401(k)s a better recruiting tool than cash, study says

investmentnews.com:

Employers competing to fill empty positions with the most talented candidates at a time of historically low unemployment are turning to a once overlooked benefit: the 401(k) match.

Workers value that perk more than cash, so much so that a dollar in 401(k) contributions is twice as effective at luring talent as a dollar in wages, according to new research published this week by the National Bureau of Economic Research.

While younger workers appear to be swayed by 401(k) matches, the benefit is more pronounced among higher-income, older workers, who value employer contributions as much as four times more than regular compensation, the research shows.

“We’ve seen a general trend of employers really taking a look at their match and match characteristics over the past few years,” said Gordon Tewell, principal at Innovest Portfolio Solutions, an RIA overseeing about $35 billion in defined-contribution assets across roughly 200 plans.

The study found “across three distinct methods that most workers exhibit willingness to pay for both the intensive and extensive margin of DC retirement plans,” the authors wrote.

The research methods included building a data set using figures from millions of online job postings and resumes and retirement plan data from the Department of Labor. The researchers also conducted an online experimental survey asking workers how much compensation they would give up for access to a 401(k) and for higher levels of employer contributions. Another aspect of the study involved designing “an on-the-job search model [that] estimates worker valuations.”

The survey found that people were willing to forgo 3.4% of wages just to have access to a 401(k), as well as an additional 1.6% in wages for each percentage