The Devolution of the American Pension System: Who Gained and Who Lost?
One of the most dramatic transformations in the economy over the last two decades has been the replacement of traditional Defined Benefit (DB) pension plans with Defined Contribution (DC) pensions. Using data from the 1983, 1989, and 1998 Survey of Consumer Finances (SCF), I find that among age group 47-64, the proportion with a DB plan plummeted from 69% to 42% between 1983 and 1998 and the share with a DC plan skyrocketed from 12% to 60%. However, median Private Accumulations (the sum of net worth and pension wealth) fell by 14% among middle-aged households over this period. The inequality of total pension wealth increased sharply over this period as a result of the switchover from DB plans to DC accounts. DB pension wealth is also found to have a very modest equalizing effect on overall wealth inequality. Moreover, DB pension wealth has a weaker offsetting effect on wealth inequality in 1998 than in 1983.
Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
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