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Unions, Pension Wealth, and Age-Compensation Profiles

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  • Steven G. Allen
  • Robert L. Clark

Abstract

This paper examines the effect of unions on both the magnitude and distribution of pension benefits. Our empirical results show that beneficiaries in collectively bargained plans receive larger benefits when they retire, receive larger increases in their benefits after they retire, and retire at an earlier age than beneficiaries in other pension plans. As a result, the pension wealth of union beneficiaries is 50 to 109 percent greater than that of nonunion beneficiaries. Just as wage differentials within and across establishments are smaller among union workers, benefit differentials within and across cohorts of retirees are smaller among union beneficiaries. This results from the smaller weight given to salary average in determining initial benefits and the larger percentage increases given to those who have been retired the longest under post-retirement increases. The more compressed benefit structure under unionism causes the union-nonunion compensation (wages plus pension contributions) differential to decline more quickly than the union-nonunion wage differential over the life cycle.

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File URL: http://www.nber.org/papers/w1677.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1677.

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Date of creation: Aug 1985
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Publication status: published as Allen, Steven G. and Robert L.Clark. "Unions, Pension Wealth, and Age-Compensation Profiles," Industrial and Labor Relations Review, Vol. 39, No. 4,(July 1986), pp. 509-517.
Handle: RePEc:nbr:nberwo:1677

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  1. Freeman, Richard B, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 643-73, June.
  2. 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.
  3. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 435-52, August.
  4. Martin Feldstein & Randall Morck, 1982. "Pension Funding Decisions, Interest Rate Assumptions and Share Prices," NBER Working Papers 0938, National Bureau of Economic Research, Inc.
  5. 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.
  6. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
  7. Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
  8. Duane E. Leigh, 1981. "The effect of unionism on workers' valuation of future pension benefits," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(4), pages 510-521, July.
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Cited by:
  1. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 510-22, July.
  2. Kathleen McGarry & Andrew Davenport, 1997. "Pensions and the Distribution of Wealth," NBER Working Papers 6171, National Bureau of Economic Research, Inc.
  3. 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.
  4. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
  5. Steven G. Allen & Robert L. Clark, 1987. "Pensions and Firm Performance," NBER Working Papers 2266, National Bureau of Economic Research, Inc.
  6. 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.

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