Unions and Public Pension Benefits

Alicia Munnell, Jean-Pierre Aubry, Josh Hurwitz and Laura Quinby

State and Local Pension Plans Briefs from Center for Retirement Research

Abstract: State and local pensions have been headline news since the 2008 financial collapse reduced the value of their assets, leaving a substantial unfunded liabil­ity. The deterioration in the funded status of these plans raised pension costs at the sa me time that the ensuing recession wreaked havoc with state and local budgets. Legislatures across the country have responded by reducing pension benefits – primarily for new employees – and increasing employer and employee contributions. As part of tha t process, governors in several states have launched initiatives to curb collective bargaining in the public sector. One possible implication is that governors view unions as responsible for pushing up state and local pension benefits. This brief identi fies the impact of public sec­tor unions and other factors on benefit levels, wages, and employment. The brief is organized as follows. The first section summarizes what is known about pensions, wages, workers, and unionization in the public sector. The second section reports on a series of empirical exer­cises to determine the role of unions in explaini ng public pensions and wages. The results show that unions have no measurable effect on plan generosity or rate of growth in pension benefits, but do have a quantifiable impact on wage levels and perhaps num­ber of workers. The third section presents a possible reason for this outcome. Public sector pensions are legislated, not bargained, so the articulateness and acumen of the lobbyists may be more important than the number of union members; in contrast, wages are bargained and union strength could h ave a more di­rect effect. The final section concludes that this area is ripe for further research because the results appear to contradict the general perception of commentators and politicians.

Pages: 18 pages
Date: 2011-07, Revised 2011-07
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