Teacher Pensions and Labor Market Behavior: A Descriptive Analysis

1. Teacher Pensions and Labor Market Behavior: A Descriptive Analysis Michael Podgursky, University of Missouri - Columbia Mark Ehlert, University of Missouri- Columbia IES Research Conference Washington, DC June 8, 2007.

2. 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

3. Schools face 'death spiral' Editorial/Opinion 2/14/2006 Until 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. …

5. 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)

6. 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)

7. Increment to PV of Pension Wealth from Working an Additional Year “Spikes” are common Loss of Pension Wealth Source: Costrell and Podgursky (2007)

8. Source: Costrell and Podgursky (2007)

9. Source: Costrell and Podgursky (2007)

10. Source: Costrell and Podgursky (2007)

11. Ohio

12. Missouri Longitudinal Teacher Data File 2005-06 1990-91 A + E ≥ 45 Full-Time Teachers N= 31,060 21,240 Retirements

13. Distribution of Age + Experience 80

14. Distribution of Age

15. Distribution of Experience 29

16. Cumulative Distribution of Age: Male vs Female

17. Cumulative Distribution of Age: Rural vs Urban

18. Cumulative Distribution of Age: White vs Black

19. Cumulative Distribution of Age: Elementary vs Secondary

20. Current Teacher Survey SASS Teacher Follow-Up Survey 2000-01 Former Teacher Survey Retired? Structure of 2000-01 SASS Teacher Follow Up Survey Collecting Teacher Retirement Pension

21. Age at Retirement: SASS Teacher Follow Up Survey, 2001 and 2005 Median = 58

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

23. Cumulative Distribution of Teacher Retirement Ages: Teacher Follow Up Surveys, Schools and Staffing Surveys, 2001 and 2005 58

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

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

26. 100.0 MO Age - 90.0 Retired 80.0 MO Age - Retired & Quit Working 70.0 TFS 2001 60.0 Cumulative Percent 50.0 40.0 30.0 20.0 10.0 0.0 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 or older Age 50 or younger Source: Schools and Staffing Surveys: 2001 & 2005 Teacher Follow Up Retirement Age in Missouri and the US: Missouri and SASS Teacher Follow Up Survey 2001.

27. Structure of 2003-04 SASS Teacher Follow Up Survey 5.3% (4.9% of total pop.) 91.6% Current Teacher Survey Collecting Teacher Pension? SASS Teacher Follow-Up Survey 2003-04 8.4% Former Teacher Survey

28. Full paper at www.caldercenter.org