Teacher Pensions and Labor Market Incentives

The majority of public school teachers are enrolled in defined benefit (DB) pensions, which provide benefits based on a function of teacher’s age, experience, and end-of-career salary, and many state systems face large, unfunded liabilities. This brief considers the influence of DB pensions on the teacher labor market, including early-career retention, mobility, retirement timing, and teacher quality. In general, teachers do not appear to change their early-career retention decisions according the incentives created by DB pensions but do consider them when timing their retirement. Moreover, there is little evidence that DB pension incentives influence the quality of the teacher workforce. Lastly, there is some evidence that cross-state mobility could be impeded by these plans, with negative consequences for student achievement.

CALDER Policy Brief No. 9-0918-1