Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-27T15:22:08.686Z Has data issue: false hasContentIssue false
  • English
  • Français

Retirement incentives and behavior of private and public sector workers

Published online by Cambridge University Press:  12 February 2020

Courtney Coile  and
Susan Stewart
Courtney Coile*
Affiliation:
Wellesley College, Wellesley, MA, USA NBER, Cambridge, MA, USA
Susan Stewart
Affiliation:
NBER, Cambridge, MA, USA
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Over the past several decades, private sector workers in the USA with employed-sponsored pensions have experienced a dramatic shift from defined benefit (DB) to defined contribution plans, while this trend has been less pronounced for public sector workers. In this paper, we use data from the Health and Retirement Study to explore changes in the retirement incentives and retirement behavior of public and private sector workers over the past quarter-century. We find that both groups have become less likely to report having a DB pension or any pension. Compared to their private sector counterparts, public sector workers have a higher level of retirement wealth and a larger financial gain from continued work at older ages, and these differences by sector are growing across cohorts. Both groups respond to financial incentives in making retirement decisions. However, growing differences by sector in the gain to continued work do not appear to have translated into diverging retirement behavior, as we observe similar trends in the two groups.

Keywords

Pensionsprivate sectorpublic sectorretirementretirement incentives

JEL classification

J32: Nonwage Labor Costs and Benefits • Retirement Plans • Private Pensions J14: Economics of the Elderly • Economics of the Handicapped • Non-Labor Market Discrimination J26: Retirement • Retirement Policies
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Special Issue 3: Retirement Decisions in a Changing Labor Market , July 2021 , pp. 393 - 409
Copyright
© The Author(s), 2020. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Asch, B, Haider, SJ and Zissimopoulos, J (2005) Financial incentives and retirement: evidence from federal civil service workers. Journal of Public Economics 89, 427–440.CrossRefGoogle Scholar
Aubry, J-P and Crawford, C (2017). State and local pension reform since the financial crisis. Center for Retirement Research Issue Brief #SLP-54.Google Scholar
Auerbach, AJ, Charles, KK, Coile, CC, Gale, W, Goldman, D, Lee, R, Lucas, CM, Orszag, PR, Sheiner, LM, Tysinger, B, Weil, DN, Wolfers, J and Wong, R (2017) How the growing gap in life expectancy may affect retirement benefits and reforms. The Geneva Papers on Risk and Insurance 42, 475–499.CrossRefGoogle ScholarPubMed
Brown, KM (2013) The link between pensions and retirement timing: lessons from California teachers. Journal of Public Economics 98, 1–14.CrossRefGoogle Scholar
Bureau of Labor Statistics (2018) The Economics Daily. Available at https://www.bls.gov/opub/ted/2018/51-percent-of-private-industry-workers-had-access-to-only-defined-contribution-retirement-plans-march-2018.htm.Google Scholar
Cahill, KE and Soto, M (2003) How do cash balance plans affect the pension landscape. Center for Retirement Research Issue Brief, 2003–2014.Google Scholar
Clark, RL, Hammond, RG, Morrill, MS and Vanderweide, D (2018) Annuity options in public pension plans: the curious case of social security leveling. The Journal of Retirement Summer 6, 33–44.CrossRefGoogle Scholar
Coile, C (2019) Working longer in the U.S.: Trends and explanations. In Social Security and Retirement Programs Around the World: Working Longer. Chicago: University of Chicago Press, pp. 299–324.Google Scholar
Coile, CC (2015) Economic determinants of workers’ retirement decisions. Journal of Economic Surveys 29, 830–853.CrossRefGoogle Scholar
Coile, C and Gruber, J (2007) Future social security entitlements and the retirement decision. Review of Economics and Statistics 89, 234–246.CrossRefGoogle Scholar
Coile, CC and Gruber, J (2001) Social security incentives for retirement. In Themes in the Economics of Aging. Chicago: University of Chicago Press, pp. 311–354.CrossRefGoogle Scholar
Costrell, RM and McGee, JB (2010) Teacher pension incentives, retirement behavior, and potential for reform in Arkansas. Education Finance and Policy 5, 492–518.CrossRefGoogle Scholar
Costrell, RM and Podgursky, M (2009) Peaks, cliffs, and valleys: the peculiar incentives in teacher retirement systems and their consequences for school staffing. Education Finance and Policy 4, 175–211.CrossRefGoogle Scholar
Fang, C, Brown, C and Weir, D (2016) Cohort changes in social security benefits and pension wealth. Michigan Retirement Research Center Working Paper WP 2016-350.CrossRefGoogle Scholar
Friedberg, L and Webb, A (2005) Retirement and evolution of the pension structure. Journal of Human Resources 40, 281–308.CrossRefGoogle Scholar
Friedberg, L and Webb, A (2009) New evidence on the labor supply effects of the social security earnings test. Tax Policy and the Economy 23, 1–36.CrossRefGoogle Scholar
Government Accounting Office (2010) Social Security Administration: Management Oversight Needed to Ensure Accurate Treatment of State and Local Employees. GAO-10-938.Google Scholar
Gustman, AL, Steinmeier, TL and Tabatabai, N (2008) Do workers know about their pension plan type? Comparing workers’ and employers’ pension information. In Overcoming the Savings Slump: How to Increase the Effectiveness of Financial Education and Saving Programs. Chicago: University of Chicago Press, pp. 47–81.Google Scholar
Gustman, AL, Steinmeier, TL and Tabatabai, N (2013) The social security windfall elimination and government pension offset provisions for public employees in the health and retirement study. NBER Working Paper 19724.CrossRefGoogle Scholar
Haider, S and Solon, G (2000) Nonrandom selection in the HRS social security earnings sample. RAND Labor and Population Program Working Paper Series 00-01.Google Scholar
Hausman, J and Wise, D (1985) Social security, health Status, and retirement. In Pensions, Labor, and Individual Choice. Chicago: University of Chicago Press, pp. 159–192.Google Scholar
Internal Revenue Service (2014) Federal-State Reference Guide, Publication 963 (Rev 11-2014, Catalog Number 21843B).Google Scholar
Liebman, JB (2001) Redistribution in the current U.S. Social Security system. In Feldstein, M and Liebman, JB (eds), The Distributional Aspects of Social Security and Social Security Reform. Chicago: University of Chicago Press, pp. 11–48.Google Scholar
Mastrobuoni, G (2009) Labor supply effects of the recent social security benefit cuts: empirical estimates using cohort discontinuities. Journal of Public Economics 93, 1224–1233.CrossRefGoogle Scholar
Mermin, GBT, Johnson, RW and Murphy, DP (2007) Why Do Boomers Plan to Work Longer? The Journals of Gerontology: Series B 62, S286–S294.CrossRefGoogle ScholarPubMed
Mitchell, OS and Fields, GS (1982) The effects of pensions and earnings on retirement: A review essay. In Research in Labor Economics, Vol. 5, Greenwich, Conn.: JAI Press, pp. 115–155.Google Scholar
Munnell, AH, Aubry, J-P and Cafarelli, M (2014) Defined contribution plans in the public sector: an update. Center for Retirement Research State and Local Pension Brief #37.Google Scholar
Papke, LE (2019) Retirement choices by state and local public sector employees: the role of eligibility and financial incentives. Journal of Pension Economics and Finance 18, 515–528.CrossRefGoogle Scholar
Pingle, JF (2006) Social Security's delayed retirement credit and the labor supply of older men. Federal Reserve Board Finance and Economics Discussion Series, 2006-37.Google Scholar
Quinn, JF and Burkhauser, RV (1983) Influencing retirement behavior: a key issue for social security. Journal of Policy Analysis and Management 3, 1–13.CrossRefGoogle Scholar
Quinn, JF, Cahill, KE and Giandrea, MD (2019) Transitions from career employment among public- and private-sector workers. Journal of Pension Economics and Finance 18, 529–548.CrossRefGoogle Scholar
Samwick, AA (1998) New evidence on pensions, social security, and the timing of retirement. Journal of Public Economics 70, 207–236.CrossRefGoogle Scholar
Shoven, JB and Slavov, S (2014a) Does it pay to delay social security? Journal of Pension Economics and Finance 13, 121–144.CrossRefGoogle Scholar
Shoven, JB and Slavov, S (2014b) Recent changes in the gains from delaying social security. Journal of Financial Planning 27, 32–41.Google Scholar
Stock, JH and Wise, DA (1990) Pensions, the option value of work, and retirement. Econometrica 58, 1151–1180.CrossRefGoogle Scholar
Wiatrowski, WJ (2012) The last private industry pension plans: a visual essay. Monthly Labor Review 135, 3.Google Scholar
Supplementary material: File

Coile and Stewart supplementary material

Coile and Stewart supplementary material 1
Download Coile and Stewart supplementary material(File)
File 241.6 KB
Supplementary material: File

Coile and Stewart supplementary material

Coile and Stewart supplementary material 2

Download Coile and Stewart supplementary material(File)
File 16.7 MB