Efficient windows and labor force reduction
Recently many U.S. firms have offered "window" plans that provide bonuses to a group of workers if the worker retires within a specified short time span. This paper examines a window plan at a Fortune 500 firm, and addresses two main issues. First, what was the effect of the window plan on departures? Second, assuming a variety of possible firm objectives, what would be the design of an efficient window plan? These questions are addressed using the retirement model in Stock and Wise [1988a, 1988b] . The model, estimated using data for an earlier year, predicts well out-of-sample the subsequent large increase in retirements under the window plan. We find that while the firm successfully maximized departures, if its goal was to minimize either expected future wage payments or the current cost per induced retirement, the firm could have saved more with efficient plans constructed using the model. One interpretation is that the firm was primarily interested in reducing the overall size of the labor force or in retiring older employees to allow promotion of younger employees.
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- 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.
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NBER Chapters,in: The Economics of Aging, pages 279-334
National Bureau of Economic Research, Inc.
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- Jeremy I. Bulow, 1981. "Early Retirement Pension Benefits," NBER Working Papers 0654, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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