Pension shocks and wages

"How do wages respond to firm-level idiosyncratic cost shocks? We create a unique dataset that links longitudinal data on workers’ compensation to the unexpected costs that UK firms have been forced to pay to plug large deficits in their legacy defined benefit pension plans. We show that firms...

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Bibliographic Details
Main Authors: Adrjan, Pawel, Bell, Brian
Institution:ETUI-European Trade Union Institute
Format: TEXT
Language:English
Published: London 2018
LSE
Subjects:
Online Access:https://www.labourline.org/KENTIKA-19135600124919538829-Pension-shocks-and-wages.htm
Description
Summary:"How do wages respond to firm-level idiosyncratic cost shocks? We create a unique dataset that links longitudinal data on workers’ compensation to the unexpected costs that UK firms have been forced to pay to plug large deficits in their legacy defined benefit pension plans. We show that firms are able to share the burden of such costs when a significant share of their workers are current or former members of the plan. We also investigate how compensation responds to the closure of defined benefit plans to future benefit accrual. We find that firms are able to use such closures to effectively reduce total compensation of workers who are plan members. These results point to significant frictions in the labour market, which we show are a direct result of the pension arrangement that workers have. Closing schemes has an implicit cost for firms since it reduces the frictions that workers face. "
Physical Description:36 p.
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