Disentangling the effects of the employee benefits on employee productivity

Abstract

This study aimed to investigate the effects of employee benefits on employee productivity. There are conflicting views, positive and negative, with regard to the effect of employee benefits on employee productivity. Overall, we found that employee benefits have a positive impact on employee productivity through the embodied effect (direct effect). Specifically, according to a workplace panel survey in Korea conducted between 2005 and 2009, an increase of one unit in employee benefits leads to an increase of employee productivity by about 7.9%. In addition, we found that such effect is stronger in the manufacturing industry than in the non-manufacturing industry. Although there is no difference in the effect of benefits between large firms and small and medium-sized firms, the labor-embodied effect is stronger in large firms, and the capital-embodied effect is salient in small and medium-sized firms.