Economics Seminar: The Response of Wages to Mandated Benefits

Event Date: 16 October 2024

Speaker: Daniel Schaefer, University of Linz

Title: The Response of Wages to Mandated Benefits: Evidence from Automatic Pension Enrollment

Abstract:

We examine who bears the costs of mandated workplace pension programs, exploiting the quasi-experimental rollout of automatic enrollment in the UK. Total compensation (take-home pay plus employer contributions) increases, driven by employer contributions, while the amount of take-home pay decreases. The implied aggregate pass-through of employer contributions to employees is 50%. These effects differ by employer size, with take-home pay declining to an extent in the largest firms that we can rule out a pass-through to employees of more than 47%, significantly less than in smaller firms. Our findings provide the first evidence that employers shift the cost of mandated automatic enrollment onto employees.

Published: 7 November 2024