in which production is repetitive, « i | monotonous, and tiresome and there is little waiting time | I between operations, there is a tendency for nervous tension I to be built up in the worker. Such tension and fatigue j Jmay cause accidents, impair the worker’s skill or judgment, j or cause the worker to be less accurate. Many studies ! Q I have been made on this topic. Reports have been made to i I I j show that accidents occur more heavily just before lunch i and before quitting time in the afternoon. Other studies have been made on waste, scrap, and rejected material, indicating that there is a great q abundance of such in the afternoon hours. 7 As far as ^This excludes any worker covered under a state I labor code which requires rest periods. i 8 U.S. News, op. cit., pp. 6l-62. 9One such study conducted at the Firestone Tire and Rubber Company showed that piecework workers who refused to take a break had a higher scrap rate than those who took !o£fn minute rest. As a result, rest periods became mandaj office workers are concerned, an increase in errors in policy typing for insurance companies occurs in the after noon. A preponderance of evidence indicates that the greatest number of accidents occur in the afternoon, also. ! ! i As industry is faced with the problem of hiring morej and more inexperienced workers, employers find that they i are not standing up well with the increasing demands of industry. However, they have found this to be true also with some of the older workers. So the development of restj ! periods has been primarily on the initiative of management i to cut down on waste, accidents, and work shortages, j The granting of rest periods soon indicated that a brief pause given in the morning and in the afternoon greatly decreased the hazards of fatigue and high tension. A sidelight to this, which is not direetly a fringe, is i : that there has been a leniency in the no-smoking rule, : i serving of snacks (at a cost to the employee and sometimes paid for by the employer), and music throughout the day. | 1 The Firestone Tire and Rubber Company has a marked area inj which the worker may smoke and partake of various canteen provided foods and drinks. These have aided in improving | the moral and working conditions of the employees, j All major life insurance companies now allow rest i ' periods. During the development of this fringe, employers granting a long lunch period cut down on the length of time allowed for lunch in favor of giving a period of rest. 39 There is now a tendency to cut down on the number of hours I worked in the afternoon. j In many cases, the employees have Indicated a desire that the rest periods be eliminated and the time be deducted from the normal quitting time. It has been point ed out by management, industrial engineers and others that i the rest period is for the health and safety of the employ- i J eej rather than a gift of time off . The employees them- t selves are generally in favor of the rest period, but not for the same reason as employers. Most employees do not ! like to continue to work steadily all day. j I The major abuse of rest periods is very apparent and! ! this abuse is the stumbling block from managements' point | j of view. Once an employee begins his rest period, it is very difficult to get him to commence his work on time. I ; The idea of a warning whistle or bell at the start and end | I ; of the period sometimes helps. However, not all types of j I business are conducive to such noises. In the type of business where there must be continuous service, with rotating rest periods, abuse is quite prevalent. According to the survey reported in the U.S. News & World Report: j More than half the companies have fixed schedules ; for coffee breaks, both as to time of day and duration, | and only yfo of them find the privilege is abused. But ! among those without fixed schedules, 33 per cent have trouble keeping the coffee break under control. 10 fii t « * P» _ _______ The percentage of companies that reported abuses amounted 1 to llf per cent of both groups. I Abuses of rest periods are very common in govern ment agencies. Jokes and cartoons describing abuses by civil servants are very popular reading material in maga- 1 I f zines and papers. Most widely used cartoon is captioned: "Well, I must interrupt my rest period and return to work for a while." There has been and is a great concern over the attitude of the government’s employees on rest periods. If necessary to leave the premises for refreshments, many leave on time, but do not return, sometimes, for as long as two hours. Inside of a plant where movement is less free, the employees are more closely limited to about fifteen or twenty minutes for a ten-minute break. This is ]a major problem, if a consideration is to be made of the ; i ■cost. If 1000 employees earning $2.00 per hour each take six minutes longer than scheduled, the employer is forced I to pay $2 0 0. for no productive output for each occurrence. ! Furthermore, the normal time off alone adds from 10 to l6 11 days to the paid time taken from work each year. A t ! nurse at Hughes Aircraft Company makes unannounced visits i I to the women’s rest rooms and reports those women abusing ! I---------------- ^ Tbid., p. 6l. Ten days if the break is ten minutes and sixteen days if it is fifteen minutes. r ' ' * ~ ■ ■ ip.. the company’s rules. The city of Los Angeles employs checkers to prevent loitering in rest rooms. J In addition to the extra costs involved for delay- , ! ’ i j ing a return to work, overtime may be required to get out j ! i the normal workload. This has the effect of lowering pro-! j duction and adding to the cost of labor. But it is apparent that rest periods are here to stay. The average cost, as reported by the United States Chamber of Com merce’s 1953 survey, is 3.9 per cent of the total pay- 12 roll. The problems involved in rest periods are numerous. Probably they never can be completely resolved.j J It is apparent that there is an increasing trend in ! the granting of this fringe to all employees, except those with wait and work and then wait again jobs. Rest periods ! I 1 have seen a long and slow movement from their early ! : beginning, when they were granted to women and children [ 1 only, until today when they are being granted to all em- | ployees equally. Many companies have installed a plan ! and done away with it for one reason or another. But j where rest periods have been omitted from the program, other substitutes have taken their place; such as leaving the work station, when it is apparent that it would be hazardous to the individual to work longer. ' 12 Fringe Benefits, 1953 (Washington, D.C.: United States Chamber of Commerce, 195£j-)> P« 15* j k2 I Piecework employees are also permitted to leave their station for short periods. The Firestone /Agreement states, in discussing wage applications to piecework employees: "It is understood that the employee will be | | given necessary time during the shift for fatigue and i j J . 3 personal needs, including lunch." The problem of smoking has been eased from a point where a worker would be allowed to smoke only once a day to a point now that he may go to a designated area and do all the smoking he pleases; or else smoke at his work station. An extension of rest periods is the paid lunch I period. Chrysler Corporation allows 15 minutes.^ Fire- j stone allows a period of 20 minutes to all employees work- ; ing a six-hour shift. Whenever paid lunch periods are allowed, however, there are no other paid rest periods. i | Miscellaneous Non-Work Time. Unlike rest periods, ! which were and are primarily employer initiated, washup- time, travel-time, clothe-changing time, and get-ready ! time are objects of collective bargaining and trade union ! achievements. Prior to the 1920's, the employee was 1^ The Firestone Tire and Rubber Company and United Rubber, Cork, Linoleum and Plastie Workers of America Local 100, CIO, Agreement, September 1 } . , 195k-, Article VI, Section 5 (a). I ^Chrysler Corporation and UAW Locals 3* ©jb al, CIO, Agreement, amended December 11, 195>0, Section VII 11. ^Firestone, op. cit., Article VI, Section 2. "Day- | expected to travel to his work station, change his clothes, and get ready before being on the payroll. Now, through collective bargaining, additional time is usually | allowed at the beginning of the shift for a worker to prepare himself and materials for the regular working day,! i l with pay. ! The employee today reports at work at a definite j time and is paid for all functions performed from that j time until he leaves in the evening. The Portal-to-. l6 Portal Act, is the first attempt at Federal legislation 1 1 | in this field. This act specifies activities for which - the employee is or is not entitled to compensation as I time worked. Any provision unless expressly forbidden, i I 1 | will not apply, if there is a valid collective bargaining : agreement applicable. Abuse of travel pay requirements ; caused this legislation which enumerated instances when ' a person will be paid for traveling. It was formerly the 1 j practice of employers to pay miners only upon entering the shaft where they were to work. Under provisions of the Portal-to-Portal Act, portal-to-portal pay in the case of work employees will have no deduction for the twenty (20) ; minute paid lunch period.” ■^Enacted in 19^-7» May l l j . ; P.L. 80th Congress, 1st session. For a complete analysis of the law and : details concerning interpretations see: Students Labor j Law Service (New York: Prentice-Hall, I n c . 19I 4B", revised through 195> L | . ) , pp. 70I 4. 8-7 0 6 3. I coal miners has now been provided by contract as a result ■ X ■ of collective bargaining. i A unique situation arose during the Atomic Bomb tests in Nevada in 1953* Workers hired to do construction work in the desert were forced to travel 50 to 60 miles from the military reservations outer gate to their work : i stations, every day. A fight ensued between the union and employer as to whether the two hours of travel should j be allowed as time worked. The union members through j arbitration won the right to receive pay for the time j traveled, since there were no housing facilities available.^ i It is apparent that there is a trend'for pay from the timej an employee enters the employers* premises until he leaves! in the evening. By agreement between the International Union of Elevator Constructors and Elevator Manufac- j turers: It is agreed that when members of the Union are sent outside of the jurisdictional radium covered in this Agreement, traveling time will be paid at single time rates for the actual hours traveled during regular working hours. Additional traveling time up to five hours will be paid, at single time rates, for ; the actual hours traveled during regular hours the second, third or fourth day and any additional days necessary to complete a trip. Expenses incurred during trip to be paid for by the Manufacturers.1? Because of the large manufacturing concerns in the •^National* Elevator Manufacturing Industry, Inc., and International Union of Elevator Constructors, Standard Agreement, October 19, 19^1* Article XIII 1. i larger cities, parking near the plant has presented new problems. A worker to reach his place of work usually i i parks his car at a distance from the entrance according ! i to seniority. He must walk a great distance, taking up i | to 15 minutes per trip to reach his work station. There i | j are a few companies which provide transportation from : I | more distant parking lots. It is the contention of labor i j that the employer should pay for this time in transit. It j ! 1 , is difficult to arrive at an answer for this problem, but j I ! ! it is apparent that the employee no longer commences at ! ! | the time of starting work; rather from the time of "clock-' i ing in" at a point somewhat remote from his work station. . I [ ! This will also automatically adjust for the time I j that an employee will wash up and get his equipment ready, j For workers paid by the week, the foregoing is fairly well applicable. j A problem arises for those employees paid by the piece. How are they compensated? It is obvious that it j would be unfair for piecework workers to be charged with 1 their own time. This fringe, non-work time spent on the j employers premises, is compensated for in an increased . . 18 rate per piece. j ^Firestone's piecework formula, for example, of $7 *1 0 per 100 for tab number xxxij.0 was calculated by in cluding all individual costs after a time study to show that the subject made 100 tabs in about three hours. 1*1 This type of fringe is fairly well hidden inside of the worker's direct compensation and is not readily appar ent as a fringe for work not done. Likewise, piece-work workers receive compensation for other fringes in their piece-rate rather than in two forms, one by piece and one i by time. | I It is apparent that some of the fringes mentioned in this report cannot be included on the piecework basis; such as not working and not on the employer's premises, ^ to be mentioned in Chapter V, following. In these j | instances, it is the practice of the employer to base these- hours upon the employee's average earning for the hours worked over a given period of time (usually the pre- i ! ceeding. quarter of a year) or to have an established mini- I . mum hourly rate of pay. Firestone has such a plan in the XQ * form of a Basic Wage Rate. 7 This becomes the basis of j payment also for other non-work fringes. ^Firestone, op. cit., Article VI, Section 8 CHAPTER V PAYMENTS FOR TIME NOT WORKED AND t NOT ON EMPLOYER'S PREMISES This chapter deals with payments to employees for < j time not spent upon the employer's premises, therefore, ; I for which no productive output is obtained. Such pay must j be added to the cost of labor. These benefits include ! vacations, holidays, sick leaves, and a miscellaneous j i i group to be explained in the latter part of the chapter. It must be pointed out that this study includes fringes only for those workers who receive compensation for their absences from the job. It is recognized that many workers receive time off for some of the purposes to be mentioned, but receive no compensation. Such absences are not and cannot be considered as fringe benefits. The development of this type of fringe is rather recent in fringe benefit history. In the early part of the nineteenth century many employers granted employees time off, but it was not an accepted practice. Vacations . I A good definition of vacation is: . . . A definite interval in a round of duties of em ployment granted for the purpose of rest or recreation, during which the worker is allowed to discontinue his work, but is allowed to receive his salary or wage.l ---------- T---------- Charles M. Mills, Vacations for Industrial i|_8! Vacations are annual periods of rest granted by employers, They do not include leaves of absence, with or without pay, which are accumulated for work done on normally non work periods such as holidays or overtime. Vacations are conveniently classified into two separate groups. First is the shut-down plan, in which the factory is shut down for inventory or changeover pur- 2 ! poses. With this type of plan the entire factory per- ! j j ; sonnel receive their vacation at the same time. The j i i ; second is the continuous operation type of plan. Vaca- i i i ; tions are granted at convenient periods in order that i { ' ■ ] there will be no interruption of normal continuity or ; i j operation of the plant. Under each of these groups, there I i | j are two sub-groups: (1 ) a plan which grants a uniform j I period and/or pay to all qualified employees, and (2) one j ! - f j which grants variable periods and pay dependent upon the | j length of the employee’s service to the employer, or on his basic wage. The former plan is utilized in some small companies i | with only a few employees. The latter plan is most Workers (New York: The Ronald Press Company, 1927), P» 8» 2 The automobile industry is typical of this type of plan. The Technibilt Corporation (Agreement, November if, 1955, Article XI, Seetion if) has the right to shut the plant down for one or two weeks during the summer months and allow all employees to take their vacations at the same time. generally used in large companies. The plans vary ex tensively as to length of vacation and determination of 3 : pay. ; i Early History of the Vacation Movement. Prior to the Industrial Revolution, specified periods of rest and i recreation for the working class were given on the 30 or more religious holy-days and on other special days. j j During and after the Industrial Revolution and the coming ! i of machinery, the number of holidays was reduced for the j working group, but were generally maintained for the j ■ 1 j salaried workers. Next, the salaried workers' holidays j > were grouped and they took consecutive holidays or vaca- j I ; tions around the Easter or Christmas seasons, or during j slack periods of the summer months. Before the middle of ; the Nineteenth Century the salaried or executive class had j well established vacation periods. ! The industrial worker, however, did not receive I these benefits until the latter part of the Nineteenth l ! i | Century. The earliest vacations granted to workers j occurred in some of the well established factories in Germany, England, and Austria. The owners generally gave -^The minimum time is one week after one year. (Aluminum Company of America and UAW Locals 808 and 1 1 8 9, CIO, Agreement and Working Rules, September 27, 193>i{-» Article X A; Technibilt Corporation and UAW Local 9 9 0, APL, Agreement, November I 4., 195£» Article XI, Section 1; among others. ) The maximum (Hughes Aircraft Company and 50 their older workers a few days off with pay each year. provided vacations or holidays (six) to all women, and ; children under 18. This was the real spark of the vaca- 1 vacation plans adopted prior to 1 9 0 0; and prior to I91I 4- , there were very few. During the opening years of the twentieth century, trade union activity was successful in gaining vacation clauses in agreements with employers. In nearly every plan length of service was the basis of : determining both time and pay. The idea was prevalent that a vacation was a reward for continuous service rendered. tion movement. Labor was in a position, everywhere, to Aircraft Industry Workers Local 1553* AFL, Agreement, j revised thru February 20, 1952, Section VI F. ; There was no idea of social or economic benefit associated j with this plan. It was primarily a method of granting an ! award for good and loyal service, and was withheld or j given freely at the employer’s will. In England, the passage of the Factory Act of 1901 j tion movement. The Act did not grant holidays to men i k ! over 1 8, but they generally received the same. I In the United States, there were practically no World War I gave the greatest impetus to the vaea P. k * ! enforce its demands. Employers used vacations, among other benefits, as a device to attract and hold the better j workers. °In the early 1 9 2 0fs, the employers began to study the effect of vacations on the workers1 health and morale, and as a method of reducing absenteeism and worker j | turnover. J Another reason for the development of vacation plans in the United States by employers was the employer^ comparative indifference toward trade unionism. The development'of vacations was left primarily with the employers. This differs considerably from its development in Europe, where trade unionism played the major role. With the vast majority of people supporting them, the { workers in Europe turned primarily to the government and legislation to gain for them vacations and other time off i benefits. In the United States on the other hand, the , principle of vacations is rarely discussed in any agree ment between labor and management. The main difficulty 1 today is the length of service required for a given time ! | Off. I j Vacation Periods. In industry, the one week after j one year vacation is slowly giving away to two weeks, i 1 ^The Firestone Agreement (Firestone Tire and Rubber Company and United Rubber, Cork, Linoleum and Plastic Workers of America, Local 100, CIO, Agreement, September i | . , 195^, Article X. ) has been amended to allow two weeks whereas formerly two weeks were given after three to five ! years. Another achievement is that the three week vaca tion, which a few years ago was either unheard of or only given after extra long periods (2 5 to 30 years) is now | given after 10 to 15 years. } At Hughes Aircraft Company: After each year of continuous employment an active hourly-paid employee shall be granted two (2) weeks Vacation (eighty (80) hours) with pay at straight- time the base rate in effect on the date the Vacation is taken.° If an employee has completed his tenth year of . • con tinuous employment and has commenced his eleventh (11th) year, he shall receive three (3) weeks’ Vacation. . . . ! »7 i ♦ a At the Firestone Tire and Rubber Company, "Employ- | ees . . . who have completed one (1 ) year’s service but less than three (3) years’ service. . . shall receive one ft ; (1) week’s vacation. . . . 1,0 Employees with over "... I | three (3) years. . . but less than fifteen (1 5) years' [ service. . . shall receive two (2 ) weeks’ vacation. . . after one year. This took place in 1955. Hughes, 0£. eft., Section VI B. 7Ibid., Section VI F. ft Firestone, o£. cit., Article X, Section 1 (b). 9Ibid. j "Eknployees, . . who have. . . fifteen (1 5) years1 service | . . . shall receive three (3) weeks' vacation. . . i Employees of the Fruehauf Trailer Company have the j ! same vacation schedule as Firestone's employees. Vacationj i pay, however, is somewhat different and will be explained : later. I Employees of the Aluminum Company of America ". . .j with one or more years bpt less than five (5 ) years. . . seniority. ... shall be entitled to a vacation of one week. . . , with five or more years. . . a vacation of two (2 ) weeks, . . . , and with fifteen (15>) years. . . a 12 vacation of three (3) weeks. . ." t The Chrysler Corporation's vacation plan is the i j same as that of Alcoa, with the exception that . .a t payment of sixty (6 0) hours' one and one-half (1^-) weeks ; . . . to all. . . employees having at least three (3) | no ; years' and less than five (£) years* seniority. . ." J These and other companies with less than two weeks' ! i j vacation after one year will be forced to yield, in the < ; 10 , , i Ibid., Section 1 (c). ' n } Fruehauf Trailer Company and UAW Local 8ll, AFL- ; CIO, 1951 Agreement. March 12, 195l, Article XVII. ! 12 Alcoa, o£. cit., Article X B. 1 IS j -’Chrysler Corporation and UAW Locals 3* 7, et.al., i Agreement, Amended through December 11, 195>0, VII lip* & years to come, and allow the two weeks’ vacation after one year. The trend in allowing three weeks’ vacation will also continue, and the length of service required before receiving it will be-decreased to about twelve ! years. I There is also a development in the amount of pay received by the worker. At one time, vacations were granted with no compensation. (It is still the case in i ! some industries, such as the construction industry. In - i | the elevator construction industry, the contract reads: j "In anticipation of the fact that vacations may become ! general at some future date. . . . Later, varying i | amount© up to about $0% were given, then up to 7% % and finally, today it is almost universally 100$. 1 Vacation Fay. There are, however, different I methods of computing vacation pay. Hughes pays an em- I i ployee 11. . . at straight-time the base rate in effect on the date the Vacation is taken.This is the type of ^ “ National Elevator Manufacturing Industry, Inc., and International Union of Elevator Constructors, Standard Agreement, October 19, Article XII. ^Hughes, op. cit., Section VI G. i payment used by most companies. Firestone pays two per cent (2%) of the earnings of 1 i the employee for each week of vacation to which he is 17 entitled. This would result in more pay, if he has accumulated overtime and Saturday work to his credit. In ' no case will the amount be less than his normal base wage. I The vacation pay for Alcoa’s employees is determined' by multiplying their average hourly earnings by the average' 1 ■ . I number of weekly hours worked during the preceeding ten j 18 (10) weeks. This total is multiplied by two or three to | ; compute the pay for a two or three week vacation. This i { will tend to allow more pay than those plans paying on the i i base wprk-week. For the employees of Fruehauf with over five years j i j of service the payment will be either eighty (8 0) hours, ! ; I | . . . or five per cent (5%) of his straight-time hourly earnings for the twelve (1 2) calendar months immediately jpreceding January 1 of the vacation year, whichever is i------------------- i 16 i ; See also: Challenge Manufacturing Company and i I Industrial Welder's Guild Local 5>V » Agreement, February 29,i |1958, Article XVIII; Technibilt, op, cit., Article XI, j Section 7l Chrysler, op. cit., VII l l | _ . 17 'Firestone, op. cit., Article X, Section 3 (a). J " 1 8 Firestone, op. cit., Article X, Section 3 (a). greater.”"^ All other vacation pay for Fruehauf’s l ] employees is determined by the average work week of the year preceding January 1, but ". . . shall not be less than forty ( i | . 0) nor more than forty-eight ( l j . 8) times his 20 straight time hourly pay per week. ...” S In a recent study by the United States Chamber of 21 Commerce, vacation benefits amounted to an average of about 3*6$ of the total p a y r o l l . This would amount to 9 days per year (two weeks equals ten) assuming a I 4.O hour week. Fringe benefits for the civil service worker is not a subject of this report, but it must be pointed out that the government has taken a leadership in this movement. Government vacations, normally of longer comparative time off, provide an added incentive for citizens to seek , public service positions. The amount of paid time off is ' considerably more than for the private industrial worker. I ! 1 It ranges as high as one month. j Vacation Theory. The theory of vacations has pro- | vided many interesting sidelights; for instance: If an IQ j 7Fruehauf, loc. cit. | 2 0Ibid. j ^ Fringe Benefits, 1953 (Washington, D.C.: United 1 States Chamber of Commerce, 195li-)> p. 10. 57 employee takes an unauthorized day off, he may lose one i vacation day. Likewise, in the early days of vacations, they were taken at the employer’s option. If the employee was needed or required on the job, he either was not granted a vacation or was paid in lieu of one. In more j \ I recent years, the philosophy is that the employee needs j i I the time off for rest and relaxation and is forced to 22 take the vacation. The Hughes1 Agreement contains the following statement: "It is the employer’s policy to grant Vacations as a period of rest and relaxation for its employees. Therefore, Vacations shall be taken when « 23 earned,. . . ' In very few instances will the employee be forced ; to work and be paid in lieu of his vacation. If for the I convenience of the employer (Hughes) an employee is i ! i ; required to work, ". . . , he shall be paid in lieu of the; J Vacation. . ." In other plants It is generally the i practice to defer his vacation. The Firestone Agreement i i ' 22 I An interesting feature of vacations appears in financial institutions. Vacations provide a method to keep a man honest. In many instances it has been noticed I that employees refusing a vacation were doing a fancy job I of juggling the records and books. I 21 j Hughes, op. cit., Section VI A. I 2^Ibld., Section VI K. I 58 I | states: I J An employee wishing to defer his vacation until the following vacation period may do so by making arrangements with his foreman and leaving his vaca tion pay with the Paymaster. He must take such vacation time off before the end of the following vacation period.^5 j Holidays A holiday differs from a vacation in that it refers to a specific day; the vacation for a period of consecu tive days taken at no predetermined time during the year. Public or special holidays are not considered in this report as part of vacations, although holidays predate vacations and were the forerunner of vacation periods. As noted earlier, holidays at the time of the Industrial Revolution were combined and given as consecutive days | off and called vacations. Many of the holidays continued ' throughout this period of development. Possibly the one I • day which has never been removed from the list is Christ- i I I mas. I I j ‘The paid holiday of today is in addition to the vacation period. There is no doubt that collective bargaining by the labor unions, in the United States, has led to the granting of additional holidays for the i workers. I | Today there are six paid holidays generally granted ) __________________ ^Firestone, op. cit., Article X, Section i j . (h). 59 to the industrial worker as against the three or four during the 1920‘s. If a holiday fell within a vacation period, it was generally conceded that no additional time off or pay was given. Today most employers give either an additional day off or compensation for the day. The Alcoa Agreement states: "Employees shall be l paid for the holidays. . . /if he/. . . is on vacation . . . during the payroll week during which the holiday is observed.This is typical of those companies allowing extra pay. Typical of the agreements allowing the extra day Is that of Pruehauf: ". . . His vacation shall be extended pQ one (1 ) day and he shall receive pay for such holiday." Also, if a holiday falls either before or after a vacation period, the additional time off with pay is given. One exception is noted in the Firestone Agreement. That is: "An employee shall not be eligible for such payment if the employee fails to work his last full scheduled shift prior to and his first full scheduled shift after. ..." p/L New Year 's Day, Memorial Day, July i|.th, Labor Day, Thanksgiving Day, and Christmas Day. ^Alcoa, op. cit., Article IX, Section i j . A. po Pruehauf, op. cit., Article XVI. .......... I 29 unless he is on vacation, among others. ' He must work both the day before and the day after the holiday. This prevents employees from taking an unauthorized extra day ■ off, or even the week during which the holiday falls. j | Holidays falling on Sundays generally result in a i i Monday off with pay. Typical is the Firestone clause: "When any of the above designated holidays fall on Sunday, 30 f Monday shall be considered as the holiday.” Saturdays are seldom mentioned in agreements, but there is a trend toward making Friday the holiday in tuah cases. The Hughes1 Agreement was amended in 1951 to i i 31 include such a provision. j A recent innovation covering holidays is the four 1 i day holiday weekend.3^ Formerly, if a holiday fell on : Thursday or Tuesday, employees were required to work on : Friday or Monday under penalty of losing their holiday t p a y . Some employers allowed their employees to take off ! ^Firestone, op. cit., Article IX, Section 1 (b) I (3)* ! Ibid. , Section 1 (a). 1 31 | Hughes, op. cit., Section VII A. ! 32p^rs| . granted by Hughes over the Thanksgiving 1 I Holiday of 195it-J after the 195i|- negotiations were com- J pleted. i 33pirestone employees must work before and after. An exception is Hughes, where employees must work either the day before or the day after. : 6i f the additional day with the understanding that it would be made up on either the preceeding or following Saturday. However, this is not a fringe. The U*S. Hews and World Report reported this as "Labors Latest Fringe Benefit."^" However, it is wrong. The facts reported do not con- ; i stitute a fringe. It is merely a "work an extra day this week, and take one off next" policy. In this way the employer does not "pay for time not worked and not on the employer's premises." The real fringe benefit of a four day holiday weekend can only arise if the time is not made up. In 1956, employees of the Firestone Tire and Rubber Company's Guided Missile Division received two such week- 1 ends, Thanksgiving and Christmas, during the first year of the fringe. The normal contract, however, allows just 1 ; one such weekend per year; to be taken at the employees' ! f ; option. The City of Los Angeles attempted to give non- | essential city employees a four-day Thanksgiving weekend j in 1956. On a ruling by the City Attorney, it was j declared illegal and they had to work the following Satur- ! i day to make up the time. It appears that this fringe not only has had a fastj I | start, but has swept rapidly throughout all major indus- I tries. As contracts expire, employers will hereafter be ^November 2 3, 1 9 5 6, p. l i j - 2. I 62 forced, if unwilling, to accept the fact that the four-day weekend is here for good. It must be remembered, though, that if the time is to be made up, the additional day is not a fringe under ! our definition. | I i Sick Leave The granting of paid time-off due to sickness was J originally a practice of the United States government, j Under this plan the civil servant received his regular pay j while off work due to illness. This is the first major i l 1 attempt to give all employees such benefits. In past ] i years it was the practice to give all salaried employees paid time-off if ill; an attempt not to interrupt the ; process of automatic payroll, by docking the employee for absences due to sickness. Much earlier, employers rarely J set down firm rules under which a plan would operate. The ] feeling was prevalent that to do so would encourage more absenteeism. i ! Today that point of view is changing. Employers i are now encouraging employees with contagious diseases to i remain at home. This will prevent spreading of such ill- i j nesses to other employees and also speed the stricken employee’s recovery, j i. discussion of sick leave would not be complete without a brief mention of the young women problem. Due r <r c to the hiring;of more and more younger women, a greater leniency towards absenteeism at certain times of the month generally provides a better working girl for the remaining part of the month. This led to the early development of the thought that the health of the employee was essential j i to the improvement in quality and quantity of output. The trend is towards widespread use of sick-pay plans for hourly as-well-as salaried employees. This fringe for non-work pay is in many respects closely related to life insurance and other group plans. Sick-pay plans vary widely today. Most plans grant i j employees a definite number of days with full or part- time pay for each day of absence commencing the first day. There is a widespread misuse of the sick-pay plan. A recent development in benefits has to a degree done away with this abuse. In the not too recent past, it was the practice of one employer to allow a maximum of five d&ys per year per employee.If the sick leave was not used during the given year, the employee automatically i ! lost it, and the following year he would be given another five days. Realizing this, employees would fake illness in order that the time would not be lost to them. Such unrealistic attitudes toward this problem created in- 3£ Hughes Aircraft Company. conveniences for the employer in scheduling, and filling vacancies during the periods of absence. To remedy this situation, the employer began giving a vested interest in all sick pay allowances, and allowing the time to if) accumulate indefinitely. This also helped the employee who, after many years of good health, is stricken with an j illness requiring a long period of absence. Upon termina- j i I tion of his employment, at first, the employee would receive full pay for the accumulated time at the rate when earned. As an added incentive it is now paid at the rate when taken. Also the employee can accumulate the unused sick leave and retire sooner than he would otherwise, as j an option. Economically speaking, these methods of f ! reducing the amount of days taken for illness, have pro- vided the employer with better control of his production , facilities. : The development of time-off plans has advanced from I giving time off only when necessary, to time off with part ' pay until the present stated number of days permissible I ! with a stated number of days allowable. Civil servants have continued to receive large amounts of sick-leave benefits ranging up to three weeks. Hughes, o£. cit., Section V A. Through collec tive bargaining, the number of allowable days per year was increased to ten. i J n A Other Non-Work Benefits In more recent years, primarily dating from World War II, and as a direct result of collective bargaining or by law, 37 employees are granted time off with pay for civic duties such as service with the National Guard, jury, witness, and voting. Others which are sometimes paid, and which are slowly becoming important, is death in the immediate family or for some other personal reasons. Civic Duties. Government contractors, those manu facturing for or selling to the government, are required by provisions in their contracts to pay employees the difference between their regular pay and the amount of pay received for the two weeks of summer duty in the reserve services. The social benefit of this plan far outweighs the economic gain or well-being of the employee. Because j of this, the employees involved will be more likely to perform their military duties without financial worry. Thereby the nation will have a strong national defense unit in case of need. Jury duty has traditionally been a very low-compen sated position. The average worker has often been faced 3?By law in those Instances where the employer is a government contractor. : 66 with great financial hardship by being pressed into jury duty lasting many days or weeks. While it is true that most trials last only a day or two, it is nevertheless possible that some may last for months. The financial burden falling upon those persons in the lower income groups, has more or less forced jury duty upon the wealth ier or leisure classes. Through collective bargaining, primarily, the industrial worker has been able to receive differential compensation for the time spent on jury duty. It is the contention of labor that the working man is not represented as much as he should be. Differential-pay plans appear to be the answer to this problem. In a like respect, justice would suffer if it were | i not possible to induce witnesses to take the stand. In | f I ! many instances the testimony of one witness can turn the 1 i tide of evidence in favor of one party or another. The ! refusal of a witness to attend an important trial, to ! j testify, could mean a miscarriage of justice. The fact ! that a witness could be subpoenaed and forced to take the i j stand does not necessarily mean that he can be forced to I | state facts that for convenience can be forgotten. But j given an incentive, by not losing his pay, the continuation I I of his wages will in many cases prompt the witness to be i more cooperative in this vital duty. Of course, this provision would never cover an employee who is either the 67 defendent or plaintiff in an action. Voting benefits in recent years, since 19^1-8, have been granted in a few states. Legislation requires employers to release employees for two hours in order to * vote if there is a possibility that time and distance to the polls might prevent them from voting. Since voting is a major problem in this country the incentive to vote is increased immensely, by allowing pay to do this duty. P These benefits, for military, jury, witness and voting duty, add less than one-half per cent to the cost J of labor. A small cost indeed for their great value to ; society. I i Miscellaneous. Time off due to death in the family i j or for other personal reasons form a small part of this type of fringe. In most cases, it is uncompensated time- ' off; for salaried people it is usually granted if a good reason is shown. There appears to be a trend allowing time off with pay for certain types of personal reasons.^ ^Qpringe Benefits, op. cit., p. 10. -^FjLrestone ’s Guided Missile Division's employees who are salaried appear to have unlimited time off with pay for personal reasons. One female employee during her first 9° days, had an absence (with pay) record of 2 3.2$>. And the absences were tolerated. 681 I Summary It is quite apparent that in the last fifty years employees have received more time off with no loss of pay j ! for the type of fringes covered in this chapter. The ear^ | history shows that this type of fringe was allowed for ! j holidays only. Today there is a vast number of non-work days for which the employee receives pay. In the future there might possibly be many more days off. As shown by recent developments, there has been a reduced work day or week with no reduction in pay; rather than in increase in holidays. The reduction from a J 4. 8-h.our 6-day week to a ^O-hour 5-day week might be considered as allowing 52 additional holidays per year. This is so because the employee still gets paid for Saturday even though he does not work (in the form of higher hourly wages or the same salaries), and if he does work he gets extra compensation. It does not always follow, however, that he does get the extra sixth day of pay. What has happened is that his pay has been dis tributed throughout (or compressed into) the remaining I 4O hours, or 5 days. It is quite apparent that in all instances the employee did not get full pay for this additional day off. A worker is not compensated for the i 6th day-off unless he has received a 20% increase in his l^O-hour pay check. Any lesser amount would not compensate 69 him for the sixth day. The non-work fringes have greatly stabilized his income, by compensating him for ill-health and for reasons ! beyond his immediate control. i i The employer, on the other hand, has realized that j ! such treatment has benefited him in higher productivity with greater output due to his benevolence.^ A man might lose all incentive to work harder without a rest and relaxation period or the thought of security, if he is sick. But it must be remembered that this cost will be j I borne by the employer if he cannot pass it on or justify j t it by a greater quantity of output with a given amount of * j input. ^Greater productivity and output per hour worked, rather than for the forty-hour week. CHAPTER VI PROFIT-SHARING PLANS Definition A very rigid interpretation must be made of profit- sharing. Any fringe benefit mentioned in this study, if broadly defined, could be considered a share of the profits. The historic definition is: "Profit-sharing is an agreement freely entered into, by which the employees , , 1 receive a share, fixed in advance, of the profits." An important observation is that unlike other fringes in this study, those covered in this chapter are primarily designed to be paid from the profits of the employer after all costs of production have been deter mined and paid. If this was not so, the fringe would be I fj part of the basic wage of the employee. Section 7 (<*) (3) i of the Fair Labor Standards Act states that a plan must be : bonafide (in good faith, without fraud, and in all I i sincerity) if the payments are to be excluded from the ' basic wage rates* Li t I Early History ; The earliest recorded plans, outside of the United i i By the International Cooperative Congress, in Paris, in 1 8 8 9. However, there must be some profit or there can be no distribution. 71 i States, appeared in 1820 and 1 8 3 8; both in French insurance companies. A third plan begun in by a Paris house-painting contractor distributed a portion of the profits to a select group of employees. Although French concerns used these plans earlier, there are more concerns participating in profit sharing plans in England than in any other country. The Christian Socialist movement, and men such as John Stuart Mill and John Bright, were leaders in the British Co-operative movement. The later development of i this fringe in Europe was based upon the thoughts ex pounded by these and other social reformists. In the 2 United States it was fostered entirely by employers, "They also promoted profit-sharing plans in order to weaken the interests of workers in Union organizations, . 1 1 3 ■ • • • . The earliest recorded plan in the United States was set up in 179^- by Albert Gallatin in his glass works. Near the middle of the Nineteenth century, Horace Greeley set up a plan for the New York Tribune. A carriage Bryce M. Stewart and Walter J. Couper, Profit Sharing and Stock Ownership for Wage Earners and Execu tives (New York: J. J. Little and Ives Company, I94FJ 7 p. F. ^Pearce Davis and Gerald J. Hatchett, Modern Labor Economics (New York: The Ronald Press Company, 19^5)# pT”2 V x “ — _________ _______________ _____________ _____________________________ _ _ ___________________ 72 builder in New York started a plan in 1 8 6 9, but it was I 4- abandoned two years later, because of a strike. Probably the oldest existing plan in the United States today is the one set up by Procter and Gamble in 1 8 8 7. ! At the beginning of the twentieth century, labor ! i groups began to oppose the plans strongly. They feared ! that they would prevent union organization, bring lower wages, and substandard working conditions. In 1903 and I90J 4. the Massachusetts legislature turned down bills introduced to etablish compulsory profit sharing. World War I, with the larger war profits, there was a rapid development of many profit sharing plans. ^ | i 1 i In the decade following World War I, profit sharing! | £ | began losing ground to the stock ownership plan. Since . the Depression, profit sharing plans began once again to | be of importance. Nearly one-half of all plans provide 1 6 j distribution to all direct labor employees. It Is this I \ group which receives the benefit as a fringe. | ^Profit Sharing (New York: National Industrial Con- I ference Board, 19314.), p. 3. ' 5 I These are mainly plans whereby the employee is • allowed to purchase stock (either voting or non-voting) | in his company. For the most part, payment is made by j the employee. Therefore, this Is not considered here as I a fringe. L A survey was made in 19314- t>y the National Indus trial Conference Board— Financial Incentives (New York: There are four principal purposes for a profit shar ing plan: "(1 ) to accomplish a more equitable distribution of income from production, (2 ) to build up for employees a! financial reserve for emergencies, (3) to stabilize the I • wage scale, and (Ij .3 to create an incentive.” Operation of the Plans J The operation of the average plan is based on the j ability of the company to pay. In most cases a certain J percentage is first deducted from the profits for distri- i | bution to the stockholders. Participants in the plan then ' receive what is left, with or without a maximum amount, in ■ accordance with their length of service and/or wages. In j | cases where there is a maximum there is some means avail- j | able for splitting the difference between the stockholders I | and employees. J During World War II, in the United States, there | t ! were several types of profit sharing plans. Probably the | most famous was that of the Jack and Heintz Company in i Cleveland. Hie owners took a large salary and divided the remaining profits among the workers. Production workers were able to make two or three times their normal j | I i wages working for Jack and Heintz. The company was able ; i j I ------------------- I National Industrial Conference Board, 1935)# There were ! 13I 4. plans in the study with only 77 active in 193^-» J Forty-eight were suspended due to a lack of profits and j the other nine were discontinued. _ 7Profit Sharing, op._ cit., p. 27. i 7b t ^ to hire the very best talent available, from engineers to janitors. The employees set their own standards and always tried to better them, because they would be in creasing their own incomes by doing so. Eventually Jack and Heintz had to discontinue this plan due to the strenuous objections of the National Association of Manu- ^ 8 facturers. There are two classifications of payment plans: g (1 ) trusted and (2) non-trusted plans. Trusted plans involve the use of a trust agreement, whereby all or a part of the benefit is deposited, in vested, and paid out at some pre-determined date or upon the occurrence of some contingent event. Non-trusted ! plans have provisions for immediate payment. Trusted plans pay out the benefits upon retirement, I j disability, death, resignation, layoff, or dismissal for I I I j cause. Payments are made in full, in part, or none at all; either unconditionally or at the company’s discretion. The Norris Plan at the Norris Thermador Company, is an example of the trusted plan. ] i ? This plan provides retirement pay for the employee i ; ------------------- I 8 ! Stanley M. Brown (ed. ), Business Executive * s Hand- i book (New York: Prentice-Hall, Inc., 19^3) pp. 819-82.5, and Successful Employee Benefit Plans (New York: Prentice- Hall, Inc., 19^2) ch. I J L j . contain other examples of various forms of plans. Q 'Stewart and Couper, op. cit., p. 31. f . who contributes three per cent of his wages while the Company contributes ". . .an amount not to exceed 15$ of the aggregate salaries, wages or earnings of the employees participating.This limit is the maximum allowable under Section l65a of the Internal Revenue Code. Also the ! i net income of the business must exceed six per cent of the capital investment after deduction of all expenses and taxes. Of the amount over six per cent, the following per centages are added to the employees’ account: (1) twenty per cent of the first #250,000., (2) thirty per cent of the next #250,000., and (3) thirty-five per cent of all \ j in excess of #500,000, up to the maximum of 15$ of all J ■ wages and salaries.The money credited to each i j employee's account is used to buy an annuity when the ! employee retires. If the employee has an insufficient i j amount credited to his account to buy an annuity upon i retirement, he is paid the cash equivalent. If an I j employee quits or is laid off for other than economic reasons, he receives all of his own contributions plus the interest accrued on them, plus one-half of the com- ; pany's contributions plus the accrued interest. The i i i I - .—.- ..- i - ~ - — ------— ■ < i j l0Norrls Employee's Savings, Profit Sharing and Retirement Fund (Vernon: Norris-Thermador Co., 195U-)^ P-5» 1:LIbid., pp. 5-8. ■ * » I . ' _____ I remaining one-half of the company's contributions is put back into the fund and divided among the participating members in relation to the balances of their current accounts. All employees must participate in the plan after the completion of one year of continuous employment. They may retire at the age of 55* provided they have been em ployed for five years. Upon reaching 60 they must retire, unless both the eompany and the employees concerned agree 12 otherwise. Examples of the non-trusted plans are in affect at the Whiting Corporation and the Eastman-Kodak Company. The plan in use at the Whiting Corporation provides that fifty per cent of the profits after dividends and income i taxes have been deducted, will be distributed to the employees according to the ratio of their individual | ! : earnings to the total payroll. This is done on a j ; I j quarterly basis. I j The Eastman-Kodak wage dividend plan provides for | distribution based upon a ratio between the employees j individual earnings and the dividend paid on stocks. A ! minimum of seventy cents per share ( 191- 1 - 6) must be paid i ! first as dividends before the employees will participate. 12Ibid., pp. 5-8. 77 i , One-half per cent of the employees’ total earnings over the proceeding five year period is then paid. For each twenty cents of additional dividends paid, one-half per 13 cent additional is paid the employees. i The Quality Casting Company, Orriville, Ohio has a unique plan. The Board of Directors annually votes for the distribution to the employees of the net profits of the company. The amount to be distributed is divided into three pools: (1 ) attendance, (2 ) seniority, and (3) apti tude. Payments to eligible employees are made in the following manner. The attendance pool is distributed on the basis of the number of days an employee has worked during the bonus period. The seniority pool is distri buted according to the number of years of service credited j to the "employee up to a maximum of ten years. The apti- > tude pool is distributed on the employee’s subjective , rating as made by his supervisor. The rating is based ! upon the employee’s cooperativeness, progressiveness, and ability. i | Critique of Profit Sharing ! Some possible advantages of the profit sharing j I | plans are: | (1) An increase in efficiency. This is a result ■^Brown, op. cit., pp. 802-825. of the anticipation of more profits, therefore, more ; profit sharing. ■ ! (2) A decrease in labor turnover. There is a i | ; tendency for workers to remain in anticipation of higher | incomes (wages plus profit sharing). (3) The ability to attract a better and more stable elass of workers. If the share of profits paid are high I enough, there is the possibility that the supply of avail- ; able labor will be higher, therefore allowing selective ! employment. (if) An increase in employee morale. The employee i | can have the feeling that he is a part of the company by j sharing in Its profits. | (f>) There are favorable tax benefits, taxes are not i paid by the employee until he is paid upon retirement, jwhen taxes might be nil or very little. J (6) Upon retirement the employee receives a supple- [ mental income to his Social Security payments. j i There are, however, some objections to the plans. I | These include: (1) Profit sharing plans provide unequal distri bution. The larger the earned Income, the larger the share i | of the profits. : (2) Transient labor rarely participates in the I plans. (3) Dissatisfied workers tend to remain on the job due to the fear of losing benefits* (k) Because the plans depend on profits, they are of little help during periods when the employee needs lk help the most. There are three fears expressed by many companies, which are deterents to the operation of these plans. (1) Snooping by union representatives when such plans are employer-employee agreed upon plans. (2) Management feels that the employees will attempt to usurp authority in the management of the concern. (3) The employee's disappoint ment and labor unrest during periods when profits are not high enough to allow participation. Those firms that have such plans report that: (1 ) there is no snooping and that by keeping the employees well informed, there is even more interest in the com pany's problems, (2 ) employees show no interest in running the company, and (3) by keeping employees well informed of the company's progress, there has been no unrest during periods of little profits. Educational benefits may or may not be taken from the profits of a corporation. Generally, they are not considered as cost of labor items and are not subject to ^Successful Employee Benefit Plans. Ibid., pp.l53~ 158. 15>Financial Incentives, op. cit., pp. 30-39* V. r 80 , collective bargaining agreements. Therefore they are dis- / cussed in this chapter covering profit sharing. Educational Benefits Many companies reimburse their employees upon the completion of certain courses taken at any level of educa tion. The prime requisite is that the courses taken must be related in some manner to the employee's immediate position or to an advanced position with the company. The courses covered are generally part of the after working hours training programs. In all cases an application for reimbursement must be made before the first meeting of the class. It will be noted that these are reimbursement plans; paid only if the employee (1) completes the course and (2) receives a passing grade. The employee is required to pay his own j tuition at the time of his enrollment. I | There are however, different methods and amounts j of reimbursement. Hughes Aircraft Company, Culver City, I | will reimburse to the employee one-half of all tuition i | costs and fees regardless of the number of courses or ! i units taken. The only limitations imposed are: (1) ten : dollars per unit (college measurement) and up to four , units per course. It is possible to receive $100.00 as i ! reimbursement on ten units, provided no individual eourse is over four units. If the ten units consists of one six unit course and two two unit courses, the maximum payment would be #80.00 The Firestone Tire and Rubber Company will re imburse to the employee the entire tuition for up to three units of approved college courses taken after hours. Courses at other than college level are determined on an hours in attendance basis and a maximum reimburseable I amount determined in each individual case. General Petroleum Corporation will reimburse their J employees an unlimited amount of tuition and fees for | courses successfully completed. This company, however, is much stricter in interpreting a course’s relation to an employee’s job. These are examples of three methods of reimburse ment: (1) partial reimbursement, (2) full reimbursement, with a limit, and (3) full reimbursement with no limit. There is one recognized exception to the rule (in most companies) that the course must be related to the employ- j ee1s job: Courses required for a degree are generally i ] approved. f i Aside from the possible tax deductions by the 1 ---------------- 1 16 j Hughes also has a more comprehensive program for i engineers. It involves one-half time work and one-half j time school for graduate study. Since this training is : part of the work day, it is not considered here as a ' < fringe. 82 employers If not a part of a profit sharing plan, there is some doubt as to the real benefits to be gained. Many times upon gaining a degree employees leave their bene factors and seek employment elsewhere at (sometimes) a considerably higher wage. This might be due to the failure of the employer to recognize the increased value of the employee. However, these plans do provide an incentive for continued employment at least for the period of attendance in school. There is a major trend apparent in the extension of this grant. PART II ECONOMIC ANALYSIS AND ASPECTS OP FRINGE BENEFITS CHAPTER VII RECENT WRITINGS ON FRINGE BENEFITS During the past twenty years many reports have i been written on the various fringe benefits. However, j i the majority are written on only one fringe. The remain- | i ing minority are divided between comparative studies of similar benefits (that is: Old-Age Assistance versus j pensions, etc. ), or are statistical analysis of many. This writer, however, was unable to locate any previous study covering the scope of this report. Even the leading writers in the field of labor relations have not written more than two or three pages on the economics i ■ of fringe benefits. This chapter was written in order to | present the views of the leading writers in their latest J i i publications. 1 | l l Let us start with John R. Commons who, along with ; John B. Andrews, wrote Principles of Labor Legislation.^ | In their discussion of the hours of labor, they give the historical and legal backgrounds of rest periods and vaea-j 2 tions with pay. The only other significant reference to i fringe benefits concerns their discussion of welfare plans i | •'•John R. Commons, and John B. Andrews, Principles ■ i of_ Labor Legislation (New York: Harper and Brothers Publi cations, 193o) 2Ibid., pp. llj.O-157 85 from the beneficiaries1 standpoint; not as to the costs 3 i borne by the employers. i Possibly the best economic analysis on fringes read by this writer appears in Clyde E. Dankertfs Intro duction to L a b o r He agrees with my views, in that fringe benefits w. . . represent a comparatively recent development in the realm of union social security, . . . Later on he writes that he considers fringes to be a I supplement and not only a M. . . means of increasing in- i J comes but as devices for improving labor-management rela- i 6 I tions." He further concurs with this writer in that I welfare plans paid by employers are principally a develop- 7 ment caused by World War II. In commenting on the | I Chamber of Commerce reports, which this writer has I O I referred to, he writes: : . . . The Chamber is correct in maintaining that j "the hourly wage rate has ceased to be an accurate reflection of the labor costs of operating a business, or of the income and benefits received by workers." It I i - - - ! 3Ibid., pp. 222 ff. i h j ^Clyde E. Dankert, Introduction to Labor (New York: ! Prentice Hall, Inc., 1954). ! ^ibid., p. 229. ! 6Ibid., p. 4 9 8. i 7Ibid., p. 5 0 7. ■ O Fringe Benefits, 1953, (Washington, D.C.: United States Chamber of Commerce, 1954)* 86 is not to be inferred that workers are getting some thing they do not deserve.9 It is Dankert*s expressed opinion that fringes are passed on to the consumer in higher prices."*'® This will i be more fully developed in the following chapters. j Dankert covers all of the government financed plans, but j 11 I does not present any new points. i E. E. Cummins and P. T. DeVyer, in The Labor Prob- 12 lem in the United States, provide us with an excellent view of the worker and his real desire for security. Theyj write: j I i One of the wage-earner1s greatest fears, if not 1 his greatest, is that of unemployment. The possi- | bility of injury and death he faces with scarcely a quiver.13 j It is their opinion that employees are struggling for an improved economic status and for greater economic power.^ They support their opinion by recognizing that the government has provided a minimum standard of security a Dankert, op. cit., pp. 508-509. 10Ibid. Ibid., pp. 51+.3-582. 12 E. E. Cummins and P. T. DeVyer, The Labor Problem i in the United States (New York: D. Van Nostrand Co.. Inc.. i%rr 13p&id., p. 1 9. ^Ibid., p. 558. for workers. The minimums are maintained by state action i J in allowing aid in cases of industrial accidents and diseases; through Federal aid on state unemployment com pensation; and through Federal aid for the retired worker, | They write: "The specter of income loss through sickness | still haunts the American worker but legislation has been j I - ) c ' j introduced to remove this fear too." - p It is necessary to point out that the present i legislation is restricted to certain enumerated parti- j cipants. Employers with less than a given number of employees are exempt from workmen's compensation. Old- age assistance discriminates against certain classes of j ! employees. Unemployment compensation requires certain | i i conditions to exist before payment. And so goes the list J through every government sponsored program. However, all I : legislation does help some workers and this writer does : i ; not condemn them. j Like Dankert, Frederick Meyers, in his Economics I Zl ' kat>or Relations, points out the vast improvements made by labor since World War II. However, he goes much further in comparing three periods of labor relations: Pre-j | World War II, World War II, and Post-World War II. He ! I |writes: "It should be observed that many of these types ^ ! i _ _ _ _ _ _ _ _ _ _ i ■ ! » P* 559* ! (C hleag^^S JS y^K I?;. M te SslaUsm 88 j of payments have expanded greatly in frequency during the last fifteen years, . . . 1,17 Meyers recognizes that fringe benefits are supplementary wage practices. His entire discussion on fringes is from a standpoint of i i collective bargaining. [ i A major contribution is his twofold classification j of fringes: (1) Speeial pay practices for work per- formed. Included in this category are such items as overtime pay, shift premiums, outside work for which extra pay is received, and holiday work pay. None of these items are included in this writers report. (2 ) Welfare provisions for insurance and health.^ These plans provide payments to the worker while not working. This category includes, among others, vacations, retire ment, and sick pay. According to Meyers, then, we might i interpret fringe benefits as welfare provisions of I : supplementary wage practices. 1 20 Richard A. Lester, in his Economics of Labor. presents his views on the prevalence of various types of fringes since 1 9 3 5* He writes: 17Ibid., p. 3 1 3. ! i j l8Ibid., pp. 313-3 2 0. | I ^ ibid., pp. 320-329. 1 20 ! Richard A. Lester, Economics of Labor (New York: The Macmillan Co., 19M>). i 89 Some idea of the significance of various company ; welfare and personnel programs may be gained from . . J . . the data gathered from 2,lf 52 establishments with over if, 5 0 0 ,0 0 0 employees in 1 9 3 5* ■ * - He notes the following prevalent percentages for the fringes in his report; Group insurance, 59$J pensions, 37$J dismissal pay, 13$; and profit-sharing, 5$. He con tinues; ”From the employer’s point of view, plans that increase the dependence of the employee upon the company may be definitely desireable as a way of reducing labor turnover and tying the employee more firmly with the com~ pany.*'^ He presents the thought that sickness benefits might make the employee loyal due to the number of times that he might use them. On the otherhand, death and dis missal benefits may only provide for good morale, Lester also comments on the fact that with an increase of Federal legislation covering fringes, company programs have a i ! reduced importance. It appears to this writer, though^ , that government intervention enhances fringe coverage; / / ti because of the challenge to management to provide forJ ! better coverage. From the employee’s point of view, according to Lester, the best types of welfare plans are those which | increases the employee’s security by the use of insurance i i ___________________ ^ Ibid., p. 66if. 22 -Ibid, r 90 principles; the worst are profit-sharing or pension plans, 23 unless funds are set apart from company funds, Lester writes that there is at least one advantage^ in providing welfare plans even if they ", . .do not increase the average efficiency of the total labor supply as much as they increase labor costs."2^ These plans could result in better selective employment practices. One further point mentioned in this book concurs with this j writer’s thoughts. The Government will take the credit for starting a plan, even if the employer is paying the j whole cost and even if the plan was contemplated by the//' 21 ? { - ' employer. 26 In another book, Labor and Industrial Relations, Lester writes on the roles played by the various partici pants in labor relations in enhancing the positions of 27 fringe benefits. They are digested as follows: (1) Federal Government. The Federal Government has played a critical role in promoting fringe benefits through wage controls; direct action, as in the case of the coal welfare i 2^Ibid., p. 6 6 2. ! 2^Ibid., pp. 5 1 0-5 1 1. ! 2^Ibid., p. 5 1 1. | I Richard A* Lester, Labor and Industrial Relations ' (New York: The Macmillan Co., 1951). 27Ibid., pp. 167-168. 91 plans; lack of action In increasing old-age benefits, which causes union drives for pensions; and through the excess profits tax, an actual reduction in the cost of | i benefits. (2) The C.I.O. has spearheaded pension welfare plans. (3) The A.F.L. desired direct wages instead of fringes. (Note: This is no longer necessarily true.) (ij.) The employers approved fringe benefits as a means of attracting and holding necessary labor, especially during wartime. And (5) unions in general are assured of a long- run standing, if there is a long-term arrangement for joint management of welfare funds. Gordon P. Bloom and Herbert R. Northrup in their 1 PH ^ book, Economics of Labor and Industrial Relations, j i discuss the impact of fringes on the various groups of labor, government, and employer. "Fringe1 issues, . . . are often pushed by union leadership because of their prestige value to the leadership.They write that the gaining of fringes after World War II was a must and union leaders had to stress them even though sacrificing wage increases. Another feature of fringes was not mentioned by j ! ___________________________________________________________________________ 1 2®Gordon P. Bloom and Herbert R. Northrup, j Economics of Labor and Industrial Relations (Philadelphia: The Blakiston Oo., 1950). 29Ibid., p. 187. these authors. It is also a purpose of the leadership to obtain fringes that will result in a long-term bond between the union and employer. On the otherhand they hinted at this thought in mentioning their "American plan" for wel- on r fare programs* This plan requires an employer to establish programs independent of labor groups. This is | a means of de-emphasizing unions. i ! Bloom and Northrup are in concurrence with most writers on the topic of government and fringes. They write: Failure on the part of the government to supply protection against loss of earnings because of sick ness and the failure of payments under existing social security legislation to keep pace with an inflationary rise in the cost of living have created the demand which unions are meeting for their mem bers. 31 Thesre authors believe that there is an apparent. trend in the extension of the Governments labor policy. This cannot be denied. As this writer has indicated in earlier chapters there is a continuous process of ex tending minimum wage coverage and social security, among others. However, they write: "At the present tlme/T95>07« it has no labor policy but rather a patch-work of policies, comprehensive but not consistent, " 32 They also 3°Ibid., p. 2 2 3. 31Ibid., pp. 221^-225. 32Ibid., p. 72l j _ . 93 | cite as examples the non-uniform state legislation cover ing workmen’s compensation and unemployment insurance. Even the Federal Government is inconsistent in the Social Security Act and the Railway Retirement Act. Bloom and Forthrup have contributed a viewpoint on the incidence of fringe costs very similar to this writer’s. It is: . . . To the extent that companies bear the cost of pension /jkn& other benefit/ plans, costs and prices will tend to rise .... This means that the public generally must pay for the disproportionate benefits which may be obtained by strong unions in particular industries.33 Sidney C. Sufrin and Robert G. Sedgwick in their 3k book, Labor Economics and Problems at Mid-Century. write on four interesting points. They will be digested j here without comment. (1) In speaking of the functional | share of the distribution of the national income: ! The data Rational income figure§.7 do not indicate the value of the so-called ’ 'fringe benefits” as i insurance, paid vacations, paid holidays, call-in j time, etc., accruing to labor in the past few years | A 9 2 5-I95I/. When these are considered, the position j of labor would indicate a relative improvement not J ' evidenced by the table.35 | (2) In discussing fringe benefits as an equivalent raone- 1 | tary addition to income as providing equality in wage 33Ibid.. p. 727. i 3^4-Sidney C. Sufrin and Robert G. Sedgwick, Labor 1 Economics and Problems at Mid-Century (New York: Alfred j A. Knopf, Inc.7 1956). 3^Ibid., p. 35. ! " 9k 1 j 1 rates for given classes of labor, they write: "The differential rate structure for given classes of labor seem unchanged by the addition of the value of fringe benefits. " 38 (3) In discussing the economics of social security, they note that the employer's portion of com- l pulsory taxes may be passed back to the employee. They feel "... that the O.A.S.I, program should be financed by general governmental resources, " 37 ([(_) Finally, they observed a . . wave of interest in the so-called 'fringe items’ in the collective agreement," (a) ". . . Ideas for these fringe items arose from the real or alleged needs of people in given plants." (b) The fringes are designed to answer two areas lacking for most workers: "They are (1) the lack of security, and (2) the j lack of personal recognition." j Glenn W, Miller in his book, Problems of Labor,3<^ j writes on fringes as deferred payments for labor. His statements can be condensed to four points.^ (1) 36Ibid., p. 6 2. 37Ibid., p. 2?7. | 38Ibid., p. 3 5 3. j 3< ^G1 enn W. Miller, Problems of Labor (New York: ; The Macmillan Co., 1951). i ^°Ibid., pp. 366-367. Fringes are deferred payments. (2) Fringes result in \ * 95 lower wage rates than without; therefore, they are a substitute for higher wages. (3) Fringes provide added I attractions for workers; therefore, they add to the ' desirability of a job. (ip) Fringes provide for a higher ”. . . degree of long run well-being for the worker tha4 if he is left to provide for old-age or sickness, t o ? / example, out of a slightly higher wage." ^ f Finally, Dale Yoder in his book, Manpower Economics! and Labor Problems,^ presents interesting views of fringes on the individual’s economy. Yoder writes con cerning fringes as wr ages that: (1) Fringe issues or ad justments are means by which alert representatives of labor can secure significant increases in the earnings of employees. (2) The reduction in the straight time work week from [|_8 to ipO hours (World War II) has resulted in four hours of additional compensation (8% weekly increase in pay). (3) Two weeks' vacation has resulted in a i |. % annual increase in pay. (Ip} Welfare and insurance plans have increased the pay from 2 . % to 10^.^ Concerning fringes in collective bargaining he writes that: (1) Vacation privileges are more important ^Dale Yoder, Manpower Economics and Labor Problems (New York: McGraw-Hill Book Co., Inc., 1950) ^2Ibid., p. 1 2 3. than the addition of 2, I j . , or 6% to wages. (2) Fringes ! j are a symbol of a higher status or level of worker pres- j tige. (3) All non-work time, "in each instance, . . . is ! associated with privileges and prerogatives of a group I I presently enjoying superior status. They are symbols of ! k3 j attainment and recognition.'" J Yoder places strong emphasis on the social status . and its affect on the worker. He writes: j : . . . Status structures create a sort of social and ! economic inertia. At the same time they tend to reduee ! employee mobility, because individuals may hesitate to leave, a situation in which they have acquired status.H-k | This same social status may appear in profit-shar- ! ing. However, Yoder appears to have passed over this thought. An interesting summary was written on the aims ! of profit-sharing when he wrote: "... Profit-sharing i j seeks to place employers in a position paralleling that of i i ^ jowners and employees in successful operations.*" ^3ibid., p. 1^ . ^ I b i d . , p. JLj.05. ^Ibid. , p. 6l6. CHAPTER VIII ■f SIGNIFICANCE OF FRINGE BENEFITS AND ECONOMIC SURVEY Many discussions of fringes might accurately be labeled propaganda. Every union takes credit for its development of fringes and claims that labor has a right to them. Organized business groups feel just as strongly and on the contrary. With many opposing and well presented views, it is no wonder that many individuals fail to see an accurate picture of the subject. Even the views and opinions in this study will be criticized by other writers with an equally unbiased view. Nevertheless, both viewpoints are presented, wherever beneficial, and a logical analysis made in line with present economic theory and views. Earlier chapters have described the major types of fringes by category. Since the employee in each case benefits from the fringes, either directly (as in the case of time off from work, with no reduction in the pay check) or indirectly (in the form of peace of mind and security from the unknown) all payments made by the i employer are wage extras. They are wage extras because' I j they must be added to the employees* direct wages or v- > compensation in order to arrive at the employees' economic All wages and wage extras with the possible ex- ception of profit-sharing funds, are costs. The costs of labor must be added to the other costs'*' involved in pro ducing goods and services. To organize or run an enter prise, the owners anticipate profits (or an income on investment) commensurate with the risks involved.2 The economic worth of an employee (or any resource) might be explained as that amount which will divert the utiliza tion of a resource from an area of less to an area of greater worth and from a point of lower to a point of V\ higher productivity. In simple language this means that 3 a man will pass up lower paying jobs for higher pay, at the same time that employers are looking for workers who will produce a larger output in proportion to their pay^ Unfortunately the productivity capabilities of a newly hired worker are generally unknown. Therefore, the impor- j tant aspect in hiring labor is to get them at the lowest possible price. Then, if their productivity warrants it, an increase of pay commensurate with ability or output could be offered.^" "*"Raw materials, land, and entrepreneurship. 2 Other economic reasons such as existence, competi tion, etc., are not considered here. 3However, many people enjoy prestige and desk jobs or other 1 1 soft" jobs with lower pay. ^"Unfortunately many employers fail to reward What are the wage extras and how will they influencej I economic decisions? To develop an answer to this question, let us illustrate with an assumed typical ease. Employee A is making some gadgets on a machine. He earns $2,00 per hour. His average output is 20 gadgets per hour. His employer allows 15 minute coffee-breaks, two weeks1 vaca tion, five days of sick-leave, 8 paid holidays, clean-up time, wash-up time, and others. Legal requirements such as OASI, unemployment compensation, workmen’s compensation and other legally required payments are made by the em ployer. The rate per hour of output is the number of gadgets j (20) that the employee can produce uninterrupted. There- j fore, if uninterrupted for one year, the cost of labor to j produce one gadget would be ten cents (10^). However, it ' must cbst more than ten cents each, since the employee is i i j not producing twenty for each hour that he is paid; nor j are additional wage extras counted in his paycheck. productivity increases until it is too late. It may cost as high as §1 0,0 0 0. to train a worker, and this would be s a heavy loss in case of employee termination. But many ! employers wait until an employee threatens to terminate | ; before offering a raise. In many cases this raise will be j ! accepted and the employee stay. More often than not, how- j ] ever, the employee has obtained other work with more pay, I before giving his "two-week" notice. In the cases with i which the author is personally familiar, no employee who | had another job waiting had accepted the late offer. * There was the fear expressed that he would be mistreated in the future for his actions. l o o ! t First of all, let us determine the total number of gadgets produced by this employee in a year’s time. Since there are fifty-two weeks of five days, there is a maximum of 260 working days of eight hours each. There would be a total of 2080 hours. At twenty gadgets per hour, the employee could produce i j . 1 ,6 0 0 in a year for a j direct wage of $ij.,l60. The eost of labor per gadget would be ten cents. However, each year there are 10 days for vacation, days for sick leave, 30 minutes for coffee-breaks per day, eight holidays, clean-up and wash-up time totaling about 1% minutes per day. With 0 minutes per day allowed as non-productive time, the employee actually works hours and receives 8 hours of pay. Instead of producing l60 gadgets per day he actually produces l i j - 5. There are 23 days per year for which the employee gets paid, and for which he produces nothing. There are only 237 days on which production is accomplished. Therefore, instead of producing tj.1,600 gadgets, he I actually produces 3k-> 30 ( 1 0 per day times 237 days) at a direct wage of $ij.,l 6o.^ The direct wage cost per gadget * • > ^In the following calculation, for simplicity, we will assume that the quantity per hour of work remains constant. Normally, unless time-controlled by mechanical means, there Is a tendency to increase production as a result of fringes. 101 is now 1 2.1^ each.. The indirect costs^ must now be added to determine the actual cost of the employee’s time. Social Security taxes paid by the employer amounts to $8 3.20, the unem- I ployment compensation taxes about #5 0.0 0, the workmen’s compensation tax about $1 0.0 0, life insurance premiums on the group policy $100.00, Christmas bonus $75*00, and j retirement $1 5 0.0 0. ! j i ' These are enough to serve the purpose of this j j ; i example. It must be remembered that free lunches, I i 1 financial and service aid in emergencies and many other j i 1 benefits could be included. I ; | In addition to the $l{.,l60 in wages directly paid to | the employee, the employer must also pay on his behalf an ; I i j estimated additional $i}.68.20. Now the total labor cost j to produce 3^4->3&5 gadgets is $1j.,628.20. The true labor cost per gadget is then 13.Jl7^» Before determining who pays this added cost, let us look at the fringe benefits in this case to determine the amount and percentage of his base pay. According to our definition of a fringe benefit--any cost of labor (indirect or direct) which is not compensated for by some | productive output--the direct productive wages for this Wages not reflected on the employees' check. 102 employee totals $3,[ 4. 3 6 .5 0 (237 days times 7"i hours per day times $2 .0 0 per hour) and the total cost of fringe benefits totals $1,1 9 1 .7 0 ($[ 4. , 628. 20 minus $3,1 4- 36.5 0). This employee receives as fringes 2 8, of his % 8 )' direct productive wages; or the total cost is 1 1 1.25$ of y his direct wages; or the direct wage for productive timey/ is 7) 4 -.25$^ of his total economic cost. The amount which 10 is not included in his paycheck totals 9*89$ of the employer’s total cost, or due to fringes over his direct wage, 1 1.25$ ^ less. S" Who pays for these fringes? the employer? employee? or consumer ? There are many arguments, and depending^ upon the effectiveness of the various propaganda groups, each interpretation appears appealing and accurate, but only in specific cases. ^Direct productive wages ($3* 1 4 - 36.5 0) divided by the total cost of all fringes ($1,1 9 1.7 0). O The total cost to the employer ($[4., 628.20) divided by the total direct wages paid ($[ 4., 1 6 0.OO). a 7The total direct wages paid for productive time ($3, l j - 3 6.5 0) divided by the total cost to the employer ($5. , 628.20) . ■^The total economic cost to the employer ($1 4-, 628.2 0) divided by the amount not reflected in the employee’s paycheck ($[4. 6 8.2 0). 11 Payments over the employee’s direct wage payment ($lj. 6 8.2 0) divided by the employee’s direct wage ' $[ 4 . , 1 6 0.0 0). j Some say labor suffers in lower real wages, ! while others say that the fringes are amounts over and i above what they would normally receive. Some say-that the 13 ! employer receives a smaller dividend than he normally i would. Others say that the costs are added to the selling prices giving them equal or larger incomes. j i Some say that the consumer pays in the form of i ! higher prices, while others insist that the price is not J affected. The most common, however, is that each of the i three pays in varying degrees. The degrees, though, are 1 .j difficult to determine. M With so many incompatible and divergent views, it is apparent that not everyone can be absolutely correct, I ! at least in most cases. The reason for this, qualifica- tion is simply that our economy is so vast and at the V , j same time so different, that each viewpoint may apply, j j i Incidence of Fringe Increases At this point we must develop a general theory on the incidence of fringe payments. Who does pay? Let { us review two general theories already in existence; (1 ) ' The incidence of taxation and (2) Chamberlin*s "Selling i ______________________ i 12 1 That is, the direct wages as reflected in the j paycheck, and its value in the market. "^By employer, it is here meant the stockholders or owners of the enterprize. 1 0 1 * . Costs and the Theory of Value. The incidence of taxes is on the least mobile party. The least mobile party is the one who will be the last to divert his resources, capital, or expenditures in order to avoid payment of an increased amount of money. As an example, let us consider the way this affects the cigarette smoker and the tobacco industry, and the auto mobile owner and the gasoline producer. The two groups of consumers, smoker and driver, each have different theoretical demand curves. (See Figures 1 and 2) Price Quantity Quantity Figure 1 Figure 2 Theoretical Demand Curve Theoretical Demand Curve gasoline consumption cigarette consumption It will be noticed that a change in the price of gasoline will result in a much greater decline in consumption than that of cigarettes. This might come about by people using substitute means of transportation such as buses \ li-l-Edward H. Chamberlin, The Theory of Monopolistic Competition, Harvard Economic Studies, v. 3^ (Cambridge: Harvard University Press, 1956), pp. 130-17&. or share the ride groups or even walking. Since cigarette smoking is a habit, and in vogue, only a slight drop in demand may occur due to a partial abstinence by heavy smokers. Since any tax addition increases the marginal costs of each commodity the marginal revenue must necessarily increase at the point of intersection, if the cost is passed on. (See Figures 3 and i f . ) i Price MC Me Me MR Quantity Price Me". Quantity Figure 3 Gasoline Theoretical Cost Curve Figure i f . Cigarette Theoretical Cost Curve However, the change in consumption might reduce the total revenue of the producer, forcing him to cut back on pro duction. If this be so (as will be seen in the case of the gasoline example of Figure 3) the gasoline producer is the least mobile and must absorb part, if not all, of the increase in cost due to the tax. In the cigarette example (Figure i f . ) there would be no appreciable change in demand, therefore, the consumer is the least mobile and the incidence of taxation would n 106 probably fall on the consumer. However, in our examples we are holding all factors not mentioned stable. We may directly substitute fringe costs for taxes. In so doing / ' we arrive at a general conclusion that in cases of "'>■ ^ elastic demand for the employer's goods or services, the incidence of an increase of fringe costs falls, in part at least, on the employer. Conversely, in cases of in- ! elastic demand, the incidence of an increase falls on | / / < the consumer. Chamberlin', s analysis on the theory of selling costs might appeal to those who bblieve that increased cost curves result in increased revenues. However, this does not apply to fringes, directly. As we will point out later in this chapter, productivity might increase when the employees are motivated. Perhaps the fringe increases will provide the proper motivation. However, t this motivation is on the employees to produce more at a lower cost. By increasing the sales cost, advertising s - • - and promotion, according to Chamberlin's theory, the con- sumer is motivated to buy more; and the motivation of the consumer by advertising has a greater affect on the sales of a .good or service, than a direct reduction in price caused, by the motivation of the employees to produce more. { 1 It does not occur to many people, yet It needs to be pointed out here, that in many cases in all types of industries no one pays for additional fringes. Sur-' prising statement, so it would seem. ^ Another shocking statement: At the same time, the employee can receive additional fringes, and more direct income, the entrepreneur can receive a larger income, and the consumer pay less for the product. This does not necessarily occur during any expansion^ or depression"^ phases of our economy, either. And the figures or trends will he the same either as actual money or real money in- r corne."*"^ Why? There are at least three good reasons; one for each group. The employee may become more pro ficient in his work. The employer may install labor X8 saving equipment, or improve the location of equipment. Consumer expenditures may increase causing an increased ■ z', demand. In all of these cases the cost per item will drop. ■^During expansion the consumer will pay more rather than less. During depressions or downward phases all quantities will decrease. 17 Id est: Actual money is the numerical count of the number of dollars represented, while real money is the 1 value of the money in terms of its value change in rela- j tion to a given base period. l^This will cause less time in moving between equipment, if an employee must operate several to turn out one finished item; assuming that it would not be more efficient to hire separate operators. As the employee becomes more proficient on the job he can turn out more products at a lower unit cost* By good industrial engineering practices, the employers can cut down on wasteful motion. The third is possibly more difficult to explain. Simply, it is this: An increase j in demand may for a while cause an increase in price, but j coupled with the increased demand, the employer can in- I i ; still more efficient methods of production, thus cutting i | down the unit cost, and hence the selling price. Ideal i as this may sound, it does not work in reality. The ! I j profit motive and the expectations of larger profits pre vent it. It is merely mentioned to show that it is possible for all parties to actually benefit, but not at the expense of any. The profit motive, just mentioned, also does not necessarily mean that the consumer pays for all benefits. i Who Ought to Pay for Fringes A look is now necessary into the actual cost- O price relationship of each and see who ought to pay for j the increase. All employers will generally add additional units of labor until marginal costs equal marginal revenues. Conversely, employers will generally lay off i workers until marginal costs drop to a point about equal 109 to marginal revenues.^ If such an ©vent occurred, It cannot be denied that the employees laid off -will pay for the benefits of others by their loss of wages. But if unable to locate employment elsewhere, part of the employee's loss can be made up by some benefits both he and/or his employer have paid for. This is a very unique situation. Of course what is said here does not necessarily apply universally, but it does point out an unsolvable problem. An employer grants increases in fringes (here assuming unemployment compensa tion or GAW-SUP), but is unable to either absorb or pass on the added costs. His one solution which he carries out, Is the layoff of personnel, who reeeive the benefits so increased. The employer must now pay out the addi tional benefits, which he has agreed to do, to an employee I he could have used had the increase not been effected. | The net result? The same direct income for those em-' ployed, a higher cost for the employer, and the loss of an C . employee's production. In this example, on whom does the cost of the plan fall: the employee, all the employees, the employer, or the consumer? Let us go through each part one at a time. i i \\ W I Of course, many short run considerations will be made. However, cost increases, if not imputed to prices, are long run considerations and this event will then occur. The employee laid off. It is necessary here to i 20 recall the statement above about economic worth. If this employee seeks and finds other employment at an equal or better wage, has he lost? Certainly not. However, if I i he remains unemployed or takes a job with less pay, pro- 21 vided he has not been offered a job with higher wages, the difference between his income on the new job and the income he would have received on the old job is paying for the benefit, in part. The remaining employees. What about the remaining / employees? This too is dependent. If they are not forced J i to make up the losses in production incurred by the lay- | i off, there is no loss. However, if their productivity f I j must increase to make up the loss and their economic worth exceeds that previously determined, they pay for their jr increased benefits out of proportion to what they are i I J entitled, because of a lower labor per unit cost. I s - ■ I The employer. The employer’s loss is likewise dependent, and is primarily the opposite of the remaining < employees. This is mainly contingent upon his ability to j I I 20 j See page Pi It must be recognized that a worker may seek other benefits and forego higher wages. pass the additional costs back onto the remaining employ ees. Another consideration of his losses, over the long run, is considered in the consumer section, following. The consumer. So far we have considered the short ! run and the long run aspects of the case as one. There I appears to be no real significant differences in each. There is one long run aspect which must be considered. This is within the area of the consumer. In the case presented the employer was unable to pass his additional costs on to the consumer in the short run. In the short run, commodities which are elastic in — d emand- - wi-1-1—ge ner airly ~be ~consumed~more In case's’ of~a lower price and consumed less if there is a price increased j If the prices are not changed, there will be no incentive i to make a change in consumption. But in our example there i ! has been a lay-off, equivalent to a lower production or supply. This lower supply will cause a market adjustment 22 (as opposed to the employers1) in the price. Consumer’ s will bid against each other and merchants (if not also the employer) will raise their prices in expectation of larger i ^This is assuming that the decrease in supply is enough to offset the total supply. 112 23 transaction profits, if not larger total profits. In i the short run then, with the employer not raising prices, I i the consumer will pay more for a decreased supply. What i then is the answer? Does the consumer pay for the fringes? Certainly not in this example. In order that the consumer} pay for the fringes, the additional amount (or part of) j I what he pays must return to the employer. In this examplej the middleman receives what might be considered an unjust 2k profit at the expense of labor, employer and consumer, ; Even though the increase in price was indirectly caused by fringe increases, it does not follow that the addition al price paid by consumers will pay for them. In the long run, however, the picture appears quite different. At first as shown in the short run considera tion the consumer does not pay. As time elapses the em- pi oyer may notice that the consumer prices are ,_ri-Slng.,^nd will contemplate increasing his own prices. The ability to increase prices is dependent on other variables in com petition, but raising prices in a secondary operation is not as difficult as it is to raise consumer prices. Now a share of the increased consumer price will actually pay ^There are speculators who raise prices out of proportion of that necessary, but a usual practice is to maintain a given income. ^Actually no such judgment should be hastily made, for he may have lost profits at a previous increase in his own costs. ' J for the additional fringes. Since the employer's mar- I ginal revenue will have increased, he may rehire the laid- off employee. The end result in the long run is that the consumer will pay for the additional fringes. Conclusion In highly competitive firms the ability to pass on the additional cost of fringes is more difficult than in other forms. The discussion just presented shows one possible way in which it could be done. It could not possibly be done in the short run. Only in the long run can the consumer be forced to pay the burden. However, it must be recognized and it was pointed out that it need not occur at all. The individual em- I j ployer may absorb the added cost. Also, the laid off j i employee and the remaining employees may bear the costs. L * - ; I An important point which has been offered for all ! I to scrutinize is that perhaps no one actually pays for the i j additional benefits when considered as a loss. Many will : perhaps argue that labor pays in the form of an Increased output. But let me repeat that the actual payment must « be a loss to someone. If the unit labor cost after the i The marginal cost remaining the same as it was ; when granting the fringe. Many other factors may also be present, such as the well-known price-wage increases. For our purpose here, though, we assume them to remain con stant. ' ~ lll+l ! addition is exactly the same as before, labor must be producing more in a given time period, and as measured ! by a per unit cost, they are surely receiving more in come, but are not actually paying for the fringe as a loss. To illustrate this point, refer to the example on the cost of labor. It was concluded that the labor cost per gadget was 13.I|-7^. If any one of the fringes should increase, productivity remaining the same, the labor cost per gadget would rise, also. However, if coupled with a productivity increase, the cost per gadget may either remain the same or decrease. Therefore, if the unit cost "decreases wheri^fringe" costs are increased^ the~”emp 1 oyees must be producing more. All fringe benefits covered in this report are applicable to the foregoing except those of Chapter VI, Profit Sharing. The profit sharing plans act as an excellent buffer in absorbing increased benefits granted to employees. If a decision is made to increase the ^ benefits and not increase prices, the employees are merely receiving funds transferred (so to speak) from the" hind pocket to the fore pocket. However, this is at least in the short run. In the long run, it would seem ^ i that higher productivity, increased prices, or other causes mentioned earlier may return the profits back to 115 their former position. Only if this occurs do the em- ployees receive an added fringe benefit. | CHAPTER IX I SUMMARY, CONCLUSIONS, AND THE FUTURE We must recognize that labor is not a commodity* It Is a service. Because of this, labor cannot be the ! subject of barter or trade in the same way as merchandise.J I The worker is providing a service in his capacity as an individual. These individuals have minds, preferences, opinions, likes and dislikes, and capabilities which differ from each other. 4 It is due to this individuality that there are desires other than wages which he wishes fulfilled. Thls>s 'Study~has presented^most of the major "desire-satisfying" i non-wage elements, which we have called fringe benefits. ^! r We have also presented an economic analysis of fringes, ; in general, in an attempt to discuss their impact upon I ^ j the general economy. i In this final chapter it is necessary that we indicate possible trends and their impact upon the economy of the future. ' Around the turn of the century, Samuel Gompers j issued the formidable cry that labor wants more and more, I | or a larger share of the pie. To be sure the piece of I j the pie has been getting larger; so has the pie. The | real average weekly earnings have risen from $25,66 in 117 1911+ to $59*57 in 1952.^ The standard of living has more than doubled in terms of real wages. The average weekly wage has risen more than the cost of living because of the increased productivity of the American worker. In the years to come there is every expectation that productivity will continue to increase due to new advances in auto mation, electronics and in other labor and time saving devices not yet invented. As shown in the last 50 years, the future trend is for a shorter work week and day. Firestone employees on a piecework basis are already on a 6 hour day, 36 hour week, which includes a daily 20 minute lunch period. With shorter work weeks and increased pay, the employee will j( t , receive a vast amount of benefits designed to give him security of income and savings. I . . i Today, he has income security due to unemployment j compensation, vacations, sick leaves, etc. He has savings security because of insurance plans, severance pay, and retirement plans. Above all he has a peace of mind re lieving him of excessive worry over future unknown event s.j 1 But unlike direct wages the cost figures of fringe ' benefits do not appear in statistical summaries concern- j ing labor’s wages. If they did, curve and percentage ^-Pearce Davis and Gerald Matchett, Modern Labor Economics (New York: The Ronald Press Company, L 118 | I growth charts would reflect a much sharper rise in total ^ wages since the mid-1930fs; the time which might be con sidered as the commencement of fringe benefits on a large scale in the United States. The comparative growth of fringe benefits for the years 19^ 4-7 through 1953 are indicated in a study made by the United States Chamber of Commerce. (See Appendix A) In projecting this data into the future, consideration is given to each of the various fringes covered in this report. r Since World War II, fringe benefits have risen from an all industry average of 15.2$ (19^ 4-7 ) to 19*2$ S \ \\ v\ i— '(1953) of the total payroll. (See Appendix A) The mone tary increase from $14- 22. to $817. per year per employee is also about 90$. It appears that there may be no end to fringe increases. Let us see what the future for each / < type of fringe will be in terms of their present trends., Legally Required Payments The initial step into this group of benefits was taken by various governments as long ago as the nine teenth century. It was not until the 1930 fs tlhat large scale participation occurred. 19514-), P. 568. Real average is based upon the Consumer Price Index (I9I 4- 7- l j - 9 * 100) and the average weekly earning of the periods covered. 119 The Social Security system of the United States is an answer to the older person’s demand for security. Un employment compensation is an answer to labor’s demand j for better employment practices. Workmen's compensation j | is an answer to the workers 1 demands for financial relief j j in case of industrial accidents. The total cost of this j i 2 ! group of fringes was 3.2$ of the total payroll in 1953. j Old-Age and Survivors Insurance. Prior to 193^4- ! most people over 65 were either wholly or largely depend- | ent upon others, friends and relatives, for support. Old age was something to be feared. Today about 90% of the people over 65 either draw government pensions, old age i i checks or still have gainful employment. The young and i old of today may also look forward to a retirement with a guaranteed income. However, the youth of today and the yet unborn, have the payments of social security taxes as a guaran teed duty. The tax will also be increasing in the years to come. The tax was raised to l^% {2\% by employer) in 1957. It is scheduled to be 5.5$ in 19&0, 6.5$ in 1965, 7.5$ in 1970, and 8.5$ in 1975. During this same period the number retired (6 5 and over) should increase from II 4..I millions to 2 0 .7 millions. ^Fringe Benefits, 1953 (Washington, D.C.: United States Chamber of Commerce, 1951+), p. 10. 120 Moreover, these figures are based upon our present day practice of retirement at 65. In 1957* women became eligible for retirement under the Social Security plan at the age of 62. With the advent of automation and a possible rapid increase in productivity per worker the retirement age might very well drop to 60 or even as low as 55. If this should be done, might not the tax rise to a high of 12% or even 20%? C It might, but this is unlikely to happen. In the late 19lp0»s, the inadequacy of Old-Age Assistance became apparent. The payments were merely designed to give a / " minimum standard of living. Private pension plans, pur chased by or on behalf of the employees, (to be discussed more fully later) were the answer given by labor. These pension plans have grown rapidly and now the covered re tiring worker receives income which results in better than j\a minimum standard of living. Also, these plans do not : N N : result from charity, like the O.A.A. The future of the Old-Age Assistance program, then, ! /' l^is likely to continue as a means of guaranteeing a minimum I - standard of living to those over 65 (or 6 2) while private i ^pension plans will take the initiative to lower the re- ! v\ tirement age to as low as 55 years. But as the average \'v _ j standard of living rises so will the minimum. There will l 1 probably always be a lag between the two, but as the minimum rises so will the benefits. 121 Over a 20 year span a worker will pay as a Social ( Security tax not over $QIpO. (at 2%) and his employer #81^.0. } (2% as a fringe) at the 1956 rate. The total payment into the general .fund will be #l680. Yet in one year, if his wife is over 65 also, he will get as old-age benefits a i total of #1953.60 (maximum payment, 1 9 5 7* of #1 6 2 .8 0 per month times 12), This amounts to #273.60 more than his 1 ! I employer and himself paid into the fund during the 20 ! 1 years. For each additional year that benefits are re- J j ceived he would receive the funds without any off-setting I 1 I earlier contributions. I j There must always be payments into the fund which total an amount larger than the benefits paid out. In ( 1955 almost 100 million working people had to support II 4. million over 65. With such a ratio (about 7 to 1) the ! average span of payments could be about 6 years per beneficiary without exceeding the fund’s income. (7 supporters times #l680 equals #1 1,7 6 0; 6 years times #1 9 5 3 .6 0 equals #1 1,7 2 1 .6 0 as benefits.) This fringe, Old-Age and Survivors Insurance, will definitely continue an upward trend in benefits and costs. However, in comparison with other fringes (and because j increased benefits will only come with increased standards ' of living) Old-Age and Survivors Insurance is not a dynamic j fringe. r 122! Unemployment Compensation. One of the basic reasons for a man working is to receive an income. Bat if there is no work an unemployed worker would be without income. Therefore, unemployment compensation falls in the group called income-security fringes. ^ Prior to the passage, in 1932, of the Wisconsin plan for compulsory participation, the American worker was at the mercy of his employer. With the passage of similar plans in other states and the encouragement of the Federal Government through the Social Security Act, 1935, employers began to think in terms of all-year employment. Many employers in the canning, toys, and other seasonal I J industries hired employees to work at the peak rush J seasons and laid them off during slack periods. Because f! I unemployment compensation is paid fully by the employer, diversification is encouraged in seasonal industries; for instance, toy manufacturers start making Christmas season toys as long as a year and a half in advance. As a security-of-income plan, it is today, and in the future, likely to be a benefit for those out of work due to causes beyond the employer^ control. It must be remembered that labor is not a commodity to be laid sway on a shelf and forgotten until it is needed again. The Unemployment Compensation plans are directly responsible for this change in thought. 123 The current trend In employer payments is difficult to assess, because they are dependent upon the employers1 experience rating. It can be stated without contradiction: i though, that it is a stagnant fringe. It is not dynamic because it is only designed to give a minimum standard of living for a short "tide-over" period. Whether there are three or ten per cent unemployed at any one time is also no indication of a trend. The fact that the maximum pay- I . ments per week may rise is only reflecting a general in- 1 ! crease in the minimum standard of living. To be dynamic either or both of two conditions must i existj (1) an increase in the length of time that payments ! j are to be made, and/or (2) an increase in the monetary benefit out of proportion to an increase in the minimum standard of living. If either of these should occur it is highly possible that there would be a perpetual group of unemployed; a group desiring leisure with a small income than employment with a larger income. It is too early to assess a new fringe, which is | intentionally omitted from this study, the Guaranteed Annual Wage; or as this writer prefers: Supplemental Un employment Compensation. This latter fringe, however, is very dynamic, but the regular state plans are not. Workmen^ Compensation. Prom its early embattled start in the United States at the beginning of the 1 twentieth century, workmen*s compensation laws have had a dynamic growth. Each year legislation is introduced in the various state assemblies for increased benefits. In 1955 both maximum benefits and length of time that bene fits are received were increased in k8 of the states and ! territories. ! However, while dynamic in appearance it does not show the great strides that are apparent in some of the other income-security plans to be discussed later. Like Old-Age Assistance and unemployment compensation plans, workmen’s compensation contains provisions for maintain ing at least a minimum standard of living and for the same reasons, will not show an increase in benefits. On the other hand compensation for injuries received, which results in unemployment through no desire of the injured, does not fall In the same class. But a fully recovered worker might still continue to receive payments under the pretext of continued disability. The trend for this benefit, nationwide, is for slightly increased benefits in the future. Specifically, in those states with the ex clusive or compulsory plans the trend is showing a very slight Increase. Puerto Rico, with an exclusive plan, has benefits which are very low. 'In those states with competitive, or elective plans the trend is much more dynamic. Arizona, which has an elective plan, has the 125 highest benefits of all. The one major change which is bound to occur in the years to come is a movement by the exclusive plan states to the competitive plans or a move to an elective plan with no state fund. Any change is bound to be the result of lobbying by insurance companies. i Agreed Upon Payments This group of fringe benefits for the most part lay stagnant prior to World War II. Due to wage freezing during the war, labor turned to fringes such as these in order to increase the well-being and to secure savings security for the worker. Upon retirement the older person required either savings or aid from relatives in addition to the old-age assistance of the Social Security Act. Sickness drew heavily on savings or caused a large indebtedness. Due to the relative scarcity of labor during the war, termina tion pay was not generally discussed and has to this day remained in the background. Saving security plans received wide spread approval from the beginning. Employers were able to reduce labor I turnover, so it is claimed, and labor was able to be relieved of the insecure feeling when in need of medical aid. 126! Pension Plans. Pension plans were in existence prior to the passage of* the Social Security Act; due to. , I the benevolence of some very large employers. These early plans were not compulsory and the employees did not receive any vested interest in them. The plans were l designed as a means to get rid of the older worker or j i white collar worker in order that internal promotions could be obtained. In only a few cases were contributions made by the participants. The firms with pension plans in 193^ modified them so that retiring employees could receive Social Security payments plus the pension. After 193^4- tk© idea of supple mentary pension plans (Supplemental to Old-Age Assistance) spread rapidly. Prior to this time insurance companies did not participate. Through the years insurance companies have played an ever increasing role in employee contributory plans. Even for non-contributory, trusted plans, insurance companies sell the retirement policy and guarantee payments at the time of retirement. Since the mid-.1930fs, private pension plans have shown a rapid increase in benefits and coverage, but generally for the employees of single firms. The current j ( trend favors area and/or industry-wide pension plans. | ! Lockheed Aircraft Company has plants throughout I I 127] | the United States. Any employee transferring between 1 locations will lose all credited time today. The I.A.M. ; is negotiating for a plan to allow transfer of pension credits between plants. The aircraft industry of Southern California will j j be faced with similiar demands if negotiations and prob lems can be agreed upon by the various unions and com panies involved. The trend is apparent and it is dynamic. In the years to come, if this trend continues, the in surance companies involved may participate in re-insurance or co-insurance programs. Life and Group Insurance Benefits. The wide-spread use of group insurance plans are primarily the direct I ! result of collective bargaining during World War II. They 1 j are savings-security plans. These plans cover life, | health, and accident; and pay out, except in life 1 ] insurance up to a certain maximum, all of the costs of medical aid. In a majority of cases the employee or his depend- t 1 I ents receive better care and treatment than they would otherwise be able to afford. As a direct result, em ployers with such plans have healthier employees on the average than those without. The only proof to substan tiate this statement appears in lost time accidents statistics. 128 r The trend since World War II is for more employee coverage and for employers to pay 100^ of the costs. Since 1950 the number of agreements for divided payments has declined and those in which the employer pays the whole bill has increased. In only a few companies are dependents covered without employee participation in pay- I ment s. r- The current trend indicates a fourfold dynamic structural change for the future; (l) free dependent coverage, (2) free employee coverage, (3) increased maxi- j I mum benefits, and (if) widespread use of major medical j : coverage. Within five to ten years after free employee ; coverage is granted, demands may be made upon employers for free dependent coverage. This time lag is apparent in many of the plans which granted free employee cover- j age prior to 19if 9* I"] Free employee coverage has spread so rapidly since j 1952 that it appears to be a second stage (incorporation i 1 of the plan is first) in union fringe demands. A time lag of six years appears to be a reasonable estimate. The maximum benefits payable are continuing to increase each two to three years. However, it is doubt- t I | ful if this increase is out of proportion to the increase j | in medical costs. Therefore, it appears that unless new types of coverage are provided there are no dynamic 1291 trends for increased benefits. ! One new type of coverage appeared in the early J ! 1950»s. It is the major medical expense benefit (See | 1 i method of computation, Appendix D). This appears to be a I very dynamic fringe. In the years to come more and more j employees will be covered for the major portion of medical; 1 ! I bills ranging into the thousands of dollars. Life insurance benefits might be considered stag- i 1 1 nant. The plans pay an amount roughly equal to the next ! even thousand dollars above the annual wages of the j covered employees. The rapid increase in the amount of I | coverage since 19i j .6 is due only to a comparable rapid i increase in wages during the same period. Life insurance coverage is written concurrently with health and accident coverage. Therefore, a possible trend in percentage of covered employees will increase as additional employees are covered by group insurance plans. Termination Pay. A sum of money other than accrued wages and settlements for retirement contributions is considered as severance or termination pay. This type of fringe is not new but it has never been widely received j by either labor or industry. Due to unemployment insur- j ance, holding back of wages for a week or two, and paying for earned but not taken vacations has aided immensely^ in providing employees with at least a minimum standard 130 of living for two or three weeks. The arguments that older workers find it difficult to procure new employment is no longer valid. Due to publicity and the need for j | manpower during the last few years the older workers ; (over l | . 5 ) are out of work between jobs no longer than | j others. I i The one major advantage that this writer sees in j I such plans is the detrimental effect on wholesale move- I ment of plants and factories. Most plans, such as that / shown in Appendix E, pay a certain amount (for instance, i a weeks pay) for each year or more of service. j i It may appear that this fringe is stagnant or even declining; but this is only due to the lack of a great j quantity of benefits paid out. In 1953 this amount was 3 less than .05 of the total payroll. Actually this fringe is dynamic. More employers will institute such plans covering more employees, at the insistence of labor. Payments, however, will continue to decline percentage wise due to the practice of utilizing older workers more, better industrial practices, and automation. On-the-Job, Non-Work Benefits "Once upon a time'' is a good beginning in discuss ing this benefit. For, "once upon a time" a worker would ^Ibid. 131 report at work, commence operations, stop at lunch, begin work immediately at the end of lunch, and cease operations at the quitting whistle. Today, due to laws, employer benevolence, labor-management agreements, and employees* disrespect or disregard of company rules, employees no longer work continuously while "on the clock." Rest Periods. Since World War I, when rest periods began, breaks in the working day have gone through a long period of decline. With the commencement of World War II, they again became prominent and have been dynamic ever since. C Of all the plans covered in this study none has beer, abused by the worker as much as the rest period. It is I due to this abuse that employers are not in favor of any extensions in the time allowed. However, rest periods are here to stay and few employers would consider discon tinuing themj even if state laws were not enacted making them mandatory for women, Rest periods are dynamic because coverage will eventually be universal for all but operations requiring extensive non-work time. Since World War II, labor has not had to fight very hard for this fringe and in the future, new concerns will Initiate rest periods, as a ^ matter of policy. There is no indication that the length of time U n r 132 granted for the break will be increased over the ten or fifteen minutes now allowed. Employees having an allotted ten minutes, rarely return to work in less than fifteen minutes. r Miscellaneous Benefits. It is argued that such benefits as get-ready, clean-up, clothes-changing, and travel-time are part of the normal procedures of produc tion. The fact still remains that there is no productive output during this time, therefore technically these benefits are fringe benefits. Let us for a moment review the manner in which other fringes are classified. Do any of the other fringes evolve from or are they a result of production? Certainly not. May any bf the other fringes be eliminated without j ' affecting production? There is no reason why they could 1 not. Whether time was allowed or not to change clothes, travel, get ready or clean up, these would certainly con tinue as a necessary function in the process of production. We are discussing them as fringes from the technical view point in that the employees are paid for time worked with out the justification of production. The allowances for payments were and are derived from collective bargaining. The past and current trend indicates that such allowances are made when necessary. 133 There is no indication that these benefits are stagnant or dynamic; however, for all practical purposes j ! i it is dynamic. This is indicated by management in that I payment should be made whenever such performances are | necessary and proper in production. In the future, labor will continue to require agreement provisions indicating | ! the method of payment, but the theory will possibly not be heatedly discussed. j I I I 1 Payments for Time Not Worked and Not on Employer * s [ I Premises ■ ■ ■ ■ Payments for time not worked have seen the longest > i ' ; dynamic climbing trend of all the fringes covered in this j i report. Dating back to the days prior to the industrial i revolution, holidays, specifically holy days, were granted I | due to religious beliefs. The development of vacations j from holidays was very slow at first. The development i speeded up around the turn of the twentieth century and is still showing an increasing trend; both as to payment and length of time. Sick-leave and jury, voting, military, ! j and witness duty differential pay plans are relatively new ! in fringe benefit history. : i j Vacations. Having a vacation today means getting I i paid for an extended period away from the firm. In many j large industries this fringe was granted just prior to 13k\ World War II. However, office workers and key personnel have received time off with part pay back in the latter part of the eighteenth century. In these early times, though, the employee had no vested right to an earned vacation. They were granted or withheld at the employer’s! I wi sh. j At first only one-week vacations were granted and j extra long service was sometimes rewarded with two weeks, j Then two weeks after a stipulated number of years service J (usually five, ten, or fifteen) were granted. At the samej time vacation pay was computed on the basic wage of the worker. Today the industrial worker gets at least one week after one year and in all cases at least two weeks after five years. In many industries three weeks after ten or fifteen years is not uncommon. The construction indus tries are the only major areas in which paid vacations are not yet granted. The nature of employment, that is hiring by the job, prevents any vacation plan from existing. Of course full time permanent employees do receive vacations. The rising trend indicates that vacations are a dynamic fringe. In the years to come the one-week vaca tion after one year may disappear in favor of the two- week vacation. With the coming of automation, three or even four week vacations after one year may be common. 135 Since the early 1950's the three week vacation I usually granted prior to 1950 after extremely long period ! of service, usually 25 to 30 years is now granted after , i from ten to fifteen years. In the immediate future the | I ! i trend is for a reduced amount of service, about eight I i ! j years, for a three week vacation. J 1 j j A second trend is also apparent: in the amount of j | vacation pay. Prior to the Industrial Revolution, vaca tion pay was rarely given; there was some partial payment. i | Later it was the practice to pay up to one-half of the j basic wage. Pull-pay provisions were not common until thej l twentieth century. ; Today some companies have elaborate methods of j vacation pay computation. Wherever payments are made by ! formula, the employee usually benefits in receiving a greater amount.than he would if it were based on his basicj 1 II 1 wage. This is so because of overtime and Saturday work. The formula type of payment plan is recent and the j current trend indicates that there will be a wider use of i ' the formula plan in the future. Wherever the formula plan I - - - - - - - - - - - - - - - - - - - - - - - - - - - - j i typical formula, Firestone Tire and Rubber Com- ; j pany, provides vacation pay equal to 2% of the total pay j j received in the preceeding 50 weeks or the base rate which | ever is greater. If an employee works Saturdays or over time, his total pay will be increased by that amount. For example 50 weeks of pay at straight time f> 100/wk with no overtime » $5 0 0 0. vacation pay « * $100 per week ($5000x2/o). If the employee worked every Saturday his total pay would is used an important point is always made; In no case will the vacation pay be lower than the basic wage. A third trend is also apparent. It involves a compromise between more time off and more pay. Employees with long service (usually varying between five and twenty years) receive additional vacation pay with no increase in the length of time off. While new in nature, it appears to foe dynamic and designed as an incentive to longer service. The vacation fringe benefit is dynamic and there are three distinguishable trends: (1 ) longer length of time off, (2) increased use of formula for the computation of vacation pay, and (3) increased use of the extra week ' of vacation pay with no increase in time off. Each should : prove to be an alternate plan for demands during periods I i ! of collective bargaining in the years to come. i Holidays. Holidays have the longest history of all fringe benefits. Dating from before the Industrial Revolution, they have evolved from a large number of religious holy days to the three or four generally allowed during the 1920’s. With the advent of the Industrial Revolution and mechanization of industry, individual days be increased by $> 15>00 and his vacation pay would be $130 per week ($65>OOx2$>). u- 137 : gave way to an accumulated period of days at the end of the year or at Easter time. This accumulated period of days became known as vacations. Through collective bargaining other days were con sidered as holidays and time off with pay was granted. Today there are six popular holidays: New Year's Day, Memorial Day, July lj.th, Labor Day, Thanksgiving, and Christmas. There is currently a trend toward the grant ing of a seventh. However, the seventh day trend is in two different directions: (1 ) the granting of a four-day holiday weekend and (2) the granting of either Washing ton's Birthday or Veteran's Day (November 11). A four-day holiday weekend is preferred to a seventh day by itself, by most employers. Their thoughts on this matter are easily understood. If Christmas should fall on a Tuesday, for example, there would be little if any productive output on Monday* If the addi tional day was granted there would therefore be a small addition to labor costs and there would also be an antici pated boost in the morale of the employees. It must be borne in mind that many employers allow their employees to take the additional day off and "make it up" on either the Saturday before or after. This is erroneously labled a fringe. In reality it is not. Only pay for time not worked (and not made up) can qualify. 138 In the future the number of days not worked will increase through collective bargaining. The four-day holiday weekend is more dynamic than the seventh in dependent day. While relatively new, since 1 9 5 2, it has spread rapidly and should continue to do so in the years to come. There appears to be no dynamic trend in vacation pay; although, in many cases, as in the construction industries, holiday time off is granted without pay. Holiday pay is based upon the basic wage of the employee. In some firms a formula is used to determine holiday pay. This is an advantage in cases where the employees have over-time payments. However, these few firms do not indicate that there is a dynamic trend in the increased use of the formula plan. i i P Sick Leave. The extent of sick leave, payment for time not worked while home or in a hospital due to ill ness, is difficult to observe due to the absence of any wide-spread standard practices. The Federal Government during the latter half of the nineteenth century was the originator of the so-many-days-per-year plan. Probably dating from the first use of the salaried pay plan, employees have been granted time off with pay on an as- required basis. Both plans are currently in wide-spread use today. Because employers are encouraging ill employees to remain at home, an increasing trend in the granting of a | I specified number of days per year for the industrial | l worker is apparent. Further a trend is noticed favoring j i 1 this plan in new firms. i i There is a greater degree of abuse in the time-off- j as-required plan, and the control over the granting of payj is with the employee's supervisor. Abuse is noticed in | the employee’s personal attitude and his departure from j i work for reason other than illness. j I Control of the specified-number-of-days plan re- ! i mains with the payroll department. HVhen the number of | allotted days are used up there are no more. Abuse of j this type of plan only hurts the employee, for if he uses up the time allotted for reasons other than illness, he will have to take off on his own time if he does get ill. I The practice of allowing sick leave to accumulate works to the advantage of management from a scheduling standpoint. This one reason alone is justification for the continued trend in favor of the specified-number-of- I days plan. In case of a serious accident or illness, j however, this plan works to the disadvantage of the em ployee. Most welfare plans stipulate a waiting period and the specified-number-of-days plan is usually provided as l ij . 0 an interim support system of payments* The other use, of course, is to pay for short periods, one or two days, of illness. H The pay for sick leave has remained stagnant | j through the years and there is no indication of either an j I increasing or decreasing trend in the amount paid. The | pay is based upon the basic wage or minimum pay in indus- | tries on a piece-work basis. | Other Mon-Work Benefits. Prom earliest history menj l j have insisted that they aid one another and give of their ! time and possessions for the good of the community. In ! j our nation community aid extends to military service and i such civic duties as serving on juries, aiding justice by being willing witnesses, and casting a ballot at election time. However, today, the idea of sacrifice no I I i longer prevails and the worker insists upon receiving his I regular pay while performing his civic duties. I ^~j This has given rise to a new type of fringe: The i differential pay fringe benefit. Prior to the end of ! World War II the non-work reasons discussed here resulted in an excused absence from work with no pay. As a fringe, differential pay is granted and the employee is not con sidered as being absent for purposes of determining or calculating the other fringe benefits. With the backing of the Federal Government, any r u Ikl contractor providing services and goods must allow differ ential pay and two weeks time other than vacations for employees who are members of a reserve component of the military. This fringe while apparently dynamic is g actually quasi-stagnant; the current trend indicates that for the immediate future, only government contractors will permit such plans. Non-governmental contractors usually expect their employees to use their vacations for the summer training programs, or else request an unpaid leave of absence. r The differential pay for jury duty is primarily labor developed. In the past salaried workers were ! generally granted the one or two days required. However, j the hourly worker never received such pay. At the in- ! j sistence of labor, that they were poorly represented on i ; juries, the move was started to give the working man a i q greater incentive to do his duty. Currently, negotiations j are including discussions about this fringe. Since the ; early 195>0’s an increasing trend is apparent. Due to the 3 j relative low cost it would appear that this fringe will be recognized and used by management as a counter-offer to demands made by labor at collective bargaining sessions. ^We shall use this term in the sense that for the most part it is "as if" stagnant. The fact that there is some use does not mean.that it is dynamic. n i » « * V Witness duty is or should be considered in the same manner as jury duty. It will be noticed that allowances granted to witnesses will only be given when jury duty pay is granted. Otherwise the allowances will not appear by themselves In agreements. The voting allowance paid by employers, which started in 19^8 > is primarily legislative sponsored. Currently many states require that employers release employees on election day, if there Is a liklihood that they might not have a minimum specified number of hours between the opening or closing of the polls and the beginning or end of the work period. The time allowance ! is also subject to adjustment if the distance from the ! place of business to the polling place is excessive. This 6 j is a dynamic trend with the responsibility primarily upon i ! the states to initiate such action. j J This fringe should not be used as a weapon at j collective bargaining sessions or left to the discretion of employers. If employers could grant time off at their discretion, they could influence the vote by not allowing the time off when it would be apparent that the general feelings of the employees would be contrary to manage ment ’ s views. This must be the responsibility of the state. See the following paragraph. 114- 3 Profit Sharing Due to the inherent rights of economists to dis agree, profit sharing benefits as fringes are considered I to be: (1) costs of production and (2) not a cost in pro- j duction. Prom a tax standpoint the latter is true. Cor- : i poration taxes are paid on the net profits before the j profits are distributed. Therefore, the share of profits given to the employees is taxed like other profits. Since costs of production are deducted from gross revenue before the levying of the corporation tax, any funds paid out after determination of the corporation tax cannot con ceivably be a cost. Prom a distribution standpoint, employees have a claim on the corporation for money wages due, which is prior to the stockholdersf claim for profits or dividends. I J Therefore, profit sharing not considered as a cost of production is again proved by an interpretation which depends on the legal approach. The profit-sharing J principle allows participation only if there are profits I available and if there are sufficient dividends to dis tribute to the stockholders. Profit sharing plans have ; i : been dynamic during periods of dynamic economic activity. | | There has also been a much accelerated decline in periods of contraction, or during depressions. Currently, the / trend appears to be stagnant or possibly a decline in ilj4 growth. Organized labor, at least the union leader or organizer, does not like profit-sharing plans. All plans are company-initiated and tend to attract the worker away j ! from union activity. | i As unionization spreads in the coming years profit-j sharing plans will likely be replaced by other fringe i benefits. This will be accomplished by collective bar gaining. However, there might not be the wholesale abandonment of such plans. To explain this let us look at the effect of "hind-pocket snitching." The psychological effect of cancelling out a profit sharing plan and then blaming the union might hurt the employer; resulting in disgruntled workers and possibly many terminations of employment. In addition bad rela tions with the union may result. The psychological effect of increasing wages or other fringes without doing away with a profit sharing plan might Increase the prestige of the union and might satisfy the workers; yet not result in an increased cost to the employer. Remember what we said previously? Profits are shared with employees only if there are any, and are determined by deducting all costs of production and dividends to stockholders first. If there Is any increase in wages or other fringes the costs of pro duction will go up with the result that the profits to be j ikB j distributed will go down. Therefore, the employer pays j the same either way, the employee receives the same either way. This is the ”hind-pocket snitching'1 effect: taking funds from future distribution and distributing them currently. j While the plan will possibly remain, the chances ofj I I , eyer paying out profits will diminish, because the union | will demand that labor’s share be distributed currently. ! Therefore, profit sharing' plans (at least in the union- ■ ized industries) will show a declining trend. Educational Benefits I ' ; Training of employees at one time was limited to i j the equipment with which they worked. Furthermore, all I i such training was accomplished during the normal working i hours. Executive and key-personnel training extended into the plants of vendors (suppliers) and users (customers). i n it was, however, not until World War II that employers j subsidized employees for after-hours instruction in t j colleges, universities, and trade schools. i ! Employers have initiated various plans ranging | from partial reimbursement to full payment in advance. { The methods of payment vary as much as the number of j different plans in effect. However, the newer plans ! indicate that the trend is for partial or complete tuition reimbursement up to a specified maximum number 1^.6 of hours. H The earliest plans were developed to increase the abilities and knowledge of the employees on either their current or anticipated future positions. Therefore, strict limitations were placed on the type of courses I covered. However, the trend now is for the attainment of ( any degree, as well as knowledge. If a degree is the I objective of the employee, regardless of the major, all ! required courses are reimburseable. i i Because of the reimbursement programs, graduate I courses leading to advanced degrees are especially attrac tive to employees already graduated with Bachelors or 1 Masters degrees. Because of this fringe benefit, many | ' companies with educational benefits are able to attract and hold many key personnel. American industry will probably be responsible for 1 the degree attainment of many employees, from the shop through management. Internal promotions will likely result for employees with broad technical and educational background s. r There is a dynamic trend in providing educational benefits and there is every reason to believe that more employees in the future will be eligible. Industry today and in the future is and will be vitally concerned over the amount of education and the number of college c L r L Ikl graduates who will be available for employment. Industry has been subsidizing universities for years and is , under the educational reimbursement plans, supplementing such grants in a more selfish, self^benefitting manner. | Summary j The great increases in the basic straight-time ■ wage of the American worker in the last few years are only | a small measure of the progress of labor or of the | additional costs of production. Increased fringe benefitsj i j ! have been offered and taken either alternately or con- j i currently with wage increases. i i Many contracts for 195? and 1958 will contain pro- j ] ! j visions for another paid holiday each year. By 1958, i seven paid holidays per year will be as common as six are i i now. ; Numerous contracts during the same period will have i provisions requiring employers to pay the full cost of j 1 pension and insurance plans. By i960 dependents might i j very well be covered free of cost to the employee. An additional week of vacation with reductions in length-of-service-requirements will become predominant during contract negotiations. By 1958 it is likely that the three week vacation will be as popular as the two week vacation was in I9I 4. 8. As the output per man hour of work increases, as it has in the last fifteen years, there is every indica tion that employers will be more willing to concede to union fringe benefit demands. At the same time, employers will be unlikely to raise prices as sharply as they did prior to 1952. Unions today keep a closer look at cor porate profits and at the first sign of an increase, devise ways and means for appropriating them for the worker. The trend is dynamic for the entire group of benefits which are subject to collective bargaining. There is likely to be a lessening effect of lobby ing at either the state or Federal level for increased benefits other than for normal increases due to cost of living adjustments. On the whole legally required bene fits will tend to remain stagnant in the years to come. Of all the fringe benefits, only one has a tendency I to have a declining trend. Profit sharing plans are dis- ! liked by organized labor. Therefore, as unionization takes a stronger hold in unorganized industries or firms, profit sharing plans will b e replaced by more positive and direct fringe benefits. Conclusions Fringe benefits are here to stay and will continue , to increase as a cost item for employers. However, ^ fringe benefit increases will be compensated for by a J lack of increases in the employee's direct wage. The fringe benefits will greatly increase the employee’s sense, actually or mentally, of security both from an income and savings standpoint. In the future vast strides In fringe benefits will be made In directions incon ceivable at this time. However, no matter in what area, | organized labor will be the prime-mover, even if the benefits are eventually given as a matter of routine policy by employers. All benefits which have been given, are given, or will be given will fall in either of two categories: (1) income security or (2) savings security. Income security is the continuation, or maintenance without loss, of all or a portion of the currently earned wage. Savings I security is the prevention of loss of savings accumulated by the employee over the years from his wages. , The ultimate in income security, which is yet to r ! be seen anywhere for the industrial worker, is a guaran- i teed annual wage for a specified number of days per year. 1 Such a plan would allow automatically for vacations and holidays. If illness or layoff should result, there would continue to be an income for the employee, i The ultimate in savings-security is an insurance j plan which will pay at least eighty to ninety per cent ! (a deductible plan requiring partial contribution seems I reasonable) of all costs involved in personal tragedy. 150 Personal tragedy will include employee and dependent coverage for all personal injury, health, accident and death. In the next twenty-five years savings security as defined will probably be in wide-spread use. However, income security might not be prevalent for even fifty or unore years to come. BIBLIOGRAPHY BIBLIOGRAPHY A. 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New York: The Ronald Press Company, 1927* National Research Council. Fatigue of Workers. New York: Reinhold Publishing Corporation, 19^1"• : The New Salary Freezing Regulations. New York: Prentice- j Hall, Inc., 1952. 1 1 Personnel, Policies and Practices. New York: Prentice- 1 ; Hall, Inc., 1953- j ! I | Phelps, Orme W. Introduction to Labor Economics. New | York: McGraw-Hill Book Company, Inc., 1955• 1 1 Schneider, Margaret. More Security For Old Age. New York: | Twentieth Century Fund, Inc., 1937« | School of Law. Unemployment Compensation. Durham, N.C.: j Duke University Press, 193&« ! Selekman, Benjamin M., et al. Problems in Labor Relations. ! New York: McGraw-Hill Book Company, Inc., 1950. I Shister, Joseph (ed.) Readings in Labor Economics and Industrial Relations. New York: J. B. Lippincott Company, 1956. | Stewart, Bryce M., and Walter J. Couper. Profit Sharing and Stock Owner ship for Wage Earners and Executives. New York: J. J. Little and Ives Company, 194°• 1 Students Labor Law Service. New York: Prentice-Hall, Inc.. 1948, revised through 1954* 15U- Successful Employee Benefit Plans* New York: Prentice- Hall, Inc., 19^2. Sufrin, Sidney C., and Robert C. Sedgwick. Labor Economics and Problems at Mid-Gentury. New York: Alfred A. Knopf, Inc., 1956. Taft, Philip. Economics and Problems of Labor. New York: Stackpole and Heck, Inc., I9I 4- 8. Taylor, Albion G. Labor Problems and Labor Law. New York: Prentice-Hall, Inc., 1950. Tyler, Poyntz (ed. ). Social Welfare in the United States. New York: H. W. Wilson Co., 1955. Unterberger, L. Herbert. Guaranteed Wage and Supple mentary Unemp1oyment Pay Plans. Chicago: Commerce Clearing House, Inc., 1956"! Werne, Benjamin. The Law of Labor Relations. New York: The Macmillan Co., 1955T White, R. Clyde. Administration Unemployment Compensa tion, A Comparison and Critique. Chicago: University of Chicago Press, 1939* Yoder, Dale. Manpower Economics and Labor Problems. New York: McGraw-Hill Book Company, Inc~ 1950. B. PUBLICATIONS OP THE GOVERNMENT, LEARNED SOCIETIES, AND OTHER ORGANIZATIONS Bureau of Labor Statistics, United States Department of Labor. Occupational Wage Survey: Los Angeles, Cali fornia, March 1955. Bulletin Number 1172-12. Washington: Government Printing Office, May 1955* Disability Insurance Provisions. Sacramento: State loiiity insurance rrovi Printing Office, 1955. Economic Report of the President. Transmitted to the Congress January 23, 1957. Washington: Government Printing Office, 1957. Emmet, Boris. Profit Sharing: in the United States. Washington: Government Printing Office, 1917. ! Employee Benefit Plans, Nation-Wide Survey, Twelve Metro politan Areas. Publication No. 6 9. New York; Research Council for Economic Security, May, 1950. Financial Incentives. New York: National Industrial Con ference Board, 1935. I Firestone Tire and Rubber Company. Non-Contributory ! Pension Plan and Contributory Retirement Income Plan for Salaried Employees. Newark, N. J.: Prudential Press, 195 5. Fringe Benefits, 1953. Washington: United States Chamber oF Commerce, 195h- . Profit Sharing. New York: National Industrial Conference Board, Inc., 1931-1-. Profit Sharing Manual. Columbus, Ohio: Council of Profit Sharing Industries, 191-1-8. Retirement Plan. Culver City: Hughes Aircraft Co., 1951. : United States Department of Labor, Bureau of Labor Standards. Supplement to Bulletin No. l6l. Washington: Government Printing Office, November, I 1955. 1 i i Your Hughes Group Insurance Program. Culver City: Hughes ! Aircraft Company, 1958. C. PERIODICALS "Labor's Latest Fringe Benefit," U.S. News and World Report, November 23, 1958, p. 1I 4S. I "Ten Amazing Years,” U.S. News and World Report, | February 1, 1957, PP* 26-29. I "Time Out For Coffee - A new 'Fringe Benefit’,” U.S. News and World Report, January 18, 1957, PP« 61-6 3. "Who's Making the Big Money,” U.S. News and World Report, August 31, 1958, pp. 111-113. 156 D. ENCYCLOPEDIA ARTICLES "Unemployment Insurance,” Encyclopaedia Brltannlca (1 95 6 ed. ), v. 2 2, pp. 693-6 9 9. E. COLLECTIVE BARGAINING AGREEMENTS Aluminum Company of America and UAW Local 8 0 8, CIO. Agreement and Working Rules. September 27* 1951+. Aluminum Company of America and UAW Local II8 9, CIO. Agreement and Working Rules. September 27* 195)+. Challenge Manufacturing Company and Industrial Welder*s Guild, Local 51+. Agreement. February 29* 1956. Chrysler Corporation and UAW Locals 3, et al., CIO. Agreement. Amended through December 11, 1950. Crest Pacific Company and United Furniture Workers of America, Local 576, CIO. I9^5-1946 Agreement. September 12, 1945. _______ . 1950 Agreement. August 31* 191+9* and Local 1010. 1950-1953 Agreement. October 19* T9F0. . 195^ Agreement. November 10, 195)+. . 1957 Agreement. February 26, 1957. Federal Pacific Electric Company and International Brotherhood of Electrical Workers Local 1710, AFL-CI0. Agreement. November 1, 1956. Firestone Tire and Rubber Company and United Rubber, Cork, Linoleum and Plastic Workers of America, Local 100, CIO. Agreement. September )+, 1951+. Fruehauf Trailer Company and UAW Local 8ll, AFL-CI0. 1951 Agreement. March 12, 1951. . 1956 Agreement. March 1, 1956. Hughes Aircraft Company and Aircraft Industry Workers Local 1553> AFL. Agreement. Revised through February 20, 1952. _. Agreement. Revised through February 3, 1953. _. Agreement. November 9> 1953* National Elevator Manufacturing Industry, Inc., and International Union of Elevator Constructors. Standard Agreement. October 19, 1951* Technibilt Corporation and UAW Local 99^* AFL. Agreement. November I j . , 1955. APPENDIX 159 TABLE I FRINGE PAYMENTS BY TYPE OF PAYMENT, 1953 Type of Payment Total all companies Total all manu facturing Total non-manu facturing Legally required 3.2 3.4 2.8 ...... O.A.S.I. 1.3 1.3 1.3 Unemployment Comp. 1.1 1.2 1.0 Workmen's Comp. 0.7 0.9 0.4 Other taxes 0.1 - - 0.1 Agreed-upon payments 5.9 4.5 8.3 Pension plan premiums 3.8 2.6 5.8 Medioal plan premiums 1.8 1.8 1.8 Termination pay - - - - Miscellaneous 0.3 0.1 0.7 On-the-job non-work pay 2.0 2.1 1.8 Ihyments for time not worked 6.2 5.4 7.6 Vacation pay 3.3 3.2 3.6 Holiday pay 2.1 1.9 2.4 Ihid sick leave 0.6 0.2 1.2 Others 0.2 0.1 0.4 Profit-sharing and others 1.9 1.4 2.9 Total as cents per payroll hour 34.6 31.5 40.0 Total as dollars per year per employee 720 667 809 Total as per cent of payroll 19.2 16.8 23.4 Number of companies 940 594 346 - - Less than .05% Souroe: Fringe Benefits, 1953 1954), p. 10. (Washingtons U.S. Chamber of Commerce, I TABLE II COMBRISON OF 1947, ,1949, 1951 and 1953 FRINGE FOR 130 IDENTICAL COMPANIES PAYMENTS Type of Payment 1947 1949 1951 1953 1. As per cent of payroll, total 15.2 16.9 19.1 20.2 a* Legally required payments 3.0 2.8 3.2 2.9 b. Agreed upon payments 4.4 5.2 5.6 6.6 c. On-the-job non-work pay 1.6 1.8 2.0 2.2 d. Payments for time not worked 5.0 5.9 6.8 7.1 e. Profit-sharing and others 1.2 1.2 1.5 1.4 2. As cents per payroll hour 20.7 26.0 33.0 38.2 3. As dollars per year per employee 422 525 684 817 4. Humber of companies 130 130 130 130 1 ! I ;Sources Fringe Benefits, 1953 (Washingtons U.S.Chamber of Commerce, 1954;, p. 25. APPENDIX B 162 TABLE III CALCULATION OP PENSION PAY FOR NON-CONTRIBUTING EMPLOYEES OF THE FIRESTONE TIRE AND RUBBER COMPANY The amount paid annually will equal five-eights of one per oent of the first $3600. of the annual earnings of the employee his years of credited service. (5/8%) idur ing Range of Earnings t #3700.00 1926 #7800.00 1956 #3600.00 30 years credited service average annual income to be credited $ 22.50 Average annual amount to be paid for each year of credited service (5/8% of #3600.). $ 675.00 Annual pension ($22.50 times 30 years). __ ________ 163 I i i TAB IE IV | CALCULATION OF PENSION PAY FOR CONTRIBUTING EMPLOYEES OF THE FIRESTONE TIRE AND RUBBER COMPANY | The annual amount of retirement pay will equal 37^ of the 'employee's contributions plus the portion he is entitled to under |the non-contributing plan. i Range of earnings: #3700.00 1926 #7800.00 1956 #5700.00 Average Annual Earnings #171,000.00 Total earnings for 30 years #108,000.00 Portion of total earnings on which no contribu tions were made (#3600. times 30 years) f 63,000.00 Portion of total earnings on which contributions were made (all over #3600. per year) # 3150.00 Total contributions (5% of all income over #3600. per year) # 1155.50 Annual amount of retirement income due from the contributory plan (57% of total contributions) # 675.00 Annual amount of retirement income due from the non-contributory plan (see Table III) # 1830.50 Total annual retirement pay for contributory employee 164 TABUS Y CALCULATION OF PENSION PAY FOR THE EMPLOYEES OF HUGHES AIRCRAFT COMPANY The annual amount of retirement income will equal one-half of the total contributions made by the employee #3700.00 #7800.00 #5700.00 #3600.00 # 2100.00 # 72.00 # 84.00 # 156.00 # 78.00 #2340.00 Range cf earnings: 1926 1956 Average Annual Earnings Portion of earnings on whioh 2% contributions are made. Portion of earnings on which are made. contributions Average contributions at 2% annually Average contributions at 4% Total average annual contributions One-half of the average annual contributions Annual amount of retirement income (30 years times #78.00) APPENDIX G TABLE VI BENEFITS OF THE HUGHES GROUP INSURANCE PROGRAM Employees * Base rate of weekly pay Life insuranoe Accidental death, and d i smamberment Less than #80.00 #80.00 less than #100.00 #100.00 less than #125.00 # 4000.00 5000.00 6000.00 # 4000.00 5000.00 6000.00 #125.00 less than #150.00 7500.00 7500.00 #150.00 and over 10, 000.00 10,000.00 The weekly cost is paid by the employer, except for the 1$ wage tax on the first #5600.00 earned during a calendar year for Unemployment Compensation Disability benefits. The non-occupational disability benefits are paid up to #40. per week for 26 weeks. The maximum daily hospital benefit is #16. per day for 70 days. Maternity benefits equal #100. The maximum extra charges are #300. The maximum reimbursement for surgical expenses is #350. The maximum additional accident benefit is #300. The maximum Polio and major medical expenses are #5000. each. For dependents the weekly cost is #1.86. There are no life insurance, accidental death and dismemberment, non-occupational disability, nor major medical expense provisions provided. All other provisions are the same as for employees, except: (l) maximum daily hospital benefit is #12.50 per day for 31 days. (2) the maximum for extra charges is #300 plus 75$ of the next #700. Source: Your Hughes Group Insurance Program (Culver City: Hughes Aircraft Company, 1956), pp. 4,5^ APPENDIX D 168 TABLE VII AN EXAMPLE OF THE MAJOR MEDICAL PLAN OF HUGHES AIRCRAFT COMPANY An employee has a heart attack, requiring major surgery and a long period of hospitalization and convalescence. Total Expense Ihid by Basic Plan Excess Expense Hospital room & board 200 days at #18. Extra charges $ 3600. 750. # 1120. 300. # 2480. 450. Total hospital # 4350. $ 1420. # 2930. Surgery 750. 350. 400. Private nurse 1200. 1200. Prescriptions, drugs, laboratory tests, etc., outside hospital 350. 350. Total # 6650. # 1770. # 4880. ,Calculation of Major Medical Benefit 1 1 f 6550* Total expense J 1770. Paid by Basic Plan | | 4880. Balance ! 100* Deductible # , 4780. # 1056. Raid by employee (80$ of #4780. plus #100.) # 5594* Ibid by Basic and Major Medical Insurance Sources Your Hughes Group Insurance Program (Culver Citys Hughes Aircraft' Company, 1956), p. 17 AFPEEDIX E 170 TABLE VIII TIME IN SERVICE REQUIREMENTS FOR TERMINATION PAY Term of Employment Amount of payment Less than 6 months none 6 months but less than 1 year 1 weeks * pay 1 year but less than 2 years 2 weeks * pay 2 years but less than 3 years 3 weeks• pay 3 years but less than 4 years 4 weeks» pay 4 years but less than 5 years 5 weeks * pay 5 years but less than 6 years 6 weeks * pay 6 years but less than 7 years 8 weeks' pay 7 years but less than 8 years 10 weeks * pay 8 years but less than 9 years 12 weeks’ pay 9 years but less than 10 years 14 weeks* pay 10 years but less than 11 years 16 w&eks’ pay 11 years but less than 12 years 19 weeks' pay 12 years but less than 13 years 22 weeks' pay 13 years but less than 14 years 25 weeks' pay 14 years but less than 15 years 28 weeks' pay I Longer than above specified: I ! For a term of employment in excess of that specified for payment of 28 weeks' pay, 28 weeks' pay plus 4 weeks* pay for each year of fraction thereof such excess* i Source: Pearce Davis and Gerald Matchett, Modern labor Economics I (New York: The Ronald Press Company, 1954), p. 161. I U n iversity < rf Southern C zd ifo m tii

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Creator Gideon, Lester P. (author)

Core Title Fringe benefits: History and economic analysis

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Garis, Roy L. (committee chair), Campbell, Robert W. (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-446015

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