Geoffrey T. Sanzenbacher

Pension type, tenure, and job mobility

Over the last 25 years, the United States has seen a dramatic shift in the private sector away from defined benefit plans and towards defined contribution plans. While commentators constantly cite an increase in labor mobility as a major reason for the shift in the private sector from defined benefit to defined contribution plans, researchers to date have not been able to document any difference in mobility by pension type. This study argues that the inability to find such a relationship stems from ignoring the important role of job tenure. Using data from the Survey of Income and Program Participation (SIPP) and the Panel Study of Income Dynamics (PSID), the results of duration analyses that include the interaction of job tenure and pension type reveal that workers with between five and ten years of tenure at a firm are 23% more likely to leave a job with a defined contribution plan than with a defined benefit plan. This difference is consistent with differences in the timing of benefit level entitlement between the two types of plans.

Recruiting and Retaining High-Quality State and Local Workers: Do Pensions Matter?

Many state and local governments have responded to challenges facing their pension plans by cutting benefits. Will these cuts make it harder for state and local governments to recruit and retain high-quality workers? To date, the answer has been difficult to obtain; most micro-level datasets contain information on the existence of pensions but not on pension generosity. To get around this constraint, this study uses a unique source, the Public Plans Database, to obtain data on the pension generosity of state and local workers’ pensions. These data are merged with the Current Population Survey to investigate how pension generosity affects the gap between the private sector wage of workers that states and localities recruit from the private sector relative to the workers that they lose to it. The findings suggest relatively generous pensions help reduce this “quality gap,” making it easier for state and local employers to recruit high-earning workers from the private sector and retain those workers. The effect is similar regardless of whether employer or employee contributions finance the benefits. The study suggests states should be cautious as they cut their pension benefits and that a strategy to maintain benefits by shifting some costs onto employees may help maintain states’ ability to recruit and retain high-quality workers.

Calculating Neutral Increases in Retirement Age by Socioeconomic Status

As the gap between retirement resources and needs grows, many researchers have prescribed the antidote of working longer. But this prescription may disadvantage lower socioeconomic status (SES) households because they have shorter lives than higher-SES households, and working longer may increase existing disparities in retirement durations. This paper uses data from the National Longitudinal Mortality Study to quantity these disparities by SES since 1979, using education as a proxy for SES. The paper finds that age-65 life expectancies have increased for all levels of educational attainment but that the gains have been much greater for those in the top quartile. The paper uses these calculations to determine hypothetical retirement ages that hold constant for each SES group the 1979 ratios of time spent in retirement to time spent working. The findings suggest that all educational groups can work longer today than in the past, while spending a similar fraction of their lives in retirement; those in the top quartile of educational attainment can work a full one to two years longer than those in the bottom quartile and still maintain their 1979 ratios.

Evolving provider payment models and patient access to innovative medical technology

Abstract Objective: To investigate the evolving use and expected impact of pay-for-performance (P4P) and risk-based provider reimbursement on patient access to innovative medical technology. Methods: Structured interviews with leading private payers representing over 110 million commercially-insured lives exploring current and planned use of P4P provider payment models, evidence requirements for technology assessment and new technology coverage, and the evolving relationship between the two topics. Results: Respondents reported rapid increases in the use of P4P and risk-sharing programs, with roughly half of commercial lives affected 3 years ago, just under two-thirds today, and an expected three-quarters in 3 years. All reported well-established systems for evaluating new technology coverage. Five of nine reported becoming more selective in the past 3 years in approving new technologies; four anticipated that in the next 3 years there will be a higher evidence requirement for new technology access. Similarly, four expected it will become more difficult for clinically appropriate but costly technologies to gain coverage. All reported planning to rely more on these types of provider payment incentives to control costs, but didn’t see them as a substitute for payer technology reviews and coverage limitations; they each have a role to play. Limitations: Interviews limited to nine leading payers with models in place; self-reported data. Conclusion: Likely implications include a more uncertain payment environment for providers, and indirectly for innovative medical technology and future investment, greater reliance on quality and financial metrics, and increased evidence requirements for favorable coverage and utilization decisions. Increasing provider financial risk may challenge the traditional technology adoption paradigm, where payers assumed a ‘gatekeeping’ role and providers a countervailing patient advocacy role with regard to access to new technology. Increased provider financial risk may result in an additional hurdle to the adoption of new technology, rather than substitution of provider- for payer-based gatekeeping.

Do Households Increase Their Savings When the Kids Leave Home

Much of the disagreement over whether households are adequately prepared for retirement reflects differences in assumptions regarding the extent to which consumption declines when the kids leave home. If consumption declines substantially when the kids leave home, as some life-cycle models of retirement saving assume, households need to achieve lower replacement rates in retirement and need to accumulate less wealth. Using administrative tax data from the Health and Retirement Study (HRS), as well as the Survey of Income and Program Participation (SIPP), this paper investigates whether household consumption declines when kids leave the home and, if so, by how much. Because consumption data are noisy and savings is the flip side of consumption, this paper examines whether savings in 401(k) plans increase when the kids leave home. The paper also investigates alternative methods of saving, including non-401(k) savings and increased mortgage payments.

The effect of job mobility on retirement timing by education

Job-changing among late-career workers increased steadily from the 1980s through the mid-2000s before declining somewhat in recent years. This study asks how the rise in job changing – which seems largely voluntary – affects retirement timing and whether this effect varies by a key measure of socioeconomic status: educational attainment. Workers presumably change jobs voluntarily to improve their well-being through gains in the economic or non-economic rewards of work or better working conditions. As a result, workers switching jobs late in their careers might retire later than they otherwise would have. Retiring later would be especially beneficial to less educated workers, who are generally less prepared financially to retire than better educated workers. Changing jobs, however, sheds the protection that tenure provides against involuntary job loss, which often leads to earlier retirements for older workers. This study seeks to understand which effect dominates, while dealing with the fact that job changing could be endogenous to retirement – that workers willing to bear the cost of a job search could intend to remain in the workforce longer. The analysis does so by controlling for each individual’s planned retirement age. The results show that the benefits of job changing are widely distributed and are associated with later retirements for men and women and for better and less educated workers.

DOES AGE-RELATED DECLINE IN ABILITY CORRESPOND WITH RETIREMENT AGE?

While declines in physical and mental performance are inevitable as workers age, they are not uniform across the various systems of the body – some physical and cognitive abilities decline much earlier than others. This variance implies that workers in occupations that rely on skills that decline early may be unable to work until late ages, even as policy changes like increases in the Full Retirement Age (FRA) encourage them to. Researchers often estimate models of early retirement that include a control for whether a worker is in a blue-collar job – basically assuming that less-physical white-collar work allows longer careers. But this assumption ignores the fact that even workers in white-collar occupations may find themselves relying on skills that have declined. This paper instead reviews the literature on aging and constructs a Susceptibility Index meant to reflect how susceptible an occupation is to declines in ability, regardless of whether the occupation relies on physical abilities (as blue-collar occupations do) or cognitive ones.

SINGLE MOMS AND DEADBEAT DADS: THE ROLE OF EARNINGS, MARRIAGE MARKET CONDITIONS, AND PREFERENCE HETEROGENEITY: SINGLE MOMS AND DEADBEAT DADS

Why do some men father children outside of marriage without providing support? Why do some women have children outside of marriage when they receive little support from fathers? Why is this behavior more common among Blacks than Whites? We estimate a dynamic equilibrium model of marriage, employment, fertility, and child support decisions. We consider the extent to which low earnings, marriage market conditions, and preference heterogeneity explain nonmarital childbearing, deadbeat fatherhood, and racial differences in these outcomes. We find the Black–White earnings gap and preference heterogeneity explain a substantial portion of racial differences, whereas marriage market conditions are less important.

Beyond Blue and White Collar: Age-Related Decline, Occupation, and Retirement Timing

Retirement timing research has accounted for age-related decline in ability to work by classifying occupations as blue or white collar, but this rough categorization may throw out information. Instead, this article presents a susceptibility index that measures how susceptible the abilities required by an occupation are to early decline. The results suggest that (1) considerable variance exists, especially within white-collar occupations, in the importance of abilities that are known to show early decline; (2) this variance, as captured by the index, is predictive of early retirement; and (3) this variance captures more information than the common white- and blue-collar distinction.

The Behavioral and Consumption Effects of Social Security Changes

Social Security’s Trust Fund is projected to be exhausted in 2034. A variety of changes to the program have been put forward that would either push this date out into the future or delay it indefinitely. Some of these changes would cut benefits – e.g., increasing the Full Retirement Age (FRA) to 69 – while others would increase program revenue – e.g., increasing the payroll tax. While Social Security’s Office of the Chief Actuary projects the financial impact on the program of a wide variety of changes, understanding the impact of these changes on recipients’ behavior and well-being is also a valuable exercise. This paper uses the Gustman and Steinmeier structural model to analyze the effects of four changes to the Social Security program on recipients’ retirement timing and household consumption.