Nav: Home

Pension benefits may not be effective tool for teacher retention

October 26, 2016

COLUMBIA, Mo. - Fifteen years ago, in an effort to improve teacher benefits, St. Louis Public Schools enacted a change to the defined-benefit pension plan that resulted in an immediate and dramatic increase in the incentives to remain teaching in St. Louis. Similar enhancements also occurred across the country. Now, a study from Cory Koedel, associate professor of economics and public policy in the College of Arts and Science and the Truman School of Public Affairs at the University of Missouri, found that pension enhancements may not be a cost-effective or productive way to increase employee retention. Koedel says that these findings will be useful for informing pension policy as states attempt to address pension shortfalls while retaining effective teachers.

"Improving teacher retention is of value to schools because it reduces turnover and can increase the experience of the workforce, both of which provide value to students," Koedel said. "Many have argued that generous defined-benefit plans help to retain high-quality teachers. Understanding whether and how much pension enhancements impact teacher retention is critical as states continue to grapple with pension issues."

Koedel and Brett Xiang, a graduate student in economics at MU, studied the cost-effectiveness of the St. Louis pension enhancement, which retroactively provided a 60 percent benefit increase for all workers. For example, a teacher who had accumulated 30 years of experience under the previous rules had the new, higher pension replacement rate legislated by the enhancement applied to those 30 years. The retroactive implementation of the enhancement created a situation where some teachers--those closer to retirement eligibility--had much more to gain than others from remaining in the workforce until full retirement eligibility. However, Koedel and Xiang found that the pension enhancement did not cause higher retention among these teachers.

"There are several explanations for why the pension enhancement was not an effective way to increase employee retention. A possibility supported by other research is that teachers do not greatly value or fully understand the values of their pensions. The policy also was poorly targeted in important ways," Koedel said. "Regardless of the reason, all indications from this study point toward teachers not valuing these benefits as much as they cost to provide. Funds currently devoted to support defined-benefit plans could likely be spent in a more strategic manner to promote the highest quality workforce for students."

"Pension enhancements and the retention of public employees," will be published in Industrial and Labor Relations (ILR) Review.
Editor's note: For more on the story, please see the policy brief from the Institute of Public Policy in the Truman School of Public Affairs, "Do Pension Enhancements Improve Teacher Retention?"

University of Missouri-Columbia

Related Economics Articles:

Life data economics: calling for new models to assess the value of human data
After the collapse of the blockchain bubble a number of research organisations are developing platforms to enable individual ownership of life data and establish the data valuation and pricing models.
SCAI and ACVP release consensus statement on cardiovascular catheterization laboratory economics
A newly released expert consensus statement provides recommendations for optimizing the financial operations of the cardiovascular catheterization laboratory (CCL) while providing cutting-edge patient care.
Shocking economics
Understanding economies in times of crises? Modern macroeconomics failed so far.
When does one of the central ideas in economics work?
Many situations in economics are complicated and competitive; this research raises the question of whether many theories in economics may suffer from the very fundamental problem that the key behavioral assumption of equilibrium is wrong.
From property damage to lost production: How natural disasters impact economics
When a natural disaster strikes, major disaster databases tend to compile information about losses such as damages to property or cost of repairs, but other economic impacts after the disaster are often overlooked--such as how a company's lost ability to produce products may affect the entire supply-chain within the affected region and in other regions.
University of Chicago Prof. Richard H. Thaler awarded the 2017 Economics Nobel Prize
The Royal Swedish Academy of Sciences honored Thaler, the Charles R.
Cell economics 101
Every time we swallow food, cells that line the intestines must step up their activity in a sudden and dramatic manner.
Research group focuses on economics of transportation needs for rural elderly
A multidisciplinary team of researchers is examining economic issues associated with providing transportation for the rural elderly and other socially disadvantaged populations.
Understanding decisions: The power of combining psychology and economics
A new paper published in the Proceedings of the National Academy of Sciences shows how collaborations between psychologists and economists lead to better understanding of such decisions than either discipline can on its own.
Three Harvard experts explain how economics can shape precision medicines
Many public and private efforts focus on research in precision medicine.
More Economics News and Economics Current Events

Top Science Podcasts

We have hand picked the top science podcasts of 2019.
Now Playing: TED Radio Hour

Why do we revere risk-takers, even when their actions terrify us? Why are some better at taking risks than others? This hour, TED speakers explore the alluring, dangerous, and calculated sides of risk. Guests include professional rock climber Alex Honnold, economist Mariana Mazzucato, psychology researcher Kashfia Rahman, structural engineer and bridge designer Ian Firth, and risk intelligence expert Dylan Evans.
Now Playing: Science for the People

#540 Specialize? Or Generalize?
Ever been called a "jack of all trades, master of none"? The world loves to elevate specialists, people who drill deep into a single topic. Those people are great. But there's a place for generalists too, argues David Epstein. Jacks of all trades are often more successful than specialists. And he's got science to back it up. We talk with Epstein about his latest book, "Range: Why Generalists Triumph in a Specialized World".
Now Playing: Radiolab

Dolly Parton's America: Neon Moss
Today on Radiolab, we're bringing you the fourth episode of Jad's special series, Dolly Parton's America. In this episode, Jad goes back up the mountain to visit Dolly's actual Tennessee mountain home, where she tells stories about her first trips out of the holler. Back on the mountaintop, standing under the rain by the Little Pigeon River, the trip triggers memories of Jad's first visit to his father's childhood home, and opens the gateway to dizzying stories of music and migration. Support Radiolab today at