Explaining the Decline in the Offer Rate of Employer Retirement Plans between 2003 and 2012

Abstract

Workplace retirement plans (deferred compensation plans [DCs] and deferred benefit plans [DBs]) help workers save for retirement conveniently, consistently, and automatically. But the percentage of firms offering retirement accounts is steadily declining. Between 2001 to 2003 and 2010 to 2012, the retirement plan offer rate of firms dropped from 63 to 55%. The drop is driven by a decline in both DCs and DBs. Using a probit model and an Oaxaca–Blinder threefold decomposition technique applied to data from the Current Population Survey (CPS) for 2001 to 2003 and 2010 to 2012, and using longitudinal analysis of the Survey of Income and Program Participation (SIPP) 2008 panel waves 3 and 11, the authors find that the labor-contracting environment dominates individual- and firm-level variables in explaining whether employers offer a retirement account to their workers. Therefore, attempts to raise retirement account offer rates must address the decline in workers’ bargaining power and the changes in norms relating to provision of benefits. This study contributes to the important discussion about trends in DC and DB coverage and the decline in retirement security.

Keywords

pensions retirement accounts collective bargaining

Get full access to this article

View all access options for this article.

References

Aaronson

Stephanie

Coronado

Julia

. 2005. Are firms or workers behind the shift away from DB pension plan? Finance and Economics Discussion Series No. 2005-17. Washington, DC: Board of Governors of the Federal Reserve System.

Cooke

William N.

Meyer

David G.

1990. Structural and market predictors of corporate labor relations strategies. Industrial and Labor Relations Review 43(2): 280–93.

Doiron

Denise J.

1992. Bargaining power and wage-employment contracts in a unionized industry. International Economic Review 33(3): 583–606.

Even

William E.

Macpherson

David A.

1990. Plant size and the decline of unionism. Economics Letters 32: 393–98.

Even

William E.

Macpherson

David A.

1994. Why did male pension coverage decline in the 1980s? Industrial and Labor Relations Review 47(3): 439–53.

Even

William E.

Macpherson

David A.

2000. The changing distribution of pension coverage. Industrial Relations 39(2): 199–227.

Even

William E.

Macpherson

David A.

2008. Improving pension coverage at small firms. In Furchtgott-Roth

Diana

(Ed.), Overcoming Barriers to Entrepreneurship in the United States, pp. 123–56. Washington, D.C.: Rowman & Littlefield.

Hinz

Richard P.

Turner

John A.

1998. Pension coverage initiatives: Why don’t workers participate? In Mitchell

Olivia

Schieber

Sylvester

(Eds.), Living with Defined Contribution Pensions: Remaking Responsibility for Retirement, pp. 17–37. Philadelphia: University of Pennsylvania Press.

Parsons

Donald

. 1991. The decline in private pension coverage in the United States. Economics Letters 36(4): 419–23.

10.

Peetz

David Robert

. 2002. Individual contracts, bargaining and union membership. Australian Bulletin of Labour 28(1): 39–52.

11.

Wooldridge

Jeffrey M.

2003. Cluster-sample methods in applied econometrics. American Economic Review 93: 133–38.

12.

Wooldridge

Jeffrey M.

2006. Cluster-sample methods in applied econometrics: An extended analysis. Mimeo, Department of Economics, Michigan State University.

13.

Yun

Myeong-Su

. 2004. Decomposing differences in the first moment. Economics Letters 82(2): 275–80.

14.

Yun

Myeong-Su

. 2005. A simple solution to the identification problem in detailed wage decompositions. Economic Inquiry 43: 766–72.