April 12, 2011

Labor market aspects of state and local retirement plans: a review of evidence and a blueprint for future research

Volume 10, Issue 2, pp. 337-361, doi:10.1017/S1474747211000072

Traditional defined benefit (DB) pension plans remain the overwhelming norm for teachers, policemen and other employees of state and local governments. The incentives for workers with DB pension plans to stay in their jobs shift dramatically over the course of their careers. Moreover, limited transferability of pension wealth across states and between public and private jobs impedes mobility in the labor market. Yet, little is known about the labor market effects of pensions on state and local government workers. The literature on private-employer pensions has made contributions on some of these fronts in recent years that can shed light on policy concerns raised by the possibility that pension plans will be modified in coming years. Moreover, some of the limitations constraining research on pensions may be overcome by focusing on government workers, with recent work on public school teachers pointing the way. Very recent studies are finding strong retirement responses to age- and tenure-related incentives built into state pension plans.