Working Paper Series,
Trade Union Institute for Economic Research

Abstract: Most labour market analyses take money wages as the sole measure of compensation for labour, thus excluding fringe benefits. We examine an extended compensation measure by incorporating mandatory collective earnings-related insurance rights: the rights of individual old age pension, sickness benefit insurance and survivors’ pension. We estimate the return on investment in human capital and the gender earnings gap in a traditional earnings equation. The money wage and the extended wage are used as dependent variables in joint regressions, where a SUR framework enables proper joint cross-equation tests. The main finding is that the inclusion of earnings-related insurance rights does affect the return on education. When these non-wage benefits are included, the gender wage gap decreases by 21 per cent. However, the gender differences in returns to education are severely underestimated when money wage is used as a compensation measure.

Keywords: Non-wage benefits; Gender gap; Human capital; Occupational welfare

JEL-codes: H55; J16; J26; J32; J33; M52

21 pages, October 7, 2002

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