Working Paper: NBER ID: w1677
Authors: Steven G. Allen; Robert L. Clark
Abstract: This paper examines the effect of unions on both the magnitude and distribution of pension benefits. Our empirical results show that beneficiaries in collectively bargained plans receive larger benefits when they retire, receive larger increases in their benefits after they retire, and retire at an earlier age than beneficiaries in other pension plans. As a result, the pension wealth of union beneficiaries is 50 to 109 percent greater than that of nonunion beneficiaries. Just as wage differentials within and across establishments are smaller among union workers, benefit differentials within and across cohorts of retirees are smaller among union beneficiaries. This results from the smaller weight given to salary average in determining initial benefits and the larger percentage increases given to those who have been retired the longest under post-retirement increases. The more compressed benefit structure under unionism causes the union-nonunion compensation (wages plus pension contributions) differential to decline more quickly than the union-nonunion wage differential over the life cycle.
Keywords: unions; pension benefits; labor economics; compensation profiles
JEL Codes: J32; J51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Employer contributions (J32) | Pension benefits (H55) |
| Union membership (J50) | Larger initial pension benefits (H55) |
| Union membership (J50) | Earlier retirement (J26) |
| Union membership (J50) | Larger postretirement increases in benefits (J32) |
| Union membership (J51) | Greater pension wealth (H55) |
| Years of service, age at retirement, and average earnings (J26) | Larger initial pension benefits (H55) |