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Teacher Pensions and Labor Market Behavior:A Descriptive Analysis

Michael Podgursky, University of Missouri - ColumbiaMark Ehlert, University of Missouri- Columbia

IES Research Conference Washington, DC June 8, 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 have strong effects on labor supply and mobility– Pension system incentives are potent

• Retirement systems can affect the quantity and quality of the teaching workforce

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Schools face 'death spiral' Editorial/Opinion

2/14/2006Until last week, Los Angeles school officials had thought their unfunded health

care obligation for retirees was $5 billion. Then they scrubbed the numbers. The new estimate: $10 billion. That's bad news for taxpayers who will foot the bill and

for children whose education will be limited by the cost.…

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Michigan's education time bomb: Costly, loophole-ridden retirement system threatens public schools

Ron French | Detroit News | May 10, 2007

Michigan's school retirement system is riddled with loopholes and slipshod policies costing taxpayers hundreds of millions of dollars and driving the state's public education system toward financial crisis.

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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

• Absence of basic data – Payroll costs (esp. retiree HI)– Parameters of systems (NEA and NASRA incomplete)– Incentive structure of teacher pensions– Teacher labor market data

• SASS TFS• State studies (SEA records linked to pension data)

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Incentives in Pension Systems

• In public sector DB pension systems accrual of pension wealth is highly non-linear and back-loaded

• 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)

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Figure 2A. Annual deferred income: Missouri

age of first pension draw indicated

53

656463626160595857565554

53

54

55

5657

58

59

606060606060606060606060606060

-50%

0%

50%

100%

150%

200%

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

age at separation (entry age = 25)

perc

ent o

f sal

ary

Increment to PV of Pension Wealth from Working an Additional Year

Source: Costrell and Podgursky (2007)

“Spikes” are common

Loss of PensionWealth

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Figure 2B. Annual deferred income: Arkansasage of first pension draw indicated

60606060606060606060606060606060606060

50

535251

-100%

0%

100%

200%

300%

400%

500%

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

age at separation (entry age = 25)

perc

ent o

f sal

ary

Source: Costrell and Podgursky (2007)

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Figure 2C. Annual deferred income: Massachusettsage of first pension draw indicated

626160

59

54585756

55

656463

62

616059585756545454545454545454555555555555555555

55

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

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

age at separation (entry age = 25)

perc

ent o

f sal

ary

prior to 2001

since 2001

Source: Costrell and Podgursky (2007)

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Figure 2D. Annual deferred income: Californiaage of first pension draw indicated

62

61

56

5657 58 59

63 64 65

60

5757 57 57 57 57 57 57 57 57 57 57 57 57 57 57 57 57 57

57

57 57 5757 5757

61 62

-50%

0%

50%

100%

150%

200%

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

age at separation (entry age = 25)

perc

ent o

f sal

ary

prior to 1999

since 1999

Source: Costrell and Podgursky (2007)

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Figure 6. Annual deferred income, as % of earningsage of first pension draw indicated

55

64

636261

60

59

585756

55

55

5555

55

60606060606060606060606060606060606060

-50%

0%

50%

100%

150%

200%

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

age at separation (entry age = 25) (Assumptions: see Figure 3)

perc

ent o

f sal

ary

Ohio

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1990-91A + E ≥ 45Full-TimeTeachersN= 31,060

2005-06

21,240Retirements

Missouri Longitudinal Teacher Data File

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Frequency Distribution of Age + Missouri Experience"Rule of 80"

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

47 49 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100

102

104

106

108

110

112

114

116

118

120

122

125

127

134

Age + MOEXP

Perc

ent

80

Distribution of Age + Experience

14

0

2

4

6

8

10

12

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age

Perc

ent

Median Age

Distribution of Age

15

0

2

4

6

8

10

12

14

16

15 or fewer

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 or more

MOEXP

Perc

ent

Median Experience

29

Distribution of Experience

16

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age Group

Cum

ulat

ive

Perc

ent

MaleFemale

Cumulative Distribution of Age: Male vs Female

17

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age Group

Cum

ulat

ive

Perc

ent

RURALURBAN

Cumulative Distribution of Age: Rural vs Urban

18

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age Group

Cum

ulat

ive

Perc

ent

WHITEBLACK

Cumulative Distribution of Age: White vs Black

19

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age Group

Cum

ulat

ive

Perc

ent

ELEMENTARY

SECONDARY

Cumulative Distribution of Age: Elementary vs Secondary

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Structure of 2000-01 SASS Teacher Follow Up Survey

SASSTeacherFollow-UpSurvey2000-01

Current TeacherSurvey

Former TeacherSurvey

Retired?

Collecting TeacherRetirement Pension

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Age at Retirement: SASS Teacher Follow Up Survey, 2001 and 2005

Age at Retirement

0

2

4

6

8

10

12

14

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age

Perc

ent

TFS 2001TFS 2005

Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Survey

Median = 58

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Teaching Experience at Retirement: SASS Teacher Follow Up Survey, 2001 and 2005

Teaching Experience at Retirement

0

1

2

3

4

5

6

7

8

9

10

11

12

13

15 or fewer

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 or more

Total Years of Experience

Perc

ent

TFS 01TFS 05

Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Survey

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Cumulative Distribution of Teacher Retirement Ages:Teacher Follow Up Surveys, Schools and Staffing Surveys, 2001 and 2005

0

10

20

30

40

50

60

70

80

90

100

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age

Cum

ulat

ive

Perc

ent

TFS 2001TFS 2005

Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Survey

58

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Retirement Age in Missouri and the US:Missouri and SASS Teacher Follow Up Survey 2001.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age

Cum

ulat

ive

Perc

ent

MOTFS 2001

Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Survey

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Labor Market Experience of Teachers Who Retired in 2000:Percent of Teachers Working Full and Part-Time in Missouri Public Schools in Subsequent Years

4.8%

3.9%

3.3%

2.7%2.6%

2.4%

4.8%

5.2% 5.2%

4.0%4.1%

3.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2000 - 01 2001 - 02 2002 - 03 2003 - 04 2004 - 05 2005 - 06

Year found working

Perc

ent

FTPT

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Retirement Age in Missouri and the US:Missouri and SASS Teacher Follow Up Survey 2001.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

50 or younger

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older

Age

Cum

ulat

ive

Perc

ent

MO Age -Retired

MO Age -Retired &QuitWorking

TFS 2001

Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up

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Structure of 2003-04 SASS Teacher Follow Up Survey

SASSTeacherFollow-UpSurvey2003-04

Current TeacherSurvey

Former TeacherSurvey

Collecting Teacher Pension?

5.3%(4.9% of total pop.)

91.6%

8.4%

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• Full paper at www.caldercenter.org