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.

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.

Bridging the gap: rewritable electronics using real-time light-induced dielectrophoresis on lithium niobate

In the context of micro-electronics, the real-time manipulation and placement of components using optics alone promises a route towards increasingly dynamic systems, where the geometry and function of the device is not fixed at the point of fabrication. Here, we demonstrate physically reconfigurable circuitry through light-induced dielectrophoresis on lithium niobate. Using virtual electrodes, patterned by light, to trap, move, and chain individual micro-solder-beads in real-time via dielectrophoresis, we demonstrate rewritable electrical contacts which can make electrical connections between surface-bound components. The completed micro-solder-bead bridges were found to have relatively low resistances that were not solely dominated by the number of interfaces, or the number of discrete beads, in the connection. Significantly, these connections are formed without any melting/fusing of the beads, a key feature of this technique that enables reconfigurability. Requiring only a low-power (~3.5 mW) laser source to activate, and without the need for external power supply or signal generation, the all-optical simplicity of virtual-electrodes may prove significant for the future development of reconfigurable electronic systems

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.

Pensions, Bonding, and Lifetime Jobs

A well-known, if underappreciated, finding in the mobility literature is that turnover is much lower in jobs covered by pensions than in other jobs. This could result from capital losses for job changes created by most benefit formulas, the tendency of turnover-prone individuals to avoid jobs covered by pensions, or higher overall compensation levels in such jobs. A switching bivariate probit model of pension coverage and turnover is developed to estimate the effect of each of these factors. The results show that capital losses are the main factor responsible for lower turnover in jobs covered by pensions, but self-selection and compensation levels also play an important role. This is the first direct evidence that bonding is important for understanding long-term employment relationships.

Phasing Into Retirement

Employers have been launching phased retirement programs to help workers navigate the transition from work to retirement more effectively. This paper examines the experience of the phased retirement system for tenured faculty in the University of North Carolina system. After phased retirement was introduced, there was a sizable increase in the overall separation rate in the system. A multinomial logit model of the retirement decision as a function of pension incentives, employee performance, demographics, and campus characteristics is developed. The key empirical result is that the odds of entering phased retirement are strongly and inversely related to employee performance, as measured by recent pay increases.

Pension Wealth, Age-Wealth Profiles and the Distribution of Net Worth

This study estimates the magnitude of pension wealth and compares pension wealth to net worth for households in the 1983 Survey of Consumer Finance (SCF). The SCF is the first data set to provide detailed information on both household finances and pension characteristics. The pension information is provided by the employer, so that it is much more detailed and likely to be more accurate than the pension data used in previous studies. Pension wealth was estimated under two sets of assumptions. Under the projected earnings approach, mean pension wealth is $98,291, which represents 43 percent of mean net worth for households with pensions. Under the legal method of calculating pension wealth, mean pension wealth is$47,541, which represents 26 percent of mean net worth for households with pensions. Both estimates are much larger than those obtained in earlier studies. The study also examines how estimates of inequality in the wealth distribution change when pension wealth is added to household balance sheets. Using a variety of methods and assumptions, the distribution becomes more equal when the definition of wealth is expanded to include pension assets.