Releasing Latent Demand: Wage Shocks and Matched Pension Contributions among Low Earners

Abdullah Tirgil (), Sadettin Haluk Citci () and Halit Yanıkkaya
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Abdullah Tirgil: Department of Economics, Ankara Yildirim Beyazit University
Sadettin Haluk Citci: Department of Economics, Gebze Technical University

No 2026-02, Working Papers from Gebze Technical University, Department of Economics

Abstract: Matching subsidies for retirement savings consistently fail to draw contributions from workers at the lower end of the wage distribution. The literature is divided on whether the cause is preferences or constraints. Using administrative records on 2.7 million individual-year observations in the voluntary Turkish Individual Pension System, we exploit the 2016 minimum wage shock, which raised the wage floor by 30 percent while leaving the 25 percent state match unchanged. Workers in the affected wage brackets raised real annual pension contributions by 3.9 to 5.7 percent, with a within-participant intensive-margin response of 2.6 to 4.1 percent on a balanced panel. The contribution response is larger for workers without a university degree than for graduates, at 6.8 percent versus 1.7 percent. The pattern is consistent with a binding budget constraint at the bottom of the wage distribution that the matching subsidy on its own cannot relax.

Keywords: Wage shock; matching contributions; retirement savings; minimum wage; liquidity constraints (search for similar items in EconPapers)
JEL-codes: D14 H55 J38 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2026-09-30
New Economics Papers: this item is included in nep-eff, nep-ene, nep-env and nep-mac
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