Risky Business: The Decline of Defined Benefit Pensions and Firms’ Shifting of Risk

Abstract

Since the early 1980s, employment in the United States has undergone significant transformation as the large corporations that once safeguarded employees with stable jobs and rewards for loyalty have replaced these employment relationships with ones based on cost containment and flexibility. One important consequence of these developments is that firms have abdicated their role as a critical risk bearer in society. Although evidence suggests that firms have increasingly shifted market risks onto their workforce, to date, there have been few detailed analyses exploring what factors have driven this phenomenon. This study adds to our understanding of why firms have transferred risk to their employees by examining the decline of a highly institutionalized practice wherein large U.S. firms used to bear retirement risk: the defined benefit (DB) pension plan. Through a detailed analysis, I show that variance in the presence, power, and interests of shareholders and employees at the firm level differentially affect a firm’s willingness to shift the risk of retirement onto its workers. Specifically, I demonstrate empirically that different types of shareholders have differential effects on a firm’s retirement practices, suggesting that the changing equity ownership structure of large U.S. firms has played a key role in how risk is allocated between workers and firms. Declines in employee power have also played a role because firm levels of unionization positively affect rates of DB participation for both unionized and nonunionized workers.

Alternative Work Arrangements: Two Images of the New World of Work

“…Firms increasingly hire contract workers who receive no long-term job security, benefits, or often even training (Bidwell 2009, Bidwell & Briscoe 2009). Related trends include less opportunity for upward mobility (Bidwell & Mollick 2015), fewer institutional protections such as health and retirement benefits (Cobb 2015), and declining union membership ). The result is what Kalleberg (2009) refers to as precarious work, in which the power differentials between workers and employers are amplified.…”

When Do Theories Become Self-Fulfilling? Exploring the Boundary Conditions of Performativity

“…For example, theories about the "base of the pyramid" postulate that companies can both increase profits and benefit the poor by creating products that are specifically tailored to the needs of low-income customers in developing countries (London & Hart, 2004;Prahalad, 2006). Here, given the increasing influence of investors (Cobb, 2015; Davis, 2009), we focus on whether theories on the CSP-CFP link change the practices of investors, shifting them toward socially responsible investing.…”

Mapping themes in the study of new work practices

“…Moreover, organizations increasingly resort to hiring contract workers who receive no long-term job security, benefits, or even adequate training (Bidwell and Briscoe, 2009). Likewise, various studies have shown how workers hired on temporary contracts encounter increased difficulties with upward mobility, receive fewer institutional protections (in the form of health and retirement packages) and as result, are more disfranchised from work, resulting in lower union membership (Bidwell et al, 2013;Cobb, 2015). Highlighting the precarity of these work arrangements, Sliter and Boyd (2014) show that part-time workers resort to moonlighting either to complement a low-paid job or because they cannot find full employment.…”