Work-Family Benefits: Which Ones Maximize Profits? [*]

Despite the growing attention given to work-family programs in the popular media (e.g., Hammonds, 1996; Lawlor, 1996; Moskowitz and Townsend, 1995), few studies have attempted to measure their financial impact on the firms which provide such benefits (see Lobel and Faught (1996) for difficulties in quantifying the effects of specific programs). This study attempts to fill the gap by determining which work-family programs have a significant effect on the profitability of the firm and measuring the magnitude of that impact. In the process, we are able to pinpoint particular benefits that our sample firms may, from the point of view of maximizing profits, be over-providing or under-providing [1] relative to their optimal level. While we follow standard economic practice and focus on profit-maximization, we are aware that for many firms, profits are not the sole motivating factor as, increasingly, organizations are becoming sensitive to the pressures facing employees endeavoring to balance family and job respons ibilities. One source of pressure on firms to introduce work-family programs came from the changing needs of a work force increasingly comprised of women with families (Hammonds, 1996). The increased participation of women in the labor force occurred not only for all women (56% in 1996 versus 51% in 1980), but was especially dramatic (a jump from 45% in 1980 to 63% in 1996) for married women with children under the age of six (U.S. Department of Commerce, 1998). Consequently, there was a substantial rise in the number of dual-earner families. For instance, in 1996, in over half of the 53 million married couples both husband and wife worked outside the home. These dual-earner families significantly outnumbered the 10.1 million "traditional" married couple families in which the husband worked for pay and the wife did not (Bureau of Labor Statistics and Bureau of the Census, 1997). These trends contribute to the fact that currently only 16 percent of full-time workers go home to a non-employed spouse (Barker, 1995). The s tress of having another full-time job waiting at home after a full day at the office has both professional and personal effects (Johnson, 1995). These stresses are likely to lower the effectiveness of workers, as indicated by numerous studies (Auerbach, 1988; Axel, 1996; Bailyn, 1993; Ferber and O'Farrell, 1991; Gonyea and Googins, 1992; Magid, 1983; Zigler and Frank, 1988). With the changing demographics of their work force, many companies began to revamp their work-family programs. Anecdotal evidence suggests that this was done in part to accommodate the needs of a work force increasingly comprised of women with families (Hammonds, 1996). For instance, the rise of dual income families made certain traditional benefits, such as family medical care, redundant. Whereas in 1993, 82 percent of full-time employees in medium and large private establishments were covered by the firms' medical care plans, by 1997 that figure dropped to 77 percent (Bureau of Labor Statistics, 1997a). Concurrently, other new benefits became increasingly relevant for employees such as the ability to take a day off to care for a sick child, a flexible schedule to attend a parent-teacher conference, extended family leave to accommodate long-term family illnesses, child-care subsidies, and onsite daycare. The net effect is that total benefits have mushroomed into a major expense for firms, comprising around 28 percent of the total cost of compensation (Bureau of Labor Statistics, 1997b). Has the expansion of programs helped worker productivity? To date, studies about work-family programs and productivity have either relied on anecdotal evidence to examine a range of programs or have used statistical analysis to look at only one specific type of work-family program. Focusing first on studies in the former category, surveys indicate that many employers have been experimenting with new or enhanced work-family benefits to increase worker productivity by reducing absenteeism and turnover (Hammonds, 1996). …