Panel Paper:
Pension Generosity in Oregon and Its Impact on Mid-Career Teacher Attrition and Older Teachers' Retirement Decisions
*Names in bold indicate Presenter
We then examine the extent to which Oregon’s pension system impacted its K12 workforce, as greater pension generosity could incentivize longer tenures. In the case of Oregon’s money match provision, however, the true magnitude of its generosity was largely unknown to teachers until just prior to retirement. As such, any economic incentives to promote longer tenure among mid-career teachers were muted, while the plan’s generosity, once revealed just prior to retirement, created strong wealth effects that could enable earlier K12 exits. We find that between 2000 and 2010, average tenure among teachers in Oregon was, for the most part, below that of teachers in nearby Washington and the U.S. generally. A further analysis of attrition based on more than 57,000 Oregon teachers active from 2000 to 2013 revealed that quit rates among those covered under Tier One did not differ systematically from those covered under Oregon’s more recent pension plan provisions. Quit rates among Oregon’s Tier One teachers were even somewhat higher than those among teachers in Washington who were covered by plans that were substantially less generous than Oregon’s Tier One plan. These findings suggest that the generosity of Oregon’s Tier One plan did not induce mid-career teachers to remain in Oregon’s K12 workforce longer. Finally, using work histories on 8,621 teachers in Oregon who were aged 50 and older in 2000 we find that the generosity of Oregon’s Tier One money match provision encouraged earlier departures from the K12 workforce, with teachers leaving, on average, one year earlier than what would have been expected under Oregon’s full formula, defined-benefit plan.
These findings suggest that pension generosity alone does not incentivize longer tenure—even in the extreme case of Oregon—as the true generosity of a plan must be known to employees in advance. Oregon’s Tier One pension was not only costly but the plan appears to have negatively impacted Oregon’s K12 workforce.
Full Paper:
- ec160030.pdf (806.2KB)