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Explaining Pension Dynamics

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  • Rebecca A. Luzadis
  • Olivia S. Mitchell

Abstract

Whether and how the labor market will adapt to anticipated changes in the workforce age distribution depends on how able companies are to induce desired turnover patterns among older and younger employees. This paper contends that companies can and will use pension plan provisions as powerful incentives to induce people to remain on their jobs, and perhaps even more importantly to leave at later ages. A longitudinal file of collectively bargained pension plans gathered by the United States Bureau of Labor Statistics is examined empirically. We find dramatic increases in benefit levels, reductions in early, normal and deferred retirement ages, and declines in the age at which pension present values peak (with retirement after that age penalized). Several explanations for these observed pension outcomes are evaluated empirically. We believe that these findings indicate how employer-provided pensions can and will play an important role in helping companies induce desired turnover patterns as the workforce ages.

Suggested Citation

  • Rebecca A. Luzadis & Olivia S. Mitchell, 1991. "Explaining Pension Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 679-703.
  • Handle: RePEc:uwp:jhriss:v:26:y:1991:i:4:p:679-703
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    References listed on IDEAS

    as
    1. Richard V. Burkhauser, 1979. "The Pension Acceptance Decision of Older Workers," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 63-75.
    2. repec:hoo:wpaper:e-88-28 is not listed on IDEAS
    3. Edward P. Lazear, 1983. "Pensions as Severance Pay," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 57-90, National Bureau of Economic Research, Inc.
    4. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
    5. Phillip B. Levine & Olivia S. Mitchell, 1988. "The Baby Boom's Legacy: Relative Wages in the 21st Century," NBER Working Papers 2501, National Bureau of Economic Research, Inc.
    6. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, January.
    7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    8. Gary S. Fields & Olivia S. Mitchell, 1984. "Retirement, Pensions, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262060914, December.
    9. Levine, Phillip B & Mitchell, Olivia S, 1988. "The Baby Boom's Legacy: Relative Wages in the Twenty-First Century," American Economic Review, American Economic Association, vol. 78(2), pages 66-69, May.
    10. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    11. Clark, Robert L. & Gohmann, Stephan F. & McDermed, Ann A., 1988. "Declining Use Of Defined Benefit Pension Plans: Is Federal Regulation The Reason?," Department of Economics and Business - Archive 259433, North Carolina State University, Department of Economics.
    12. Hutchens, Robert, 1986. "Delayed Payment Contracts and a Firm's Propensity to Hire Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 439-457, October.
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    Citations

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    Cited by:

    1. Olivia S. Mitchell, "undated". "Retirement Systems in Developed and Developing Countries: Institutional Features, Economic Effects, and Lessons for Economies in Transition," Pension Research Council Working Papers 94-3, Wharton School Pension Research Council, University of Pennsylvania.
    2. Mitchell, O.S. & Piggott, J., 2016. "Workplace-Linked Pensions for an Aging Demographic," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 865-904, Elsevier.
    3. Olivia S. Mitchell, "undated". "New Trends in Pension Benefit and Retirement Provisions," Pension Research Council Working Papers 2000-1, Wharton School Pension Research Council, University of Pennsylvania.
    4. Courtney Coile & Jonathan Gruber, 2001. "Social Security Incentives for Retirement," NBER Chapters, in: Themes in the Economics of Aging, pages 311-354, National Bureau of Economic Research, Inc.
    5. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1993. "The Role of Pensions in the Labor Market," NBER Working Papers 4295, National Bureau of Economic Research, Inc.
    6. Garen, John & Berger, Mark & Scott, Frank, 1996. "Pensions, non-discrimination policies, and the employment of older workers," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(4), pages 417-429.
    7. Ruhm, Christopher J., 1996. "Do pensions increase the labor supply of older men?," Journal of Public Economics, Elsevier, vol. 59(2), pages 157-175, February.
    8. Alan L. Gustman & F. Thomas Juster, 1995. "Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis," NBER Working Papers 4996, National Bureau of Economic Research, Inc.
    9. Samwick, Andrew A., 1998. "New evidence on pensions, social security, and the timing of retirement," Journal of Public Economics, Elsevier, vol. 70(2), pages 207-236, November.
    10. Alan L. Gustman & Olivia S. Mitchell, 1990. "Pensions and the U.S. Labor Market," NBER Working Papers 3331, National Bureau of Economic Research, Inc.
    11. Dan A. Black, 1996. "Family Health Benefits and Worker Turnover," Labor and Demography 9604001, University Library of Munich, Germany.
    12. Vittas, Dimitri, 1998. "Regulatory controversies of private pension funds," Policy Research Working Paper Series 1893, The World Bank.
    13. Olivia S. Mitchell, "undated". "Developments in Pensions," Pension Research Council Working Papers 98-4, Wharton School Pension Research Council, University of Pennsylvania.
    14. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1994. "Retirement Research Using the Health and Retirement Survey," NBER Working Papers 4813, National Bureau of Economic Research, Inc.

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