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Labor Market Effects of Pensions and Implications for Teachers

Author

Listed:
  • Leora Friedberg

    () (Department of Economics, University of Virginia and TIAA-CREF)

  • Sarah Turner

    () (Department of Economics, University of Virginia and NBER)

Abstract

While the retirement security landscape has changed drastically for most workers over the last twenty years, traditional defined benefit (DB) pension plans remain the overwhelming norm for K–12 teachers. Because DB plans pay off fully with a fixed income after retirement only if a teacher stays in the profession for decades and yield little or nothing if a teacher leaves early, DB plans induce a strong, nonlinear relationship between years of tenure and benefit accrual. One implication is that as many current teachers approach eligibility for full pensions, there are strong incentives for retirement and associated consequences in the teacher labor market. In this article, we assess the key features of DB plans, discuss the general incentive effects, and consider the application to the particular case of teachers. This work highlights the importance of assessing the characteristics of teachers who respond most to the retirement timing incentives. © 2010 American Education Finance Association

Suggested Citation

  • Leora Friedberg & Sarah Turner, 2010. "Labor Market Effects of Pensions and Implications for Teachers," Education Finance and Policy, MIT Press, vol. 5(4), pages 463-491, October.
  • Handle: RePEc:tpr:edfpol:v:5:y:2010:i:4:p:463-491
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/EDFP_a_00011
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    Citations

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    Cited by:

    1. Patten Priestley Mahler, 2017. "Are Teacher Pensions "Hazardous" for Schools?," Upjohn Working Papers and Journal Articles 18-281, W.E. Upjohn Institute for Employment Research.
    2. Berk, Jillian & Weil, David N., 2015. "Old teachers, old ideas, and the effect of population aging on economic growth," Research in Economics, Elsevier, vol. 69(4), pages 661-670.
    3. Ashok Thomas & Luca Spataro, 2016. "The Effects Of Pension Funds On Markets Performance: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 1-33, February.
    4. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

    More about this item

    Keywords

    teacher retirement benefits; teacher pension plans; teacher labor market;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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