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.
-end-
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:

Challenges for Russia's agriculture: new special issue in Russian Journal of Economics
While Russia seems to have tackled its historic problem: food shortage -- with the agri-food sector becoming one of the most steadily developing of the national economy in the last decade -- there is a new set of challenges.
Brief entrance test can predict academic success within first year of study in economics
German researchers at Johannes Gutenberg University Mainz (JGU) and Humboldt-Universität zu Berlin found that even a short test can reliably predict students' success within their first year of study in economics -- much better than an intelligence test or predictions based on school grades.
The case for economics -- by the numbers
In recent years, criticism has been levelled at economics for being insular and unconcerned about real-world problems.
Scientists develop open-source software to analyze economics of biofuels, bioproducts
Perennial grasses can be converted into everything from ethanol to bioplastics, but it's unclear which bioproducts hold the greatest potential.
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.
More Economics News and Economics Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Listen Again: Reinvention
Change is hard, but it's also an opportunity to discover and reimagine what you thought you knew. From our economy, to music, to even ourselves–this hour TED speakers explore the power of reinvention. Guests include OK Go lead singer Damian Kulash Jr., former college gymnastics coach Valorie Kondos Field, Stockton Mayor Michael Tubbs, and entrepreneur Nick Hanauer.
Now Playing: Science for the People

#562 Superbug to Bedside
By now we're all good and scared about antibiotic resistance, one of the many things coming to get us all. But there's good news, sort of. News antibiotics are coming out! How do they get tested? What does that kind of a trial look like and how does it happen? Host Bethany Brookeshire talks with Matt McCarthy, author of "Superbugs: The Race to Stop an Epidemic", about the ins and outs of testing a new antibiotic in the hospital.
Now Playing: Radiolab

Speedy Beet
There are few musical moments more well-worn than the first four notes of Beethoven's Fifth Symphony. But in this short, we find out that Beethoven might have made a last-ditch effort to keep his music from ever feeling familiar, to keep pushing his listeners to a kind of psychological limit. Big thanks to our Brooklyn Philharmonic musicians: Deborah Buck and Suzy Perelman on violin, Arash Amini on cello, and Ah Ling Neu on viola. And check out The First Four Notes, Matthew Guerrieri's book on Beethoven's Fifth. Support Radiolab today at Radiolab.org/donate.