Generous pensions—one of the main “perks” of public-sector employment—come at a steep price: After years of can-kicking, state pensions face funding shortfalls that total in the trillions. Yet many are hesitant to restructure them. Among the reasons cited is the backlash expected from teachers facing a loss or diminution of their long-established defined-benefit (DB) pension plans. This new study by Dan Goldhaber and colleagues suggests, however, that teachers may be more receptive to new pension structures than previously thought (echoing findings from a New York poll conducted earlier this year). Researchers analyzed teachers’ pension preferences using data from Washington State over two time periods during which educators could opt for a DB or hybrid plan (which combines a DB and an employee-funded defined-contribution [DC] plan). During both periods, the majority of teachers—both new and experienced—opted for the hybrid plan. (Only teachers over age fifty-five preferred the traditional DB option.) The researchers then examined the association between choice of pension program and teacher effectiveness, measured by value-added. Compellingly, teachers choosing the hybrid plan were 2 to 3 percent of a standard deviation more effective than those opting for the DB plan. This is equivalent to the difference between a teacher with one or two years of experience and a novice—and hints that the composition of the teacher workforce (and its overall quality) is likely to be influenced by pension structures. The political will to revamp teacher-pension plans remains buried. This study provides a shovel with which we may start to dig it out.
Dan Goldhaber, Cyrus Grout, Annie Pennucci, and Wesley Bignell, Teacher Pension Choice: Surveying the Landscape in Washington State (Washington, D.C.: National Center for Analysis of Longitudinal Data in Education Research, October 2012).