girlnextdoor

financial discussions with the girl next door

Employer-Sponsored Benefits, Part 1 November 25, 2008

Filed under: Uncategorized — girlnextdoorfinance @ 4:49 pm
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Today G.E. at 20somethingfinance posted a blog about companies cutting 401(k) matches. I felt like I was taking over the “comments” section on his post with my lengthy response, and decided that a post about my view on company benefits (on my own blog, rather than taking any more space on his!) was in order.

Many of you know I have strong leanings toward a free-market economy. I believe in letting businesses decide for themselves how best to run their companies. I believe that if consumers dislike the way the business is being run, they can frequent other businesses. Likewise, if employees dislike the way they are treated, they are free to leave and find another job. If enough people show their concern by walking away, a company will either change their ways or risk profit cuts (or going out of business!).

The concept of employer-sponsored benefits is a relatively new one, but it has become so ingrained that we forget that it hasn’t been around forever. At the beginning of WWII, the government froze wages to try and prevent inflation. Employers thus turned to other, non-wage forms of rewarding or attracting employees. This wasn’t meant to be permanent – it was simply to replace the wage increases that they would be offering employees, if the government hadn’t stepped in.* In those days, employees got to decide for themselves what to spend their money on, rather than their employers telling them what options they had for spending their compensation for employment. When it comes down to it, that is exactly what employers are doing, by telling you that you can choose to follow one of the specific plans chosen by Human Resources (for health insurance, 401(k) matching, etc.) or you can forfeit your benefits. Essentially, your payment for employment consists of a salary and benefits, and there is generally no way you can turn down the benefits you don’t want and receive a cash equivalent. With the way the system is currently set up, your employer dictates where an often significant portion of your compensation has to be spent.

I’ll post soon on how this applies to me personally.

*Click here and start reading on page 87 of this book if you’d like to learn more about the history of employer-sponsored benefits (of if you just don’t believe me and want to see a credible source).
Note: I googled the title, so words in the title will be highlighted in yellow in the book.

What are your thoughts on employer-sponsored benefits? If you could receive benefits from your employer OR receive a cash-equivalent increase in salary (that you could spent on anything you would like), which would you choose? Why?

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