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Retirement system characteristics and compensating wage differentials in the public sector

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  • Ronald G. Ehrenberg

Abstract

This paper presents evidence that a trade-off exists between wages and certain characteristics of retirement systems in the public sector. Cross-section econometric estimates for uniformed municipal employees, based upon data from two national surveys of municipalities, suggest that, other things equal, an increase in the contribution made by uniformed employees to their retirement system leads to a compensating increase in their salaries, while retirement systems with more "generous" characteristics are associated to some extent with lower salaries. The estimates also indicate that the extent of retirement system underfunding is related to employers' and employees' perceptions of the probability that promised retirement benefits will not be fully paid and that these perceptions too are reflected in compensating wage differentials. The author concludes that pension reform legislation in the public sector will be likely to have an impact on public sector wages and, therefore, careful consideration should be given to the design of such legislation. (Abstract courtesy JSTOR.)

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 33 (1980)
Issue (Month): 4 (July)
Pages: 470-483

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Handle: RePEc:ilr:articl:v:33:y:1980:i:4:p:470-483

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Cited by:
  1. Johnson, Richard W., 1997. "Pension Underfunding and Liberal Retirement Benefits Among State and Local Government Workers," National Tax Journal, National Tax Association, vol. 50(1), pages 113-42, March.
  2. Joachim Inkmann, 2006. "Compensating wage differentials for defined benefit and defined contribution occupational pension scheme benefits," LSE Research Online Documents on Economics 24516, London School of Economics and Political Science, LSE Library.
  3. Ronald G. Ehrenberg & Paul L. Schumann, 1981. "Compensating Wage Differentials for Mandatory Overtime," NBER Working Papers 0805, National Bureau of Economic Research, Inc.
  4. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 35(3), pages 510-22, July.
  5. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1984. "Post-Retirement Adjustments of Pension Benefits," NBER Working Papers 1364, National Bureau of Economic Research, Inc.
  6. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
  7. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics 431, Boston College Department of Economics.
  8. William D. Manson & Gene E. Mumy, 1982. "Human Capital Theory and Retirement Income: Some Further Considerations," Eastern Economic Journal, Eastern Economic Association, vol. 8(3), pages 247-249, Jul-Sep.
  9. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(1), pages 21-39, January.
  10. David G. Lenze, 2009. "Accrual Measures of Pension-Related Compensation and Wealth of State and Local Government Workers," BEA Working Papers, Bureau of Economic Analysis 0054, Bureau of Economic Analysis.
  11. Erwin Ooghe & Erik Schokkaert & Jef Flechet, 2003. "The Incidence of Social Security Contributions: An Empirical Analysis," Empirica, Springer, vol. 30(2), pages 81-106, June.

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