Pension Coverage Research Articles

Work and Retirement Patterns for the G.I. Generation, Silent Generation, and Early Boomers: Thirty Years of Change

This study examines how the shifting choices and constraints facing older workers have changed work and retirement patterns over the past 30 years. Health improvements, declines in physical job demands, changes in Social Security rules, and the erosion in traditional defined benefit pension coverage and employer-sponsored retiree health insurance have altered work incentives at older ages. This paper compares labor force exits by older workers born 1913 to 1917 (part of the G.I. Generation), 1933 to 1937 (part of the Silent Generation), and 1943 to 1947 (part of the Baby Boom Generation). The analysis uses 16-year longitudinal panels from the Health and Retirement Study and decades-long administrative earnings records linked to respondents in the Survey of Income and Program Participation.The results show that early boomers worked longer than members of the Silent Generation, and that the pathways older workers follow out of the labor force have become more complex over time. The median retirement age for men was about one-half year higher in the 1943–47 cohort than in the 1933–37 cohort (62 vs. 61.5), but differences were more pronounced at older ages. By age 65, for example, 40 percent of early boomer men had not yet retired, compared with only 20 percent of Silent Generation men. Both male and female workers in the 1933–37 cohort were much less likely than their counterparts in the 1913–17 cohort to follow the traditional retirement path of exiting the labor force from full-time employment and never returning to work.

THE GENDER GAP IN PRIVATE PENSIONS

ABSTRACTIn many western countries, older women receive considerably less private pension income than older men on average. We analyse this differential in Britain, examining differences between the sexes both in private pension coverage and in pension income conditional on receipt. Using regression‐based decompositions, we show that both gender gaps are associated mainly with differences in returns to personal characteristics rather than with differences in personal characteristics per se.

China's new rural pension scheme: can it be improved?

PurposeThis paper aims to describe China's need for old‐age pension coverage in its rural areas, to highlight the strengths and weaknesses of the new rural pension system currently being implemented, and to suggest some needed reforms.Design/methodology/approachThis paper's analysis is based largely on evidence from Chinese government documents, newspaper reports, and research reports including those discussing related programs in rural areas of other developing countries. This evidence is supplemented with a small number of interviews with government officials, Chinese academics, and farmers living in rural China.FindingsChina has recently started a major effort to bring old‐age pension coverage to rural China. While it is too early to know how successful this effort will be, there are some structural issues that should be addressed. The paper's major conclusion is that the current funded accounts component needs to be supplemented with a modest social pension scheme.Originality/valueTo date next to nothing has been published for an academic audience about this major new and first ever countrywide old‐age pension program for rural China. If successful, this program has the potential to stimulate efforts in many other developing nations around the world to provide pension coverage in rural areas. The paper analyzes the program, uncovers some serious limitations, and proposes changes to deal with those limitations.

Later-Life Employment Preferences and Outcomes: The Role of Midlife Work Experiences

In this paper, we evaluate relationships between mid-life work experiences and the realization of preferences for full-time employment, part-time employment, and complete retirement at age 63-64. Using rich data from the Wisconsin Longitudinal Study, we demonstrate that the likelihood of achieving one's preferred employment status is related to earlier work experiences including employment stability in mid-life and self-employment, part-time employment, and private pension coverage across the life course. Despite large gender differences in work experiences across the life course, relationships between earlier work experiences and the likelihood of realizing later-life employment preferences are generally similar for men and women. We also find that these relationships are only partially mediated by economic and employment circumstances in late mid-life, suggesting the need for further evaluation of the cumulative pathways linking mid-life work experiences to the realization of later-life employment preferences.

Unions Improve Chinese Workers' Welfare – Results from 1,268 Firms

Based on a survey of 1,268 firms in 12 Chinese cities, this paper empirically studies the effects of unions on three aspects of workers’ welfare, namely, hourly wages, monthly working hours, and pension coverage. Our baseline results show that unionization increases hourly wage rates by 5.6%, reduces monthly working hours by 1.4%, and raises pension coverage by 12.3%. Taking the endogeneity of unionization into consideration, our 3SLS estimation finds larger effects. These results are robust in the subsample of domestic private enterprises where unions are less common than in other types of firms. Further econometric analysis has established two channels for unions to improve workers’ welfare, one by encouraging collective wage contracts, and the other by encouraging written contracts.

Tax Reform and Retirement Saving Incentives: Take‐up of Stakeholder Pensions in the UK

In April 2001, the UK government introduced Stakeholder Pensions – a new private pension arrangement. The reform also changed the structure of tax‐relieved pension contribution ceilings, increasing their generosity for lower‐earners. We examine the impact of these changes on private pension coverage using individual level data. We use a difference‐in‐differences strategy with an estimator that is modified to allow for dichotomous outcomes. Contrary to the conventional wisdom that the Stakeholder Pension reforms had little or no impact on saving behaviour, our results indicate that the change to the contribution ceilings affected private pension coverage rates among lower‐earners, especially among women.

Negotiating with Labor Under Financial Distress

We analyze how firms strategically renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This paper attempts to fill this gap. Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions. We show that airlines in financial distress obtain wage concession from employees whose pension plans are underfunded. As part of our identification strategy, we exploit the fact that pension plans in the U.S are partially insured by the Pension Benefit Guaranty Corporation (PBGC). Using variation in the degree of pension coverage provided by the PBGC, we show that employees’ outside option in bargaining is crucial in determining the degree of wage concessions during labor contract renegotiation. Our empirical evidence highlights the strategic use of pension underfunding by firms and the resultant wage cuts which employees endure as a result.

Solidarity with whom? Why organised labour is losing ground in Continental pension politics

AbstractThis article explains why the power of organised labour in the reform of Swiss and German pension regimes has faded over the last three decades. Postindustrialisation has brought two different sets of reform issues onto the pension policy agendas of Continental European welfare states: retrenchment of existing benefit levels, and the pension coverage of new, postindustrial social risk groups. Recent pension reforms increasingly combine these two types of measures in encompassing policy packages –‘modernising compromises’– in order to compensate for retrenchment with selective expansive reform elements. Continental trade unions attach a lower importance to postindustrial modernisation than do the left‐wing parties – notably the Social Democrats and the Green parties. Consequently, the distance between the labour movement and the left‐wing parties, as well as intra‐labour heterogeneity, increase and ‘modernising compromises’ tend to divide the left and to marginalise trade unions. The empirical analysis relies on coded actor positions from eight major pension reforms between 1972 and 2003.

Pension Coverage and Earnings Replacement Rates Among Canadian Couples

Using data from the Longitudinal Administrative Database (LAD), this paper compares the earnings replacement rates achieved in retirement by a sample of married and common-law couples in which the husband was aged 55 to 57 in 1991. Emphasis is placed on the outcomes experienced by couples in which one spouse or both spouses had registered pension plan (RPP) coverage and by couples without RPP coverage. The earnings replacement rates achieved by couples without RPP coverage are more widely dispersed than those of couples with RPP coverage. When compared at the mid-points of the pre-retirement earnings distributions, the median earnings replacement rates of couples without RPP coverage are about three to six percentage points lower than those of couples with RPP coverage. In contrast, the average earnings replacement rates of couples without RPP coverage are generally six to twelve percentage points higher than those of couples with RPP coverage.

How Do Pension Changes Affect Retirement Preparedness? The Trend to Defined Contribution Plans and the Vulnerability of the Retirement Age Population to the Stock Market Decline of 2008-2009

Our findings suggest that although the consequences of the decline in the stock market are serious for those approaching their retirement, the average person approaching retirement age is not likely to suffer a life changing financial loss from the stock market downturn of 2008-2009. Similarly, the likely effects of the stock market downturn on retirements have been greatly exaggerated. If there is any postponement of retirement due to stock market losses, on average it will be a matter of a few months rather than years. Counting layoffs, retirements may be accelerated rather than reduced. We provide background information that corrects misperceptions about pension holdings of the retirement age population. Pension coverage is much more extensive than is usually recognized. Over three quarters of the households with a person ages 51 to 56 in 2004 are currently covered by a pension, or have enjoyed pension coverage in the past. Pension wealth accounts for 23 percent of the total wealth of those on the cusp of retirement. For those nearing retirement age, defined contribution plans remain immature. As a result, almost two thirds of pension wealth held by those 51 to 56 in 2004 is in the form of a defined benefit plan. Lastly, women approaching retirement age are more likely to be covered by a pension than are women from earlier cohorts and they account for a significantly larger share of household pension wealth.

Equal pensions, equal rights: achieving universal pension coverage for older women and men in developing countries

In most countries, state pensions are financed from pay-roll taxes. However, such pensions have a strong male bias, with more men than women accessing them while also receiving higher benefits. Achieving universal pension coverage in developing countries is not possible, with pensions financed by pay-roll taxes due to high levels of informal sector employment. Furthermore, such schemes would be biased against women. Universal pensions funded from general taxation are the only means by which developing countries can achieve universal pension coverage on a basis that is equitable for both men and women. Such schemes can be found in a number of developed and developing countries and have been very successful in reducing poverty in old age for both women and men.

Chronic disease prevalence and care among the elderly in urban and rural Beijing, China - a 10/66 Dementia Research Group cross-sectional survey.

BackgroundDemographic ageing is occurring at an unprecedented rate in China. Chronic diseases and their disabling consequences will become much more common. Public policy has a strong urban bias, and older people living in rural areas may be especially vulnerable due to limited access to good quality healthcare, and low pension coverage. We aim to compare the sociodemographic and health characteristics, health service utilization, needs for care and informal care arrangements of representative samples of older people in two Beijing communities, urban Xicheng and rural Daxing.MethodsA one-phase cross-sectional survey of all those aged 65 years and over was conducted in urban and rural catchment areas in Beijing, China. Assessments included questionnaires, a clinical interview, physical examination, and an informant interview. Prevalence of chronic diseases, self-reported impairments and risk behaviours was calculated adjusting for household clustering. Poisson working models were used to estimate the independent effect of rural versus urban residence, and to explore the predictors of health services utilization.ResultsWe interviewed 1002 participants in rural Daxing, and 1160 in urban Xicheng. Those in Daxing were more likely to be younger, widowed, less educated, not receiving a pension, and reliant on family transfers. Chronic diseases were more common in Xicheng, when based on self-report rather than clinical assessment. Risk exposures were more common in Daxing. Rural older people were much less likely to access health services, controlling for age and health. Community health services were ineffective, particularly in Daxing, where fewer than 3% of those with hypertension were adequately controlled. In Daxing, care was provided by family, who had often given up work to do so. In Xicheng, 45% of those needing care were supported by paid caregivers. Caregiver strain was higher in Xicheng. Dementia was strongly associated with care needs and caregiver strain, but not with medical helpseeking.ConclusionApparent better health in Daxing might be explained by under-diagnosis, under-reporting or selective mortality. Far-reaching structural reforms may be needed to improve access and strengthen rural healthcare. The impact of social and economic change is already apparent in Xicheng, with important implications for future long-term care.

Optimizing the equity-bond-annuity portfolio in retirement: The impact of uncertain health expenses

This paper derives optimal equity-bond-annuity portfolios for retired households who face stochastic capital market returns, differential exposures to mortality risk and uncertain uninsured health expenses, and differential Social Security and defined benefit pension coverage. The results show that the health spending risk drives household portfolios to shift from risky equities to safer assets and enhances the demand for annuities due to their increasing-with-age superiority over bonds in hedging against life-contingent health spending and longevity risks. Households with higher income have a greater incremental demand for life annuities. The annuities in turn provide greater leverage for equity investment in the remaining asset portfolios.

Voluntary affiliation to Peru's individual accounts pension system

AbstractOne important aspect in the design of social protection is coverage. In Peru, as in most Latin American countries, social security coverage is mandatory only for workers in the formal sector. This article investigates the determinants of voluntary affiliation to Peru's individual accounts pension system. It is found that married males with more than high‐school level education living in high income households and with other family members already affiliated to the individual accounts pension system have a higher likelihood of voluntary affiliation. Although the results suggest that family‐based safety nets might be substitutes for voluntary participation in the individual accounts pension system, nonetheless, extending pension coverage and addressing poverty remain as challenges for government involvement.

Economic Security in Retirement: How Changes in Employment and Marriage Have Altered Retirement‐Related Economic Risks for Women

We examine across birth cohorts the consequences for inter‐ and intra‐gender equality of changing patterns of women's work, earnings, and marriage. While over time work participation rates, average earnings, and pension coverage for women have become increasingly similar to those for men, inequality among women has grown. As the economic opportunities for college‐educated women have improved, women with only a high school education or less are increasingly disadvantaged in the labor and marriage markets. The effects of employment changes on the future retirement security of women can either be told simply—on average the gender gap in labor force participation, wages, and pension coverage is closing—or be told with attention to the growing inequality among women in employment, pension coverage and benefits. In the presence of greater gender equality, inequality among women is becoming the future retirement security challenge for women and policy makers.

The National Pensions Savings Scheme

The National Pensions Savings Scheme (NPSS) provides a supplementary personal pension for all employees who choose not to opt out. If they do not opt out, their employer is obligated to pay a contribution. The article considers the employment effect of the increase in labour costs implied by the NPSS. It shows how this employment effect is likely to be greatest for small firms since few of them have any supplementary pensions of the quality that is required.The negative employment effect will be reduced to the extent that there is non-compliance or opt-out, but if this occurs, the purpose of extending pension coverage to employees on lower earnings will be defeated.

Pension Coverage in Kenya: Legal and Policy Framework Required to Enhance Pension Coverage in Kenya

Kenya's pension system is fragmented and covers only 15% of the labor force. The enactment of the Retirement Benefits Act in 1997 has not in any significant way impacted on the widening coverage of the pension system. The problem of low coverage is attributable to lack of an effective policy aimed at widening of coverage and the current legal framework which was designed to target participation of formal workers. This paper argues that wide ranging policy and legal reforms are required to enhance pension coverage in Kenya. Recommended policy and legal reforms include: (i) macro-economic reforms to create l employment (ii) provision of funded pension schemes to workers as a term of employment (iii) review of current pension laws to allow participation of employees in short-term employment contract (iv) introduction of social assistance and tax financed scheme, and (v) legal reforms and government incentives to make it flexible and affordable for informal sector workers to participate in the pension system.

The gender impact of National Pension reforms in the Republic of Korea

AbstractThis article examines the gender impact of National Pension reforms in the Republic of Korea. In 2007, the Korean government introduced an income‐tested basic old‐age pension scheme paying flat‐rate benefits. It also introduced credited pension coverage periods for child rearing and changed entitlement conditions for divorcees and widows and widowers. This paper examines the impact of these policy changes for individuals with shorter working lives and lower wages, for survivors and for the traditional social protection role played by the family in Korea. Findings indicate that the reforms have some positive features. However, the reforms still offer better value for those with higher earnings and an uninterrupted employment history, both of which are more characteristic of male workers. Moreover, the important income security role played by the family is still strongly embedded in the provisions and the protection available to survivors remains weak.

Pension reform in Israel under mandatory pension law

This study proposes pension reform in Israel under legislation of a mandatory pension law covering all workers by funded pension plans. Referring to a mandatory pension coverage law rather than a national pension implies that pensions are paid by private entities and are not part of the government system. The rate of ageing of Israel's population is slower than most of the Western world, and this opens a demographic window of opportunity to savings for funded pensions. The proposed reform aims to promote greater social equality as well as transparency. New data and actuarial calculations are presented, as well as estimates of the budgetary expenses, to substantiate the claim that such legislation is needed.

Do part-time/full-time compensation differentials for nurses vary between the private and public sector?

This study examines whether, compared to their private sector counterparts, public sector health care employers are at a disadvantage using part-time (PT) nurses to lower labour costs. Findings reveal a lack of a PT wage differential. Public and Private sector PT nurses are less likely to receive health care and pension coverage compared with full-time (FT) nurses. Yet, these PT/FT nonwage compensation coverage differentials do not vary across sectors. The nonwage findings are interpreted as suggesting that public sector health care employers are just as likely as private sector health care employers to benefit from cost savings associated with lower nonwage coverage for PT nurses.