Public agencies vary considerably in the extent to which they defer compensation until later in workers’ careers and often heavily backload compensation even when frontloaded compensation would likely be more efficient. I use two-way fixed effects models and detailed longitudinal data on collective bargaining agreements, salaries, and fringe benefits in public school districts in California to test two common theories about the prevalence of deferred public sector compensation. I find no evidence that stronger unions bargain for more backloaded compensation on average. However, I find suggestive evidence that unions may prefer to bargain for more backloaded compensation when their members are more veteran. I find no support for the theory that administrators prefer to defer compensation when employee performance is more difficult to monitor. These results suggest that other explanations for the backloadedness of public sector compensation may hold more promise, though they also call for additional empirical investigation.
AdamsS. J.HeywoodJ. S. (2011). Does deferred compensation increase worker effort?The Manchester School, 79(3), 381–404.
2.
AldemanC.ChuongC. (2014). Teacher Evaluations in an Era of Rapid Change: From “Unsatisfactory” to “Needs Improvement.” Bellwether Education Partners. https://bellwether.org/
3.
AronsonJ. R.DeardenJ. A.MunleyV. G. (2009). The impact of surplus sharing on the portfolio mix of public sector defined benefit pension plans: A public choice approach. Public Choice, 140(1), 161–184.
4.
BabcockL.EngbergJ. (1999). Bargaining unit composition and the returns to education and tenure. ILR Review, 52(2), 163–178.
5.
BallouD.PodgurskyM. (2002). Returns to seniority among public school teachers. The Journal of Human Resources, 37(4), 892–912.
6.
BarlingJ.FullagarC.KellowayK. K. (1992). The union and its members: A psychological approach. Oxford University Press.
7.
BarthE. (1997). Firm-specific seniority and wages. Journal of Labor Economics, 15(3), 495–506.
8.
BrunoP. (2019). The challenges of health and welfare benefit costs for california districts (Report). Policy Analysis for California Education.
9.
BurbidgeJ. B.MageeL.RobbA. L. (1988). Alternative transformations to handle extreme values of the dependent variable. Journal of the American Statistical Association, 83(401), 123–127.
10.
ChaneyB. A.CopleyP. A.StoneM. S. (2002). The effect of fiscal stress and balanced budget requirements on the funding and measurement of state pension obligations. Journal of Accounting and Public Policy, 21(4), 287–313.
11.
DavisR. S. (2011). Blue-collar public servants: How union membership influences public service motivation. The American Review of Public Administration, 41(6), 705–723.
12.
de HekP.van VuurenD (2011). Are older workers overpaid? A literature review. International Tax and Public Finance, 18(4), 436–460.
13.
DelfgaauwJ.DurR. (2008). Incentives and workers’ motivation in the public sector. The Economic Journal, 118(525), 171–191.
FarberH. S. (1986). Chapter 18: The analysis of union behavior. In AshenfelterO.LayardR. (Eds.), Handbook of labor economics (Vol. 2, pp. 1039–1089). Elsevier.
16.
FitzpatrickM. D. (2015). How much are public school teachers willing to pay for their retirement benefits?American Economic Journal: Economic Policy, 7(4), 165–188.
17.
FowlerL.BirdsallC. (2020). Are the best and brightest joining the public service?Review of Public Personnel Administration, 40(3), 532–554.
18.
GlaeserE. L.PonzettoG. A. M. (2014). Shrouded costs of government: The political economy of state and local public pensions. Journal of Public Economics, 116, 89–105.
19.
GrissomJ. A.StrunkK. O. (2012). How should school districts shape teacher salary schedules? Linking school performance to pay structure in traditional compensation schemes. Educational Policy, 26(5), 663–695.
20.
GroshenE. L.KruegerA. B. (1990). The structure of supervision and pay in hospitals. ILR Review, 43(3), 134-S.
21.
GustmanA. L.SegalM. (1977). Teachers’ salary structures—Some analytical and empirical aspects of the impact of collective bargaining [Conference session]. Proceedings of the Thirtieth Annual Winter Meeting of the Industrial Relations Research Association (pp. 437–445).
22.
HammerT. H.AvgarA. (2005). The impact of unions on job satisfaction, organizational commitment, and turnover. Journal of Labor Research, 26(2), 241–266.
23.
HendricksM. D. (2014). Does it pay to pay teachers more? Evidence from Texas. Journal of Public Economics, 109, 50–63.
24.
HendricksM. D. (2015). Towards an optimal teacher salary schedule: Designing base salary to attract and retain effective teachers. Economics of Education Review, 47, 143–167.
25.
HeutelG. (2009). Testing implications of a tournament model of school district salary schedules. Economics of Education Review, 28(1), 143–151.
26.
HoangT.GoodmanD. (2018). Public pensions and collective bargaining rights: Evidence from state and local governments. Public Administration Review, 78(5), 772–784.
27.
KelleyD. G. (2014). The political economy of unfunded public pension liabilities. Public Choice, 158(1), 21–38.
28.
KelloughJ. E.LuH. (1993). The paradox of merit pay in the public sector: Persistence of a problematic procedure. Review of Public Personnel Administration, 13(2), 45–64.
29.
LangbeinL.RobertsF. W. (2022). Money matters: Sector differences, competition, and the public personnel system. The American Review of Public Administration, 52(1), 61–86.
30.
LankfordH.WyckoffJ. (1997). The changing structure of teacher compensation, 1970–1994. Economics of Education Review, 16(4), 371–384.
31.
LazearE. P. (1981). Agency, earnings profiles, productivity, and hours restrictions. The American Economic Review, 71(4), 606–620.
32.
LlorensJ. J. (2008). Uncovering the determinants of competitive state government wages. Review of Public Personnel Administration, 28(4), 308–326.
33.
MariannoB. D. (2015). Teachers’ unions on the defensive?: How recent collective bargaining laws reformed the rights of teachers. Journal of School Choice, 9(4), 551–577.
34.
MariannoB. D.BrunoP.StrunkK. O. (2021). The effect of teachers’ union contracts on school district efficiency: Longitudinal evidence from California. SAGE Open, 11(1).
35.
MariannoB. D.StrunkK. O. (2018). The bad end of the bargain? Revisiting the relationship between collective bargaining agreements and student achievement. Economics of Education Review, 65, 93–106.
36.
MillerG. J.WhitfordA. B. (2007). The principal’s moral hazard: Constraints on the use of incentives in hierarchy. Journal of Public Administration Research and Theory, 17(2), 213–233.
37.
MitchellO. S.SmithR. S. (1994). Pension funding in the public sector. The Review of Economics and Statistics, 76(2), 278–290.
38.
MoeT. M. (2006). Political control and the power of the agent. Journal of Law, Economics, and Organization, 22(1), 1–29.
39.
MoodyJ.RandazzoA. (2020). Hidden Education Funding Cuts: How Growing Teacher Pension Debt Is Eating into K-12 Education Budgets [Research Report]. Equable Institute. https://equable.org/hiddenfundingcuts/
40.
NelsonS. (2004). The state of the federal civil service today: Aching for reform. Review of Public Personnel Administration, 24(3), 202–215.
41.
PrendergastC. (1999). The provision of incentives in Firms. Journal of Economic Literature, 37(1), 7–63.
42.
SalopJ.SalopS. (1976). Self-selection and turnover in the labor market. The Quarterly Journal of Economics, 90(4), 619–627.
43.
StrunkK. O.CowenJ.GoldhaberD.MariannoB. D.KilbrideT.TheobaldR. (2018). Collective bargaining and state-level reforms: Assessing changes to the restrictiveness of collective bargaining agreements across three states (Working Paper No. 210-1218-1). National Center for Analysis of Longitudinal Data in Education Research.
44.
StrunkK. O.GrissomJ. A. (2010). Do strong unions shape district policies? Collective bargaining, teacher contract restrictiveness, and the political power of teachers’ unions. Educational Evaluation and Policy Analysis, 32(3), 389–406.
45.
StrunkK. O.ReardonS. F. (2010). Measuring the strength of teachers’ unions: An empirical application of the partial independence item response approach. Journal of Educational and Behavioral Statistics, 35(6), 629–670.
46.
TaylorL. L.FowlerW. J.Jr. (2006). A comparable wage approach to geographic cost adjustment (NCES 2006-321). U.S. Department of Education, National Center for Education Statistics.
47.
ThomM. (2013). Politics, fiscal necessity, or both? Factors driving the enactment of defined contribution accounts for public employees. Public Administration Review, 73(3), 480–489.
48.
ThomM. (2017). The drivers of public sector pension reform across the U.S. States. The American Review of Public Administration, 47(4), 431–442.
49.
U.S. Department of Education. (2018). State nonfiscal survey of public elementary/secondary education, 2000-01 through 2015-16. National Center for Education Statistics.
WestK. L.MykereziE. (2011). Teachers’ unions and compensation: The impact of collective bargaining on salary schedules and performance pay schemes. Economics of Education Review, 30(1), 99–108.
52.
WilliamsonO. E. (1981). The economics of organization: The transaction cost approach. American Journal of Sociology, 87(3), 548–577.
53.
WintersJ. V. (2011). Teacher salaries and teacher unions: A spatial econometric approach. Industrial & Labor Relations Review, 64(4), 747–764.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
