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Labor Market Effects of Pensions and Implications for Teachers

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  • Leora Friedberg

    ()
    (Department of Economics, University of Virginia and TIAA-CREF)

  • Sarah Turner

    ()
    (Department of Economics, University of Virginia and NBER)

Abstract

While the retirement security landscape has changed drastically for most workers over the last twenty years, traditional defined benefit (DB) pension plans remain the overwhelming norm for K–12 teachers. Because DB plans pay off fully with a fixed income after retirement only if a teacher stays in the profession for decades and yield little or nothing if a teacher leaves early, DB plans induce a strong, nonlinear relationship between years of tenure and benefit accrual. One implication is that as many current teachers approach eligibility for full pensions, there are strong incentives for retirement and associated consequences in the teacher labor market. In this article, we assess the key features of DB plans, discuss the general incentive effects, and consider the application to the particular case of teachers. This work highlights the importance of assessing the characteristics of teachers who respond most to the retirement timing incentives. © 2010 American Education Finance Association

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Bibliographic Info

Article provided by MIT Press in its journal Education Finance and Policy.

Volume (Year): 5 (2010)
Issue (Month): 4 (October)
Pages: 463-491

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Handle: RePEc:tpr:edfpol:v:5:y:2010:i:4:p:463-491

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Web page: http://mitpress.mit.edu/journals/

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Related research

Keywords: teacher retirement benefits; teacher pension plans; teacher labor market;

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Cited by:
  1. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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