Wages, fringe benefits and worker turnover

Linked employer–employee data from Norway are utilised to study how employers use wages and fringe benefits in managing their workforce. The analysis shows that on average across all establishments, we observe a positive correlation between wages and fringe benefits. This indicates the presence of labour market frictions and thus is not supportive of the classical frictionless hedonic wage model. Higher wages and more fringe benefits reduce the worker turnover rate. Fringe benefits have stronger negative impact on the excess worker turnover rate than indicated by the reported monetary value.