Employer-Sponsored Benefits: Can Policy Keep Up With the Shifting Landscape?

On June 30, The Pew Charitable Trusts hosted an event highlighting the state of employer-sponsored benefits and the impact on firms and workers of changes in the benefits landscape. The discussion brought together a diverse set of speakers who focused on the role of research, policy, advocacy, and philanthropy in understanding the evolving nature of work, and four themes emerged from the conversation, as detailed below.

Employers offer a range of benefits, and employees see the value

In his keynote address, Clinton Key, a research officer with Pew, provided an overview of benefit offerings in today’s private sector labor force and highlighted the variation in worker access to and employer costs for those benefits. For example, private sector jobs are more likely to offer defined contribution retirement plans, including 401(k)s, than defined benefit plans, such as pensions. However, Pew research indicates that employers offering the same type of benefit may pay different rates. This cost variation is driven by the quality of the benefit provided, the size and type of employer, and the nature of the job each worker holds. As a result of such cost disparities, employers may offer the same benefit, but the value to each employee can differ significantly.

Although the share of jobs that provide a given benefit varies, almost all workers have access to at least some benefits: Nearly 8 in 10 jobs offer supplemental pay for overtime work, which is mandatory for some classes of employees, but only about 1 in 10 offers extra pay as a benefit for working specific shifts, such as at night. Similarly, large segments of the labor force have access to paid time off for holidays and vacations, but paid sick leave is rarer.

Respondents to Pew’s Survey of American Family Finances clearly indicated that employer-provided benefits matter to their families. An overwhelming 98 percent of those with health insurance through their jobs described it as important to their households’ financial security, and rates for retirement plans and paid leave were similar. In addition, most workers prefer benefits over an equivalent cash payment, which further demonstrates that workers not only value their benefits but also view them as contributing differently to household financial well-being than their paychecks do.

Benefits matter for families’ financial security

The first panel—which included Janet Boguslaw, Brandeis University; Matthew Rae, the Kaiser Family Foundation; and John Hart, Opportunity Lives and was moderated by Jonnelle Marte, The Washington Post—explored employer-sponsored benefits from the employee perspective. Throughout the day, panelists noted that benefits can help families absorb financial shocks and manage insecurity. Rae indicated that employees at companies of all sizes want access to employer-sponsored health insurance, and Boguslaw argued more broadly that employees need a variety of benefits to help them better manage income volatility and unexpected expenses and build short- and long-term financial stability.

Although the panelists agreed on the importance of benefits generally, they also acknowledged that the public and private sectors must work together to ensure that workers have access to benefits that increase family financial security. Hart pointed to the need to foster peer learning and share promising practices among employers as a means of cultivating new strategies for meeting worker needs.

Providing benefits helps employers attract, invest in, and retain workers

The second conversation of the day featured Holly Wade, National Federation of Independent Business; James Klein, American Benefits Council; and Erik Rettig, Small Business Majority and was moderated by Kimberly Adams, Marketplace. This panel focused on the comparative experiences of small and large employers in offering benefits. Klein indicated that many businesses, particularly large employers, are starting to design benefits packages that include not only traditional offerings but also options such as long-term care insurance. Building on Klein’s comments, Rettig and others suggested that employers often value benefits as a way to more holistically invest in their employees’ well-being and gain a competitive advantage in the labor market.

Wade and Klein noted that small and large employers often have different needs and purchasing powers, and uncertainty about staffing, profits, and regulations can present even greater challenges than the cost of benefits themselves to planning for and providing total compensation packages that comprise wages plus benefits. For example, Wade mentioned that many small employers don’t survive their first few years of operation and that the need to focus on staying in business in the short-term can make it difficult for them to think about offering longer-term benefits. Further, she and Klein reinforced the need for federal and state governments to create regulations that give businesses the flexibility to determine which benefit offerings best help them remain competitive in their sectors and the labor market. Financial security doesn’t look the same for every worker, and businesses need and want to be able to direct benefit dollars toward the items employees value most.

The employer-employee relationship continues to change

The third and final panel, which I moderated, included Arne Kalleberg, University of North Carolina at Chapel Hill; Angela Rachidi, American Enterprise Institute; Richard Luss, Willis Towers Watson; and Aditi Vaidya, Solidago Foundation and See Forward Fund. We discussed the future of employer benefits, building on many of the ideas expressed throughout the day. Changes in the workforce and economy over the past several decades have been drivers of the evolving relationship between firms and workers and altered the environment in which employees, businesses, and governments operate. Among the most significant factors are:

• The emergence of a more mobile workforce. Rachidi highlighted the need for a regulatory framework that provides employers with flexibility while ensuring that the most vulnerable workers in the new, more fluid labor market have access to benefits and services.
• The impact of globalization, technological change, and the decline of unions on the shifting of benefit costs and risks from employers to employees. This trend includes, for instance, the movement away from defined benefit retirement savings plans and toward defined contribution plans and the increased provision of high-deductible health care coverage. Kalleberg mentioned the need to find new approaches for government to protect employees facing financial stress created by less generous benefits. He identified the Freelancers Union as an organization that helps independent workers manage shifts in total compensation through collective access to benefits, development opportunities, and a peer network.
• The emergence of a more diverse workforce and set of employers. Although many experts suggest that the growing independent, contingent workforce has an increasingly tenuous connection to traditional employers, Vaidya and Luss pointed out that direct relationships with employers continue to be the norm for most American workers. Over the last generation, larger numbers of women and people of color, among other underrepresented groups, have entered and remained in the workforce, and Vaidya mentioned the importance of ensuring that total compensation packages and benefit policies reflect the needs of all workers.

Throughout the day and across many conversations, panelists reiterated that employer benefits are an integral piece of families’ financial security, and they emphasized the need for more data on employer practices, employee needs, and the size and scope of the changes occurring in the American workforce and economy.

At several points during the event, the panelists posed an intriguing question: Can firms, workers, and the government create and contribute to policies that keep pace with the changing labor market and employer-employee relationship? They indicated that to succeed in that effort, the stakeholders would need to establish a safety net for those who need one, support those finding new opportunities through technology, and ensure that businesses remain competitive in a rapidly changing economy.

Sarah Sattelmeyer is an officer with Pew’s financial security and mobility project.