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Wage-Pension Trade-offs in Collective Agreements

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  • Morley Gunderson
  • Douglas Hyatt
  • James E. Pesando

Abstract

Analyzing 98 matched collective agreements and flat benefit pension plans in Ontario in 1984, the authors find evidence of a significant trade-off between wages and an actuarially constructed summary measure of the expected future pension costs for employers. With respect to the separate components of the pension plans, they find a significant trade-off between wages and the main item that is bargained over—the flat benefit rate—but not between wages and most of the early and postponed retirement options. These results obtain when the pension variables are specified as a proportion of wages, to capture the assumption that the generosity of pension plans is reflected in replacement rates, and when simultaneous equation procedures are used to account for the possible endogeneity of pensions; the trade-off disappears, however, when the pension variables are specified in dollar amounts.

Suggested Citation

  • Morley Gunderson & Douglas Hyatt & James E. Pesando, 1992. "Wage-Pension Trade-offs in Collective Agreements," ILR Review, Cornell University, ILR School, vol. 46(1), pages 146-160, October.
    • Handle: RePEc:sae:ilrrev:v:46:y:1992:i:1:p:146-160
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    Cited by:

    1. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics 431, Boston College Department of Economics.
    2. James E. Pesando, 2008. "Risky Assumptions: A closer Look at the Bearing of Investment Risk in Defined-Benefit Pension Plans," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 266, June.
    3. Haynes, Jonathan B. & Sessions, John G., 2013. "Work now, pay later? An empirical analysis of the pension–pay trade off," Economic Modelling, Elsevier, vol. 30(C), pages 835-843.
    4. Jonathan Gruber, 1998. "Health Insurance and the Labor Market," NBER Working Papers 6762, National Bureau of Economic Research, Inc.
    5. Li, Zhigang & Wu, Mingqin, 2018. "Education and welfare program compliance: Firm-level evidence from a pension reform in China," China Economic Review, Elsevier, vol. 48(C), pages 1-13.

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