Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

تمرين 16

ANALYZING MANAGERIAL DECISIONS: Paying for Fringe Benefits at Lincoln Electric
The willingness of firms to listen to the preferences of employees suggests that employees pay for their own fringe benefits. For instance, most companies would be willing to pay higher salaries if employees did not want health insurance. Employees, therefore, face an opportunity cost of lost salary when they receive fringe benefits. Lincoln Electric, a manufacturing company in Cleveland, makes this trade-off quite clear to employees. Employees at Lincoln receive about half their compensation in the form of annual bonus payments. Fringe benefit costs are taken out of this bonus payment and are shown on the employees' pay stubs. On several occasions, Lincoln employees have voted against dental plans because the majority of employees prefer cash.
Critically evaluate the following statement:
At Lincoln Electric, workers must pay for their own fringe benefits (e.g., health insurance). The payment for these benefits is taken out of the annual bonus checks. At other firms, the firm pays for fringe benefits. Therefore, the workers at Lincoln are worse off than at other firms.