Unions, Pension Wealth, and Age-Compensation Profiles

Abstract

This paper examines the effect of unions on both the magnitude and distribution of pension benefits. An analysis of experience during 1973–79 under a sample of defined benefit plans shows that beneficiaries retire at an earlier age under collectively bargained plans than under other plans, receive larger benefits when they retire, and receive larger increases in their benefits after they retire. Also, benefit differentials within and across cohorts of retirees are smaller among union than nonunion beneficiaries. The average union-nonunion differential is therefore greater in total compensation (wages plus pension benefits) than in wages alone. Because pension benefits grow more rapidly with years of service in the nonunion sector, however, the total compensation differential narrows with age more quickly than the wage differential.