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Distribution of Benefits in Teacher Retirement Systems and Their Implications for Mobility

Author

Listed:
  • Robert M. Costrell

    (Department of Education Reform, University of Arkansas)

  • Michael Podgursky

    (Department of Economics, University of Missouri-Columbia and Fellow, George W. Bush Institute, Southern Methodist University)

Abstract
While it is generally understood that defined benefit pension systems concentrate benefits on career teachers and impose costs on mobile teachers, there has been very little analysis of the magnitude of these effects. The authors develop a measure of implicit redistribution of pension wealth among teachers at varying ages of separation. Compared with a neutral system, we find that often about half of an entering cohort's net pension wealth is redistributed to teachers who separate in their fifties from those who separate earlier, and we also identify some variation across six state systems. This implies large costs for interstate mobility. We estimate that teachers who split a thirty-year career between two pension plans often lose over half their net pension wealth compared with teachers who complete a career in a single system. Plan options that permit purchases of service years mitigate few or none of these losses. It is difficult to explain these patterns of costs and benefits on efficiency grounds. More likely explanations include the relative influence of senior versus junior educators in interest group politics and a coordination problem between states. © 2010 American Education Finance Association

Suggested Citation

  • Robert M. Costrell & Michael Podgursky, 2010. "Distribution of Benefits in Teacher Retirement Systems and Their Implications for Mobility," Education Finance and Policy, MIT Press, vol. 5(4), pages 519-557, October.
    • Handle: RePEc:tpr:edfpol:v:5:y:2010:i:4:p:519-557
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/EDFP_a_00015
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    Citations

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    Cited by:

    1. Figlio, D. & Karbownik, K. & Salvanes, K.G., 2016. "Education Research and Administrative Data," Handbook of the Economics of Education,, Elsevier.
    2. Hendricks, Matthew D., 2014. "Does it pay to pay teachers more? Evidence from Texas," Journal of Public Economics, Elsevier, vol. 109(C), pages 50-63.
    3. Kim, Dongwoo & Koedel, Cory & Xiang, P. Brett, 2021. "The trade-off between pension costs and salary expenditures in the public sector," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(1), pages 151-168, January.
    4. Matthew M. Chingos & Martin R. West, 2015. "Which Teachers Choose a Defined Contribution Pension Plan? Evidence from the Florida Retirement System," Education Finance and Policy, MIT Press, vol. 10(2), pages 193-222, March.
    5. Robert M. Costrell & Josh McGee, 2019. "Cross-Subsidization of Teacher Pension Costs: The Case of California," Education Finance and Policy, MIT Press, vol. 14(2), pages 327-354, Spring.
    6. Hendricks, Matthew D., 2015. "Towards an optimal teacher salary schedule: Designing base salary to attract and retain effective teachers," Economics of Education Review, Elsevier, vol. 47(C), pages 143-167.
    7. Martin F. Lueken & Michael Podgursky, 2016. "Determinants of Cashing Out: A Behavioral Analysis of Refund Claimants and Annuitants in the Illinois Teachers Retirement System," Working Papers 1605, Department of Economics, University of Missouri.
    8. Kim, Dongwoo & Koedel, Cory & Ni, Shawn & Podgursky, Michael, 2017. "Labor market frictions and production efficiency in public schools," Economics of Education Review, Elsevier, vol. 60(C), pages 54-67.
    9. Cory Koedel & Shawn Ni & Michael Podgursky, 2014. "Who Benefits from Pension Enhancements?," Education Finance and Policy, MIT Press, vol. 9(2), pages 165-192, March.
    10. Fitzpatrick, Maria D., 2017. "Pension-spiking, free-riding, and the effects of pension reform on teachers' earnings," Journal of Public Economics, Elsevier, vol. 148(C), pages 57-74.
    11. Laura D. Quinby, 2020. "Do Deferred Retirement Benefits Retain Government Employees?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 469-509, March.

    More about this item

    Keywords

    teacher retirement systems; teacher pension plans; mobile teachers;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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