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Unions, Pension Wealth, and Age-Compensation Profiles

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  • 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.

Suggested Citation

  • Steven G. Allen & Robert L. Clark, 1985. "Unions, Pension Wealth, and Age-Compensation Profiles," NBER Working Papers 1677, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1677
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    References listed on IDEAS

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    1. Richard B. Freeman, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 643-673.
    2. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
    3. repec:ucp:bknber:9780226062815 is not listed on IDEAS
    4. Martin Feldstein & Randall Morck, 1983. "Pension Funding Decisions, Interest Rate Assumptions, and Share Prices," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 177-210, National Bureau of Economic Research, Inc.
    5. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, June.
    6. Jeremy I. Bulow, 1982. "What are Corporate Pension Liabilities?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(3), pages 435-452.
    7. Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
    8. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
    9. Richard B. Freeman, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits," NBER Working Papers 0242, National Bureau of Economic Research, Inc.
    10. Duane E. Leigh, 1981. "The Effect of Unionism on Workers' Valuation of Future Pension Benefits," ILR Review, Cornell University, ILR School, vol. 34(4), pages 510-521, July.
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    Cited by:

    1. Lu, Yi & Tao, Zhigang & Wang, Yijiang, 2010. "Union effects on performance and employment relations: Evidence from China," China Economic Review, Elsevier, vol. 21(1), pages 202-210, March.
    2. Steven G. Allen & Robert L. Clark, 1987. "Pensions and Firm Performance," NBER Working Papers 2266, National Bureau of Economic Research, Inc.
    3. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 510-522, July.
    4. Thomas C. Buchmueller & John DiNardo & Robert Valletta, 2004. "A Submerging Labor Market Institution?Unions and the Nonwage Aspects of Work," NBER Chapters, in: Emerging Labor Market Institutions for the Twenty-First Century, pages 231-263, National Bureau of Economic Research, Inc.
    5. Kathleen M. McGarry & Andrew Davenport, 1998. "Pensions and the Distribution of Wealth," NBER Chapters, in: Frontiers in the Economics of Aging, pages 463-486, National Bureau of Economic Research, Inc.
    6. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
    7. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January.
    8. Gustman, A.L. & Mitchell, O.S. & Steinmeier, T.L., 1993. "The Role of Pensions in the Labor Market," Papers 93-07, Cornell - Center for Advanced Human Resource Studies.

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