Transcript Slide 1

Teacher Pensions and Labor Market Behavior:
A Descriptive Analysis
Michael Podgursky, University of Missouri - Columbia
Mark Ehlert, University of Missouri- Columbia
Robert Costrell, University of Arkansas – Fayetteville
Center for Analysis of Longitudinal Data in Education Research
(CALDER)
CALDER Data Conference
Washington, DC October 4, 2007.
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Why study teacher retirements?
• Teacher retirements generate vacancies
• Teacher retirements generate costs
– Teacher pensions
– Retiree health insurance
• Incentives in retirement systems may have
significant effects on labor supply and mobility
– Pension system incentives are large
• Retirement systems can affect the quantity and
quality of the teaching workforce
2
Research literature
• Large labor economics literature on pensions and
retirements
• Very small literature on teachers
– Furgeson, Strauss, Vogt (2006), PA teachers
– Brown (2006), CA teachers
– Harris and Adams(2007), CPS
• Absence of basic data
–
–
–
–
Type of benefits and costs (esp. retiree HI)
Parameters of systems (NEA, NASRA, Loeb and Miller, 2006)
Incentive structure of teacher pensions
Teacher labor market data
• SASS TFS
• Longitudinal state data (SEA records linked to pension data)
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Source: Harris and Adams (2007)
4
Teacher Pensions:
Some Stylized Facts
• Mostly state-wide systems
• Roughly 70 percent of teachers are in Social Security.
Generally state decision.
• Nearly all (vested) teachers are in Defined Benefit plans.
DC and CB options limited
• Mean retirement age is well below Social Security and
Medicare ages
– 58 years (retired and stopped teaching, SASS TFS)
5
Incentives in Teacher Pension
Systems
•
•
In public sector DB pension systems accrual of
pension wealth is highly non-linear and backloaded
State systems generally have sharp “spikes” in
accrual rates
–
–
•
Pull teachers to spike
Push out after
Not inherent in DB pension systems.
–
–
“cash balance” (IBM and other firms)
Can smooth spikes
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Typical DB teacher pension
Annual
Pension = S x FAS x r(S,A)
S = service years
FAS = final average salary
r(S,A) = replacement factor
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Table 1
Key Features of Selected State Defined Benefit Teacher Pension Plans
Lots of moving parts…
In Social
Security
Vesting (years)
Retirement
Eligibility
Contribution
Rates
Replacement
factor
(percent per year
of service)
Ohio
No
Arkansas
Yes
California
No
Massachusetts
Yes
Missouri
No
5
Age=60; or
Age=55 if
Service = 25; or
Service = 30
5
Age = 60; or
Service = 25
5
Age = 55; or
Age = 50 if
Service = 30
10
Age = 55; or
Service = 20
5
Age = 60; or
Service = 30; or
Age + Service =
80
District 14%
Teacher 10%
Yrs 1-30: 2.2%
Yr 31: 2.5%
Yr 32: 2.6%, …
Employer 14%
Teacher
6%
2.15% + $900
District 8.25%
Teacher 6%*
Linear
segments:
1.1% at age 50
1.4% at age 55
2.0% at age 60
2.4% at age 63
State, varies
Teacher 11%
Linear:
0.1% at age 41 to
2.5% at age 65
District 11.5%
Teacher 11.5%
2.5%
For S ≥ 30,
add 0.2% to
factor, to max
of 2.4%
2%, simple,
plus floor of
80% initial
purchasing
power
Max replacement
= 80%
For S ≥ 35,
add 6% to total
COLA formula
For S < 30 and
age < 65,
adjustment %
applies
3%, simple
For S < 28,
benefit reduced
5% x (28-S)
3%, simple
For S ≥ 30,
add 2% x (S-24)
CPI to max of
3%, simple,
on first $12,000
CPI, compound,
up to 1.80
maximum factor
Sources: State pension fund web sites.
* An additional 2% contributes to a supplemental defined contribution plan.
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• Compute pension wealth at each year of
work life
• Compute growth of pension wealth from
an additional year of work
• Representative teacher
– Enters at 25, continuous spell of work
– Standard assumptions concerning PV of
pension wealth. (see Costrell and Podgursky (2007) )
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Increment to PV of Pension Wealth from Working an Additional Year:
Missouri
200%
53
54
150%
55
56
percent of salary
57
53
100%
58
59
50%
60 60
6060
60 60
60
60 60
60 60 60
60 60
60
After 2001
56
54 55
0%
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
Before 2001
57
-50%
58
59
60 61
62 63
age at separation (entry age = 25)
10
64
Figure 2B. Annual deferred income: Arkansas
age of first pension draw indicated
500%
50
400%
percent of salary
300%
200%
100%
51 52 53
60 60 60 60 60
60 60 60 60
60
60
60
60
60
60
60
60
60 60
0%
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
-100%
age at separation (entry age = 25)
Source: Costrell and Podgursky (2007)
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Figure 2C. Annual deferred income: Massachusetts
age of first pension draw indicated
300%
55
since
2001
250%
percent of salary
200%
150%
100%
56 57
50%
55 55 55
55 55 54
55 55 55 55
54 54 54 54 54 54
58
54 54 54 55 56 57 58
59 60
prior to
2001
61
62
0%
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
59
-50%
60 61 62 63 64 65
-100%
age at separation (entry age = 25)
Source: Costrell and Podgursky (2007)
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Figure 2D. Annual deferred income: California
age of first pension draw indicated
200%
56
150%
percent of salary
since 1999
100%
56
57
50%
57 57 57 57 57
57 57
57
57 57 57 57
57 57 57 57 57 57 57
57
57 57
57
57
57 58
59 60 61
57
prior to
1999
62
0%
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
61 62
-50%
63
64 65
age at separation (entry age = 25)
Source: Costrell and Podgursky (2007)
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Annual deferred income: FL
age of first pension draw indicated
55
400%
350%
percent of salary
300%
250%
200%
150%
100%
50%
55
55
55
55
55
0%
55
56
5758
2526272829303132333435363738394041424344454647484950515253545556575859606162636465
-50%
age at separation (entry age = 25)
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Figure 6. Annual deferred income, as % of earnings
age of first pension draw indicated
200%
Ohio
55
55
60
150%
55
percent of salary
55
55
100%
55
50%
0%
60 60 60 6060
60 60 60
60
60
60 60 60 60
60 60
60 60 60
56 57 58
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
59
61 62
-50%
63
64
age at separation (entry age = 25)
(Assumptions: see Figure 3)
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16
Missouri Longitudinal Teacher Data File
(excluding KC and STL districts)
2005-06
1990-91
A + E ≥ 45
Full-Time
Teachers
N= 31,060
21,240
Retirements
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Distribution of Age + Experience
Frequency Distribution of Age + Missouri Experience
"Rule of 80"
9.0
8.0
7.0
Percent
6.0
5.0
4.0
3.0
2.0
1.0
0.0
134
127
125
122
120
118
116
114
112
110
108
106
104
102
100
98
96
94
92
90
88
86
84
82
80
78
76
74
72
70
68
66
64
62
60
58
56
54
52
49
47
Age + MOEXP
80
18
6
Percent
Distribution of Age
12
10
8
4
2
0
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Median Age
Age
19
8
Percent
Distribution of Experience
16
14
12
10
6
4
2
0
40 or more
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
Median Experience
15 or fewer
MOEXP
29
20
Cumulative Distribution of Retirement Age:
Male vs Female
100.0
Median = 56 males, 57 females
90.0
80.0
Cumulative Percent
70.0
60.0
Male
Female
50.0
40.0
30.0
20.0
10.0
0.0
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age Group
21
Cumulative Distribution of Retirement Age:
Rural vs Urban
100.000
90.000
80.000
Cumulative Percent
70.000
60.000
RURAL
50.000
URBAN
40.000
30.000
20.000
10.000
0.000
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age Group
22
Cumulative Distribution of Retirement Age:
White vs Black
100.00
90.00
80.00
Cumulative Percent
70.00
60.00
WHITE
BLACK
50.00
40.00
30.00
20.00
10.00
0.00
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age Group
23
Cumulative Distribution of Retirement Age:
High and Low Achieving Schools
100.00
High Performing
90.00
Low Performing
80.00
Cumulative Percent
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age Group
24
Cumulative Distribution of Retirement Age:
Elementary vs Secondary
100.0
90.0
80.0
Cumulative Percent
70.0
60.0
ELEMENTARY
SECONDARY
50.0
40.0
30.0
20.0
10.0
0.0
70 or older
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age Group
25
Increment to PV of Pension Wealth from Working an Additional Year:
Missouri
53
54
r = 2.5% S ≤ 30
r = 2.55% S ≥ 31
55
56
57
53
Changed in
July 2001
58
59
60 60
6060
60 60
60
60 60
60 60 60
60 60
60
After 2001
56
54 55
9 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
Before 2001
57
58
59
60 61
62 63
64
age at separation (entry age = 25)
26
Distribution of Years of Experience at Retirement
Before and After 2001 Change In Replacement Rate
17.00
16.00
15.00
14.00
13.00
12.00
11.00
1995-2000
2002-2006
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
56
Percent
10.00
27
MOEXP
Years Experience
at Retirement
30
31
32
Replacement Factor Marginal Gain
(after July 2001)
in Annuity Distribution of Retirees, %
% of Salary
% of Salary 1995-00 2002-06 change
2.50
2.50
16.00
11.40
-4.60
2.55
4.05
7.60
10.60
3.00
2.55
2.55
4.60
6.00
1.40
28
1.5
1
0
.5
Density
Distribution
of ln (salary)
5
7
9
11
13
15
ln_sal
29
1.5
1
0
.5
Density
Distribution
of ln (salary)
5
7
9
11
13
15
.15
.1
0
.05
Density
Distribution of
ln (pension wealth)
.2
.25
ln_sal
5
7
9
11
ln_pw
13
15
30
“Retired”
• Retired (Collecting teacher pension)
• Retired and not teaching
• “Double Dipping”
– DROP
– withdrawal
– change pension systems
– part time teaching
31
Cumulative Distribution of Teacher Retirement Ages:
Teacher Follow Up Surveys, Schools and Staffing Surveys, 2001 and 2005
“Retired” = collecting pension and not teaching
100
90
58
80
Cumulative Percent
70
60
TFS 2001
TFS 2005
50
40
30
20
10
0
70 or older
69
68
Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Survey
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age
32
Retirement Age in Missouri and the US:
Missouri and SASS Teacher Follow Up Survey 2001.
100.0
MO Age Retired
90.0
80.0
MO Age Retired &
Quit
Working
70.0
Cumulative Percent
TFS 2001
60.0
50.0
40.0
30.0
20.0
10.0
0.0
70 or older
69
68
67
66
65
Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50 or younger
Age
33
Labor Market Experience of Teachers Who Retired in 2000:
Percent of Teachers Working Full and Part-Time in Missouri
Public Schools in Subsequent Years
6.0%
5.2%
5.0%
5.2%
4.8% 4.8%
4.1%
4.0%
3.9%
4.0%
Percent
3.3%
3.2%
3.0%
2.7%
FT
PT
2.6%
2.4%
2.0%
1.0%
0.0%
2000 - 01
2001 - 02
2002 - 03
2003 - 04
2004 - 05
2005 - 06
Year found working
34
Structure of 2004-05 SASS Teacher Follow Up Survey
91.6%
SASS
Teacher
Follow-Up
Survey
2003-04
Current
Teacher
Survey
5.3%
(4.9% of total pop.)
Collecting Teacher
Pension?
8.4%
Former
Teacher
Survey
35
Lesson
Total Compensation = Current + Deferred Compensation
36
• Papers at www.caldercenter.org
• Slides at http://economics.missouri.edu/
• Ohio report www.edexcellence.net
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