Non-wage benefits, costs of turnover and labour attachment

Evidence from Russian firms


  •  The work reported here is part of the Helsinki School of Economics project ‘Infrastructure and Welfare Services in Russia: Enterprises as Beneficiaries and Service Providers’, financed by the Academy of Finland (project number 200936), the World Bank, and the Yrjö Jahnsson Foundation. The authors thank Guido Friebel, Pekka Ilmakunnas, Ekaterina Zhuravskaya and seminar participants at CEFIR and BOFIT for insightful discussions.


Like firms in established market economies, many Russian firms provide non-wage benefits to their workers, such as housing, medical care or day care. This article explains the provision of benefits as a strategic choice for firms in the presence of labour and service market imperfections. Analysing unique survey data for 404 industrial establishments from 40 Russian regions, the authors provide strong evidence that non-wage benefits are used by firms to attach workers and thereby reduce the costs of labour turnover in the face of tight labour markets. It is also shown that this attachment strategy works due to imperfections in the regional markets for social services.