Work now, pay later? An empirical analysis of the pension–pay trade off

Abstract

We investigate the potential compensating differential between wages and pensions on a sample of British workers. Random effects panel regressions are run applying the Schiller and Weiss (1980) methodology to test whether a pension-wage compensating differential exists. Using data from British Household Panel Survey (BHPS) and derived prospective pension variables, calculated by the Institute for Fiscal Studies (IFS), the regression results do not support evidence for a trade off. Further analysis finds no significant differences in results between public and private sector workers, even after controlling for sample selection bias wage.

Pension scheme redesign and wealth redistribution between the members and sponsor: The USS rule change in October 2011

“…Many empirical studies have tried to quantify the compensating wage differential, i.e. the size of the trade-off between pension benefits and wages, and recent examples of this literature include Disney et al (2009), Gerakos (2010 and Haynes and Sessions (2013). Attempts to quantify the wage-pension trade-off have encountered substantial econometric and data problems (Allen and Clark, 1987), but subject to these reservations, the empirical evidence suggests the trade-off is well below onefor-one.…”