Fringe benefits and import competition

In the United States benefits are now more than 30% of compensation. While many studies have focused on the impact of trade with developing countries on U.S. wages, not much attention has been given to the impact of trade on other components of compensation. I show that if the share of benefits in compensation is not constant, the studies which focus on wages and ignore fringe benefits likely give us biased estimates of the effect of trade on workers’ total compensation and consumption. I use data about employment- sponsored health insurance (EHI) and employment-sponsored retirement plans (ERP) from the National Longitudinal Survey of Youth 1979 (NLSY79). I focus on workers who worked in manufacturing in 1991 and I follow them up to 2006. I then combine this individual level dataset with a measure of Chinese import penetration at the industry level and with an instrument for it, as in Autor, Dorn, Hanson and Song (QJE 2014). I study how EHI coverage and participation in an ERP are affected by Chinese imports competition. For both health-insurance and retirement benefits, I find that trade with China is associated with an increase in the number of years between 1992-2006 that a worker receives these benefits through her employer. This effect is robust to the inclusion of several individual and industry level control variables. Previous studies find a negative effect of trade with China on U.S. workers’ wages. Instead my results suggest that, when benefits are taken into account, the effect of trade with China on U.S. workers’ total compensation is not necessarily negative and may even be positive overall.