Retirement system characteristics and compensating wage differentials in the public sector

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Retirement system characteristics and compensating wage differentials in the public sector

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Ronald G. Ehrenberg

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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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Article provided by ILR Review, ILR School, Cornell University 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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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. [Downloadable!] (restricted)
Charles Sutcliffe, 2007. "Should Defined Benefit Pension Schemes be Career Average or Final Salary?," ICMA Centre Discussion Papers in Finance icma-dp2007-06, Henley Business School, Reading University. [Downloadable!]
Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January. [Downloadable!] (restricted)
Alicia H. Munnell, 2005. "Mandatory Social Security Coverage of State and Local Workers: A Perennial Hot Button," Issues in Brief ib32, Center for Retirement Research. [Downloadable!]
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. [Downloadable!] (restricted)
Ronald G. Ehrenberg & Paul L. Schumann, 1985. "Compensating Wage Differentials for Mandatory Overtime," NBER Working Papers 0805, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Ehrenberg, Ronald G & Schumann, Paul L, 1984. "Compensating Wage Differentials for Mandatory Overtime?," Economic Inquiry, Oxford University Press, vol. 22(4), pages 460-78, October.
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. [Downloadable!]
Edward Montgomery & Kathryn Shaw, 1992. "Pensions and Wage Premia," NBER Working Papers 3985, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Oxford University Press, vol. 35(3), pages 510-22, July.
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. [Downloadable!]

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