Unions and Public Pension Benefits
AbstractState and local pensions have been headline news since the 2008 financial collapse reduced the value of their assets, leaving a substantial unfunded liability. The deterioration in the funded status of these plans raised pension costs at the same time that the ensuing recession wreaked havoc with state and local budgets. Legislatures across the country have responded by reducing pension benefits – primarily for new employees – and increasing employer and employee contributions. As part of that process, governors in several states have launched initiatives to curb collective bargaining in the public sector. One possible implication is that governors view unions as responsible for pushing up state and local pension benefits. This brief identifies the impact of public sector unions and other factors on benefit levels, wages, and employment. The brief is organized as follows. The first section summarizes what is known about pensions, wages, workers, and unionization in the public sector. The second section reports on a series of empirical exercises to determine the role of unions in explaining public pensions and wages. The results show that unions have no measurable effect on plan generosity or rate of growth in pension benefits, but do have a quantifiable impact on wage levels and perhaps number of workers. The third section presents a possible reason for this outcome. Public sector pensions are legislated, not bargained, so the articulateness and acumen of the lobbyists may be more important than the number of union members; in contrast, wages are bargained and union strength could have a more direct effect. The final section concludes that this area is ripe for further research because the results appear to contradict the general perception of commentators and politicians.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Issues in Brief with number ibslp19.
Length: 18 pages
Date of creation: Jul 2011
Date of revision: Jul 2011
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This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-08-02 (Economics of Ageing)
- NEP-ALL-2011-08-02 (All new papers)
- NEP-BEC-2011-08-02 (Business Economics)
- NEP-LAB-2011-08-02 (Labour Economics)
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