Pensions and Firm Performance

This paper examines how pension plans affect employee behavior and firm performance. Theoretically, the impact of pensions on firm performance cannot be predicted. Firms with pensions should have lower turnover rates and more efficient retirement decisions; their employees will be less likely to shirk. On the other hand, pension compensation is not very closely linked to worker performance and there is some risk that turnover may fall too much. The evidence indicates that although wages do not seem to fall with pension compensation, profit rates are not affected by pension coverage. This suggests that pension coverage is associated with higher productivity, a proposition that is supported by indirect evidence on pensions, turnover, and productivity but not by direct tests of how pension coverage and productivity are correlated.

Strengthening Employment-Based Pensions in Japan

We investigate how the Japanese pension market for funded employment-based pensions is changing and how it might be strengthened in order to better serve one of the most rapidly aging populations in the world. Public and private pensions in Japan are estimated to hold around US$3 trillion, making that system the second largest globally after the United States. However, unfavorable economic developments have cut sharply cut into asset values, and the weak economy is undermining traditional lifetime employment contracts. Recent legislation permitting the establishment of defined contribution plans in Japan may provide new employer-sponsored retirement plan opportunities. We first describe the Japanese pension system at the end of the 20th century and provide an overview and evaluation of the changes in the pension arena emerging from the 2001 legislation. Next we show that important design questions remain to be answered, if Japanese employment-based pensions are to be reformed and modernized. Finally we indicate lessons gleaned from recent changes in US pension plans.

Unions, Pension Wealth, and Age-Compensation Profiles

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.

Pension Plan Options: Preferences, Choices, and the Distribution of Benefits

The conversion of traditional defined benefit pension plans to cash balance plans has caused considerable controversy. The primary points of contention have been the reduction in future benefits that older workers had expected and whether cash balance plans violate age discrimination laws. This analysis places the trend toward cash balance plans in the large context of a movement away from traditional defined benefit plans. For the past, 30 years employers have been terminating defined benefit plans and adopting defined contributions while the movement toward cash balance plans has been occurring over the past 15 or 20 years. The paper examines why employers and employees now tend to prefer defined contribution and cash balance plans thus placing these trends in an economic framework. A clear distinction is made between starting new plans where no pension previously existed and the conversion of existing plans. Winners and losers in the conversion process are identified. Throughout the analysis of the distributional effects of plan conversions, it is important to consider what might happen if the conversion was not made. Possible outcomes include the termination of the plan with no new plan established, layoffs, or even bankruptcy of the company. Thus, the impact of plan conversions cannot be determined by simply compared the expected benefits under the old plan conditional on it continuing and the worker remaining with the firm. In summary, the paper concludes that cash balance plans represent a reasonable choice for some firms and some workers while other firms and some workers will prefer traditional defined benefit plans or defined contribution plans. Allowing workers and firms to select from these alternatives will have a higher social benefit than restricting pension choices to a single plan type

The Helping Hand: An Administrator\u27s Role in Encouraging and Supporting Effective Science Teaching

Science teaching that mentally engages students and promotes all the goals we have for students, including a deep understanding of science content and the nature of science, is extremely difficult. That sort of teaching deviates significantly from the time-honored approaches that have permeated our schools for as long as any of us can remember. Because of that, many institutional constraints exist that make implementing effective science teaching even more difficult. This article addresses the principal\u27s crucial role as an educational leader, the principal\u27s responsibility to encourage and support effective science teaching practices, and efforts made in one building toward these two ends. This article promotes Iowa Teaching Standards 1, 3, 4, 5, and 8

Post-Retirement Adjustments of Pension Benefits

This paper examines why pension plans increased their liabflities by giving benefit increases to persons no longer working even though almost al lof them were not required to do so by any legally enforceable contract. In our model workers and firms have implicit contracts under which post-retirement increases in benefits are purchased by workers through lower wages or initial benefits. Such arrangements permit both plans and workersto share the risk of uncertain rates of return. They also allow beneficiaries to invest at a higher net rate of return than they could obtain elsewhere because of tax advantages and, in large plans, economies of scale. We also discuss how post-retirement adjustments can be used to influence turnover. Some empirical implications of the model are tested over a sample of beneficiaries of defined benefit plans. The major empirical findings are:(1) There is strong evidence of compensating differentials in final salary and initial pension benefits for beneficiaries receiving post-retirement adjustments.(2) Regardless of how the size of pension plans is measured(beneficiaries, participants, amount of benefits paid), large pension plans provide larger post-retirement benefit increases.(3) Beneficiaries of collectively bargained plans are more likelyto receive benefit increases and, among those receiving benefit increases, receive larger increases.(4) Benefit increases are larger in percentage terms for those who have been retired the longest and for those with the most years of service.

Why Do Pensions Reduce Mobility?

Previous studies have found that workers who are covered by pensions are much less likely than other workers to leave their jobs, but the evidence on how specific pension characteristics affect turnover is inconclusive. This paper examines how mobility is affected by vesting standards, the compensation level, and the capital loss of pension wealth for job changers. In two different data sets, we find that the capital loss is strongly associated with lower turnover rates, whereas vesting and the compensation level have relatively little impact. Large capital losses are mainly associated with lower layoff rates rather than lower quit rates.