Public Employee Pensions and Collective Bargaining Rights: Evidence from State and Local Government Finances

Public Employee Pensions and Collective Bargaining Rights: Evidence from State and Local Government Finances. Brookings Institution. Brigham R. Frandsen and Michael Webb. October 31, 2017

Despite the policy and press attention given to public unions and pensions, and their importance for state and local government finances and workers, research on the effects of collective bargaining rights on public employee pensions is surprisingly incomplete. This paper attempts to fill this gap. Using public employee retirement system financial data from the universe of state and local governments we exploit variation in the timing of state laws regarding public sector collective bargaining in a differences-in-differences framework, and find that collective bargaining requirements significantly and substantially increase government contributions to pensions, while reducing employee contributions. The increase in employer contributions is estimated to be about three times the size of the decrease in employee contributions; thus collective bargaining requirements significantly increase the overall generosity (and amount) of pension contributions and benefits. Collective bargaining requirements appear to have little effect on total public employment or payroll. [Note: contains copyrighted material].

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