Explaining Pension Dynamics

34 Pages Posted: 14 Apr 2007 Last revised: 7 Dec 2022

See all articles by Rebecca A. Luzadis

Rebecca A. Luzadis

affiliation not provided to SSRN

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Date Written: August 1989

Abstract

Some contend the US labor market will fail to adapt smoothly to an aging workforce, whereas others argue that employee pensions can and will play an important role in helping companies induce desired turnover patterns. This paper undertakes a longitudinal examination of pension retirement incentives in several dozen plans observed between about 1960 to 1980. The plans under study instituted many changes over this period, several of which enhanced the financial payoff to early retirement. These alterations included increases in benefit levels, reductions in early, normal and mandatory retirement ages, and cuts in the age at which pension present values peak (with retirement after that age penalized). We also find that simple indicators of pension plans' structural features (e.g. the plan's early retirement age) do not adequately summarize the complex financial incentives inherent in pensions, so that most of our attention is directed to analysis of financial benefit level measures. Three major explanations for observed pension outcomes are evaluated empirically. Of special policy interest is an evaluation of pension responses to changes in Social Security benefit rules. Additionally, key differences in behavior are discovered between single employer and multiemployer pension plans. We conclude that pension plan behavior is systematically related to both labor and product market characteristics, and is responsive to retirement income policy.

Suggested Citation

Luzadis, Rebecca A. and Mitchell, Olivia S., Explaining Pension Dynamics (August 1989). NBER Working Paper No. w3084, Available at SSRN: https://ssrn.com/abstract=980218

Rebecca A. Luzadis (Contact Author)

affiliation not provided to SSRN

No Address Available

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States