Work-Family Benefits: Which Ones Maximize Profits? [*].(Brief Article)

The results also show that all forms of alternative scheduling do not have the same effect on profits. For example, firms enjoy a significant positive benefit if more employees work from home, and yet increased job sharing has a significant negative impact on profits. The difference between the two is, in fact, fairly dramatic and indicates that whereas the firm should expand one form of scheduling to maximize profits, it should scale back the other. Other forms of alternative schedules, such as flex-time, compressed workweeks and part-time work, have no significant impact on the firm's profits. Similarly, while an increase in adoption benefits raises the profit rate of the firm, subsidizing more dependents in onsite child care actually reduces the company's profits, indicating that the costs of this benefit cannot be justified in terms of potential productivity gains, at least as measured here.

The results of this study are significant since they indicate that although addressing the needs of today's work force through the implementation of work-family programs can be profitable for firms, some programs are more beneficial than others, and some actually lead to losses. A firm therefore needs to have more information on the magnitude and direction of the impact of these programs on its profits. This information is crucial not only for choosing the particular benefits it wishes to offer, but also for deciding the degree to which each benefit should be made available or its use be encouraged. Even though further research is needed, our study points to certain programs which managers might find particularly attractive. For example, offering paid sick days if family members are ill increases profits just by virtue of its being offered. On the other hand, allowing employees to work at home does not have a significant impact on profits unless it is widely used. Job sharing, however, seems to reduce profit ability. Again, further research is needed to determine whether job-share programs should be avoided or whether they can be modified to mitigate their negative impact on profits.

This study has several limitations. First, we do not have a random sample of companies, but rather a sample of firms with the most extensive work-family programs in the country. Thus, though useful in analyzing the impact of such programs on a selected group of firms, clearly, our work cannot be generalized to all firms. Additionally, there may be other work-family benefits not included in the data. This opens up a rich possibility for future research should a comprehensive data set of all types of firms covering the widest possible range of benefits be available. An additional direction for future research involves further investigation of those programs found by our study to reduce profitability. Firms are likely to be interested in ascertaining whether programs such as job sharing and subsidized onsite child care could be modified to reduce their negative impact on profits. This could help management reconcile possible conflicts between the goals of increasing profits and of demonstrating greater concern for workers' welfare by means of work-family programs.

(*.) The authors are grateful to Charles Fischer and several anonymous referees for their valuable input. We are also indebted to John Leeth and Rexford Santerre for their comments and suggestions. Furthermore, we thank Satish Lalchand for excellent research assistance.

(1.) Economic theory suggests that for any firm which has a clear-cut objective, there exists an appropriate level of benefits which is consistent with its stated objectives. Hence the terms "over- and under-provide" would refer to benefit levels that are higher or lower than this theoretical optimum.

(2.) A separate theory that attempts to explain why a firm offers generous benefits is the theory of compensating wage differentials. According to this theory, a firm might offer generous benefits to offset relatively low wages, perhaps because a firm finds this cost-effective. However, Johnson and Provan (1995) do not find support for this theory in a random survey of women conducted in 1991.

(3.) There are different measures of profit in the literature, but for our purpose, based on our data, the standard profit measure we use seemed most appropriate. One alternative measure, for instance, uses cost per unit of capital, which is not recorded in accounting statements of firms. Imputing such costs has its own hazards (Scherer, 1980).

(4.) Across all medium and large private establishments in 1995, only 2% of employees were eligible for any type of flexible workplace arrangement (Bureau of Labor Statistics, 1997a), as compared to 54% of employees in the sample.

(5.) A plot of residuals against the fitted value of the dependent variable from the fixed effects regressions does not indicate the presence of heteroskedasticity, meaning that the variation in profit rates does not differ significantly by observable characteristics of the firm. The presence of heteroskedasticity would have rendered the usual tests of statistical significance, such as the t-statistic, invalid.

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