The Decline of Defined Benefit Pensions

What is it about?

The paper argues that one of the factors driving firms to change their employment practices is the desire to shift employment risks onto workers. Focusing specifically on defined benefit (DB) retirement plan participation, the paper shows that different types of shareholders have differential effects on a firm’s retirement practices, suggesting that the changing equity ownership structure affect the number of workers who are covered by DB pensions. Declines in employee power have also played a role as firm levels of unionization positively affect rates of DB participation for both unionized and non-unionized workers.

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Why is it important?

The paper suggests that shareholder pressures and the decline in unions have had a fundamental affect on employment relationships, as evidenced by declines in defined benefit pension plan participation. Thus to understand how and why employment relationships in the United States have changed so fundamentally over the past 40 years requires looking at how power dynamics operating inside of firms.