Wages and Public Higher Education Defined Benefit Pension Plans

Wages and pension benefits of public higher education employees are evaluated using linear regression and multiple discriminant analysis. When wage level is the dependent variable, there is no significant relationship with pension benefit characteristics. However, relationships among pension plan variables themselves are found to be significant. The authors explain contradictory coefficient signs on these variables by relying upon public choice theory, as a reasonable explanation of why state legislatures have created plans which are a hodgepodge of characteristics with no logical relationship. Finally, the authors suggest that inclusion of public pensions under ERISA-like legislation would both (i) enhance the financial soundness of America’s system of public pensions and (ii) more clearly define rights and obligations in public defined benefit pension plans.