Unions, Monitoring, and Deferred Compensation: Evidence From California School Districts

Abstract

Public agencies vary considerably in the extent to which they defer compensation until later in workers’ careers and often heavily backload compensation even when frontloaded compensation would likely be more efficient. I use two-way fixed effects models and detailed longitudinal data on collective bargaining agreements, salaries, and fringe benefits in public school districts in California to test two common theories about the prevalence of deferred public sector compensation. I find no evidence that stronger unions bargain for more backloaded compensation on average. However, I find suggestive evidence that unions may prefer to bargain for more backloaded compensation when their members are more veteran. I find no support for the theory that administrators prefer to defer compensation when employee performance is more difficult to monitor. These results suggest that other explanations for the backloadedness of public sector compensation may hold more promise, though they also call for additional empirical investigation.