Working Paper: NBER ID: w1579
Authors: Olivia S. Mitchell; Rebecca A. Luzadis
Abstract: This paper focuses on one aspect of long-term labor contracts -- employer-provided pensions -- in order to develop a better understanding of how such contracts affect employment patterns of older workers. Pensions are one of the few elements of the employment package which explicitly describe long term agreements between workers and their employers; consequently they offer a unique opportunity to study these agreements. The present paper combines labor supply and contract theory to examine pension responses to changes in taxes, Social Security benefits, and the federal government's recent decision to lift the age of mandatory retirement. Evidence on a longitudinal sample of pension plans from 1960 to the present suggests:(1) During the 1960-70 period, Social Security increases generated changes in pensions favoring early retirement; and (2) During the 1970-80 period, some plans reduced private pension benefits in response to the raising of the mandatory retirement age.
Keywords: Pensions; Labor Economics; Retirement; Social Security
JEL Codes: J26; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increases in social security benefits (H55) | Changes in pension structures favoring early retirement (J26) |
| Raising of the mandatory retirement age (J26) | Reduction in pension benefits (H55) |